In this text, we will focus on comparing the pros and cons of importing goods from China (and other low-cost Asian manufacturers). Are you interested in importing a large number of products? The profitability of importing is not always the same for each type of assortment.
It is well known that investing a lot of money in buying goods from China carries import risks. The benefits of importing from China are undeniable, but it requires very thoughtful analysis. Why? Because well-chosen Chinese goods can bring huge financial benefits. A mistake can bankrupt a company.
Advantages of importing from China: when is a large order a good choice?
The profitability of importing from China can be very high, especially with large orders. This can give the importer a significant advantage in the market. However, experience, warehouse space and proper management of the company's finances are essential. What are the benefits of importing from China?
Big order - big savings. Low purchase prices and gigantic margins are possible
Low prices are probably the biggest advantage of imports. With very large quantities, prices are much more favorable and better terms can be negotiated. This enables better unit costs, gives you a competitive position in the market and thus allows you to achieve higher sales margins. Buying in large quantities, helps maintain a secure inventory. In the event of an increase in the cost of raw materials or other market fluctuations, it will allow you to maintain the current price level or give you more time to prepare for changes.
And don't forget the opportunity to expand your product range. Importing Chinese products with low unit prices, prompts the importer to make bolder business decisions. These can prove to be a hit that will increase revenue.
Competitive advantage and better negotiating position in price negotiations
Customers are accustomed to fast order processing. They don't want to wait, and their loyalty to a vendor ends when they can't finalize an order. By having a full stock of goods, you give customers a guarantee that their orders will be completed in a timely manner.
The larger the order, the lower the purchase price you can count on. It's a well-known fact that larger orders can improve our negotiating position when talking to suppliers. It also works the other way around. By having a warehouse filled with goods purchased at a low price, we can be more flexible with our buyers.
Large-scale import of goods from China - is it worth risking a large investment? Disadvantages of importing from China.
Import risks always exist. Analyze all possible risks before investing significant funds in goods from China. Otherwise, you may lose money or freeze it in the goods for a long time. Instead of the expected profits you will generate a loss.
Exchange rate risk and demand fluctuations
A large purchase and long lead time involves a lot of risk as to whether the goods you buy will definitely sell. If you invest a lot of money and demand for the product in the meantime drops, the company may have a problem. It will be struggling with inventories of "unmarketable" goods, and thus additional challenges. You can wait for an upturn, but then you have frozen funds and can lose liquidity. Then there are storage costs. Another option is to cut prices or sell out. In that case, rather forget about making a crore profit - it's good if you can generate a small income to cover costs.
Exchange rate fluctuations are one of the important aspects you need to consider when placing an order from China. They can contribute to a sudden increase in purchase prices, reduce margins - thus weakening the company financially. Most often the fluctuations are not large, but the exchange rate risk always exists and cannot be ignored.
Quality of goods from China - quality control of goods is essential!
There are legends about the low quality of goods from China. Often hurtful, because many Chinese companies produce really good products. However, before buying, verification of the quality of goods is indispensable. Choosing a supplier is usually preceded by ordering samples. Unfortunately, we can never be sure if the main batch of goods will be equally good and free of defects. Defective or damaged products will lead to complaints, which in turn lead to additional costs. A large number of complaints is very bad for a company's image, especially in the case of online trading. Pursuing one's rights and other claims against a Chinese supplier is extremely difficult and complicated.
Products of Chinese origin can have a bad connotation. They have less than ideal PR. Hence, in some industries, entrepreneurs may find it difficult to promote and offer such items. It may be problematic to convince customers even of a good product. There is a fear that the advertising and marketing campaign will turn out to be much more expensive and less effective.
Transportation of goods from China and delivery time risk
Delivery performance and transportation time are other factors to consider. It is a naive approach to think that an order from China will be delivered quickly. You are spending a not inconsiderable amount of money on goods that will reach you in a few weeks (and sometimes a few months) at the earliest. You need to be aware that you are freezing your funds for that time. This is not an order that will be in your warehouse on time after a week.
For this, take into account other factors. Goods must travel/travel "halfway around the world" - Changing economic (fuel price increases, container availability problems) and political (wars, embargoes) situations can significantly increase the delivery time of goods, increase costs and thus reduce the expected profit.
For a large investment in goods, you need to prepare adequate storage space. You may find that the need arises to expand your own infrastructure or to rent off-site external warehouses. This raises additional costs, reducing the expected bottom line.
Relying only on Asian suppliers creates a kind of dependence on a single source. Unfortunately, this is very risky, because if anything goes wrong with the plan (a production stoppage, strike, political changes or some difficulty due to environmental reasons) it can affect the speed of order fulfillment and also the problem to find a new supplier at any given time. It's always good to have a plan B.
Risk of dishonest contractors - supplier verification
Analyzing the Chinese market is not easy. Distance, different mentality and approach to business, separate from European law. This makes the organization of imports begin to complicate already at the stage of selecting a trading partner. Verification of the supplier should be a fundamental point of the entire import process. It is not the norm, but there are cases of dishonest Chinese manufacturers. They offer products at very low prices and do not fulfill orders or send goods that do not comply with the offer. Often, it is not so much the bad intentions of the supplier that can stand in the way of a successful transaction, but the language barrier and different interpretations of specific arrangements.
When investing big money in importing goods from China, there are always risks. Therefore, cooperation with Chinese suppliers should be done through an experienced trader, preferably on the spot. There are import assistance agencies on the market. They reduce the risk, but their commission usually depends on the value of the order and is not low, which also affects the unit price.
Laws and regulations - customs clearance and required documents
Importing goods obviously involves a lot of regulations to meet and documents to fill out. Cooperation with a customs agency may prove indispensable here. It's not worth the risk that by doing something on your own you will break some regulations and the whole shipment will get stuck. Then your money spent on goods will remain frozen even longer and you may miss, for example, the peak sales for a given assortment. Consequently, your large investment in importing goods may not pay off. The customs agency is an additional cost and you have to add it to the unit price.
Another issue is the documents of the product itself. There is a much looser approach to this in China than in Europe. Certification requirements are much stricter in the EU. A product that doesn't meet the requirements may not be allowed to be sold. And you are left with a full stock of goods that you are not allowed to sell. An uninteresting prospect.
Ethical and environmental issues
The non-obvious costs of importing from China do not apply to every importer. Working conditions in China often leave a lot to be desired, especially when compared to European standards. Ecology is not the strong point of Chinese factories either. Of course, most importers look only at economic costs. However, entrepreneurs for whom ecology and work ethics and safety are important may have trouble finding manufacturers that meet these requirements.
Cost-effective and safe imports
When deciding to cooperate with a Chinese supplier, it is necessary to conduct a thorough market analysis, study the demand for the products in question, and at the same time have a well-developed logistics department and adequate financial resources. These are the key conditions that must be met to safely import goods from Asia. If you don't meet these aspects, you either take and accept the risk or let it go. It is definitely safer to do business with Polish manufacturers.
