How To Source And Import From China: Managing Risk

Importing products from China is a great way to locate new business opportunities and increase profit growth

. While the initial stages can be complicated, the payoff in terms of both immediate profit and long-term success is tremendous. Sourcing products from other countries, however, comes with its share of potential risks. It is recommended that first-time buyers follow certain precautions before embarking on any potential transaction.

Locate The Right Product

The first step is to locate a suitable product that interests you. Try to obtain as much information as possible about the demand for prospective products in your local market. Make sure that sourcing your chosen product from China is truly a cost-effective proposition. Factors like retail margins, VAT, insurance, taxes and freight and currency differences all affect the final retail price and many first-time bargain hunters end up sourcing a product at a price that is too high for the retail markets to sustain. Use a spreadsheet to chart potential additions to the final retail price and decide on a realistic sourcing price.

Find A Trustworthy Supplier

This is one of the most important steps when setting up an import business. One of the easiest ways to trap unsuspecting new entrepreneurs is to set up a fake company that offers to fulfill their every request.

Make sure the company exists in physical space by getting a street address and doing online research. Call up the company and check whether someone actually answers the phone when you call. A bona fide business will have live humans staffing the phone during the business hours in their part of the world.

Payment

A less inviting aspect of sourcing products internationally is that there are only so many payment options available to a new entrepreneur. One of the best choices, and the one preferred by larger companies, is a letter of credit. However, these are difficult to obtain when you are just starting out. In addition, they may only be available for sums much larger than the funds available to a small businessperson.

The most common method of payment among most businesspeople importing from China is the wire transfer. Many prefer to make the payment in three stages: one-third up front, the next third when the samples arrive and final payment upon delivery of goods. Regardless of your payment method, keep a reliable and current record of all of correspondence with partners.

Shipping

It is recommended that the inexperienced buyer choose from one of the major carriers such as FedEx, UPS or TNT. Though they cost more, these companies offer services that cover everything the buyer needs, from picking up the shipment at the suppliers location to clearing U.S. customs, to delivering the products right to the importers doorstep. Shipping rates can vary tremendously depending on the service used so make sure to shop around and compare prices before deciding on a final choice.

To conclude, often the biggest challenge faced by small- to medium-sized businesses is product sourcing. With online sourcing portals, millions of Americans found a way to build prosperous lives through e-commerce and international trade. Anyone who has access to the Internet has the opportunity to trade with anyone anywhere in the world with the same access. Still, such ventures are often challenging and filled with risk, so it is essential that potential buyers minimize risks by understanding all aspects of the import arrangement beforehand.

by: Jane M Dawson

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