Buy low sell high. A saying that applies to many different aspects of business. If you are able to follow this rule, profits will flow, and one area that offers huge potential to put this saying to the test is through Chinese imports. You may already be aware that Chinese imports are usually significantly cheaper, but that does not necessarily mean you know how to use it to your own advantage. This article will take a look at the technique of importing from China for profit, and offer some useful advice to hopefully bring riches to your pocket.
Unfortunately, in this present day the competition is much fiercer when it comes to reselling cheap imports for profit. The process of globalization, fuelled by the growth of the internet and the usability of sites like Alibaba has made it easier than ever for buyers to connect to suppliers. Take a look at online sites such as eBay and Amazon and you will undoubtedly find vast amounts of products imported from China. Many suppliers based overseas also trade on these sites, meaning they can usually undercut the majority of private resellers, making it even more difficult for newcomers to profit. This also creates a race to the bottom in terms of prices, meaning razor thin margins and severe time and effort for low profits.
However, it is possible to break into this market. The most effective way is to discover a new product which has not yet been picked up on by competitors. This is not an easy task, and it can be a time consuming process to repeatedly do as over time products get oversaturated. Many countries also do not have a strong online e-commerce sector, but that doesn’t mean there isn’t an opportunity in itself. For a country with a more traditional retail industry, it would be more appropriate to import from China and sell in physical locations, be it a market stall or a brick and mortar shop.
Alternatively, though, there is a way to combat the disadvantages seen within the current state of the industry, and that is through Original Design Manufacturing (ODM).
In simple terms ODM refers to products designed by another company, and offered for sale usually with the intention to be rebranded under another a company. This term can be confused with Original Equipment Manufacturer (OEM), and if you want to read a more in depth article, check out our trade wiki entries here and here.
Advantages and Disadvantages
So what is it about the process of ODM that offers greater opportunity when it comes to importing from China? Well generally, because you have rebranded the products under your own company, in the eyes of the consumer there has been value added. Many consumers are also wary of cheap Chinese imports, without even realising that most of their consumables already originate from the country. Many consumers would have a greater level of trust to purchase from a more familiar company than going simply with the cheapest they see on an e-commerce platform. Due to this perception by consumers, it allows your company to charge more for the same product, allowing you to break away from the razor thin margins seen on most Chinese imported product lines.
Hopefully this example will allow you to visualise the process better. Recently I was browsing Facebook, to which a sponsored post caught my eye advertising a portable phone charger. The company selling them is charging £19.99 per each one. However, logging onto eBay I can have the same product (minus the branding) shipped direct from China for only £7.68. If I were to sell the same product myself on eBay the price is so low it is doubtful I could even make a profit, however, if I rebranded it and targeted consumers who are going to a festival, the profit margin is much higher. As can be seen in this example, the company who chose to rebrand the product is making an extra £12.31 per each sale, a staggering 160% increase in selling price!
You are also able to create a targeted campaign directly at your specified audience. On many e-commerce sites you are competing against many sellers, and most consumers would choose the lowest priced option. However, through ODM and creating a marketing campaign, you effectively go to the consumers, rather than they coming to you. This is also a component to why you can charge larger amounts, as you are not being placed alongside direct competitors.
I believe this process to be the most effective way in making money from Chinese imports currently, but that is not to say there are no disadvantages. Despite higher profit margins and an easier market entry, there are a few negatives. Firstly, this method will generally require a larger operating cost. Advertising isn’t necessarily cheap, especially when on many e-commerce sites you only pay a fee on each sale, whereas using something like Facebook adverts, you will be paying for clicks, not conversions.
There are also other upfront costs that will need to be considered. You will most likely need your own web-store, and this will cost a large amount of money, especially if you need to pay a web developer to create it for you. Furthermore, you still run into the problem of trying to find the right product. Fortunately, even if competitors are already selling the product cheaper, there is still room to compete. Finding the right product should be easier, but it will still be a time-consuming process.
Success is certainly never guaranteed, and there is a lot more to the overall process that times a lot of hard work. However, I believe ODM importing to be a much more viable method in this modern era with plenty of potential to take advantage of. This article is not meant to be a blueprint or step by step guide, but should hopefully plant the seed of an idea you can water and grow.