For small to medium-sized enterprises, savvy product sourcing is one of the keys to survival, and it's the rare business that can afford to discount international sourcing.
In part one of this article, we listed the steps necessary to get started importing products, from deciding what you want to sell to settling on shipping terms. In this continuation, we'll discuss getting your products from your manufacturer to the right port, and then to your facility. We'll also cover common stumbling blocks and offer advice for getting around them.
So now that you've settled on an item as well as how to ship it, what are the ensuing steps you'll need to complete to ensure there are no surprises? Before we consider those, let's admit that the whole idea of importing products from a facility you've never been to—and that may be 5,000 miles away—can be a bit, well, scary. That's why we've included some tips for avoiding common mistakes from James Filbird of JMF International Trade Group, an import/export agency. Although American born, Filbird is located in Shenzhen, China, and his company acts as the eyes and ears for its clients, to protect their interests.
OK, you've read part one of the article and your goods have been manufactured and sent to the nearest shipping port. What happens next? Well, before your goods arrive at this point, everything must be documented. The documents need to correlate with the goods being shipped out of the country. In essence, you need to prove that the containers contain what you say they contain.
Of course, this is what Customs is for. At this point, duty fees may also have to be paid. As with so much that pertains to importing, even this part of the process is not cut and dried.
"Some products have no duty fees and some have steep duty fees," Filbird notes.
At this stage you may want to work through a Customs broker to facilitate getting the product to your warehouse. Such brokers may be associated with freight companies such as FedEx. Customs brokers do add another step to the process, and therefore more fees. Knowing what these various fees are and preparing for them is only one place where new importers can get tripped up.
You may think you're dealing directly with a supplier, when in actuality you're dealing with an agent who represents many suppliers
Here are some other potential stumbling blocks, according to Filbird:
- Importers don't do their due diligence. For example, the new importer "has not talked to someone who is a third-party in the country from which they're exporting. They have too much faith and confidence in the vendor. They're too trusting." We covered due diligence and tips for how best to accomplish it in the first part of this article.
- They work through the wrong party. Many people make contact with their new suppliers through sites such as Alibaba.com or Global Sources. The trouble is that people are not always who they profess to be on these sites. In some cases, you may think you're dealing directly with a supplier, when in actuality you're dealing with an agent who represents many suppliers.
So what? Well the further you get away from the manufacturing source, the more you pay, as intermediaries all want a cut of the profits. In Filbird's view, new importers shouldn't work with agents at first, as not all of them are honest. Speaking solely of the dishonest ones, he says they may "rent a small office, they receive your money, they never make your items and when you try to follow up, they're gone. Once the money leaves your hands there's nothing you can do."
- They don't get referrals. As Filbird points out, China is a vibrant exporter country where millions of suppliers compete for your business. "So they are eager to make deals," he says.
Don't let this enthusiasm keep you from doing what you know is right. Ask for referrals. While you're at it, be sure to ask if the company has done business with Western customers, Filbird suggests. "Chinese quality doesn't always meet the same expectations for businesses in the West," he contends. If they've done business with the West, they know what you're going to be expecting.
Experts can help
Now, we know of many examples of new importers who completed transactions methodically and successfully, all on their own. Yet, if this is your first time around the block, you may want to work through an import/export company like JMF. There are many companies that provide similar services—research them carefully through the Answers section of LinkedIn, for example, or check with your local business librarian. Such companies can provide the following services:
- Business migration
- Product sourcing
- Quality control inspection and assembly
- Project management
- Design consulting—for example, JMF will work with both the buyer and vendor to make product improvements that save time and money.
- Competitive shipping rates
- Customer service: "I speak the vendor's language and the buyer's language," says Filbird.
Handling these all tasks requires considerable expertise, and of course, that doesn't come cheap. So how does a company such as JMF get compensated? Filbird explains:
"I work directly with the vendors, which means my clients typically pay the factory directly and my commission is paid to me by the factory. This keeps things simple. I can also receive payment to my business account and then pay the vendor, if my client prefers. My fees are built-in to the product price, which is defined by the client as the 'target price.' It's then my responsibility to ensure the vendor produces the goods at that price. If I provide a service—such as consulting of any kind, inspection, sourcing, etc.—I typically charge a flat rate for time and materials."
Save costs by hiring a broker to handle part of the process for you (say, price negotiation, and quality control) and handle everything else yourself
Do it yourself, by degrees
There's a third option, and that is to handle some of the steps yourself, contracting with a company like Filbird's to handle the others. As with so many aspects of sourcing, it boils down to research and your approach to doing it.
We're the first to admit that not everyone enjoys that part of running a business. Fortunately, sourcing internationally does not have to be an all-or-nothing process. You can hire a firm such as JMF to handle part of the process for you (say, price negotiation, and quality control) and handle everything else yourself. This will reduce your costs.
JMF will "work with clients/buyers at any and every step in the ordering, manufacturing, inspection and shipping process," Filbird notes. "If a client just needs me to oversee a particular aspect of the value chain concerning their product, I will charge them accordingly."
Renaud Anjoran, founder and manager of Sofeast, a third-party quality control provider, suggests learning more about these issues by checking www.smartchinasourcing.com. And a helpful blog he recommends is www.chinasourcingblog.org. Alibaba.com is another excellent site merchants can use as a university of sorts, to learn the ins and outs of the import/export business.
International product sourcing may not be simple, but it may just make the difference between a business that's profitable and one that's not. Who knows? It may become a key part of your sourcing strategy, and one day result in a trip to the Far East for you. Now that wouldn't be so bad, would it?