Common mistakes in importing products for resale.
By Matt Buchel
Take a look on Ebay on Amazon and you’ll see thousands of products that are imported from China, Vietnam, Thailand, and all over the world. So you may have thought about taking a piece of the action for yourself, with plans to import products in the fashion, homeware, electronics or food industries.
And at first glance, these can be very attractive – they are huge markets, with millions of customers, and incredibly low-cost prices – just imagine buying items for $5, and selling them on for $10 or $20?
But despite the seductive margins and huge potential markets, buying low cost product doesn’t guarantee you a big profit overall. “Just because it seems like a good idea, that’s not a good enough reason to import it… mathematically, it has to add up” says Matt Buchel, author of “The 12 Most Common Mistakes Made When Importing and How To Avoid Them”.
First, many low cost products have a short life span, so you can be stuck with a whole heap of products you have paid for, but can’t sell.
Next there are the margins. If you want to make, for example, $1,000 per week from importing, and you have a product yielding $10 per unit, that’s 100 products you have to sell consistently each week, or 14 per day. Starting to sound a bit hard?
On top of that, approximately 15% of your sales will likely have some sort of customer service issue – arriving late, arriving damaged, not as the customer expected, which eats into your margins with refunds, replacement costs, additional shipping costs. So now you’re having to sell another 15 products a week to maintain your target $1,000.
Just having a product on a website doesn’t guarantee sales, and when you do make sales, everything comes at a cost. First there’s advertising, to attract people to your online store. If you’re selling on Ebay or Amazon you’ll need to pay a commission on your sales. If you sell through your own website you have the costs of running and updating your website as well as finance fees such on payment methods such as credit cards and Paypal.
Then there’s the cost of shipping for each product, especially if you have promised a fast delivery. You may be faced with import tariffs on bringing in the product. All of these take a chunk of your margin, and what started as $10 per unit may turn out to be more like $3.
If you haven’t imported before, it’s time to do some research on suppliers. With potential language barriers and communicating from afar, how do you make sure your product meets your specifications? Will it use materials that can’t be imported into Australia, and is your supplier involved in unethical practices (such as child labour)? You may have to buy in bulk to achieve the best per unit price, then have to pay for space to store excess stock, or run the risk you won’t sell it. And you’re manging all of this plus trying to deal with some 100 customers per week.
The maths stacks up more easily for higher priced products, continues Matt. With products that retail at $1,000 with a $600 margin, you only need to sell to two or three customers per week to meet the
$1,000 goal. You can spend more time reaching niche customers through targeted advertising, and building credible customer relationships that mean you spend less time dealing with issues and refunds. Once you get to this level, says Matt, “You’re not dealing with eBay or Amazon, you’re actually running a real proper business… people make an enquiry, you pick up the phone.”
Having a cheap product online may seem like an easy way to make money, but at the end of the day, people buy from people.