Putting your faith – and your money – in a factory thousands of miles away is a daunting prospect. Reading some of the horror stories that abound on the internet, it’s easy to become petrified into inaction. Of course, any investment involves elements of risk, but there’s no reason why new importers should come unstuck, provided they are able and willing to learn from others’ experience.
Here are seven of the most common mistakes those new to importing tend to make and how to avoid them.
It’s tempting, once you’ve identified a gap in your home market, to try and fill that as quickly as possible. The overseas manufacturer will almost certainly strive to meet your tight deadline to keep your business, but common sense dictates something will have to give and more often than not, that is going to be the quality of the end product. Avoid this by being realistic about timescales. Build in enough time to do your homework before you reach the stage of parting with any money – it will be worth it in the longer term.
While one of the many advantages of buying from abroad is a cheaper price per unit, there’s still some truth to the old adage ‘you only get what you pay for’. It may be tempting to go for the cheapest price in order to maximise your profits, but it’s more likely that this will cost you in the longer term. Either the quality won’t be up to scratch or the offer is a scam and your money will disappear.
It’s also vitally important not to take the price quoted at face value: research and take into account any and all the costs involved. Have you, for instance, factored in additional expenses such as shipping, duties and insurance? Are you covered if the exchange rate fluctuates? You may even find that the factory requires investment for additional specialist equipment to fulfil the order, for example a unique mould to add a customised logo to a product. All this can and will add up, and you may find that importing some items is not actually cost-effective.
It is increasingly common – and highly sensible – to ask the factory for samples before placing an order. The obvious temptation is to assume that what you receive at this stage will be representative of the quality and look of the final products. However, others’ experience shows this is not necessarily so. Make sure you specify that you require samples made from the exact materials to be used in final production. Checking doesn’t stop here, though. Agree with the manufacturer that the end product will meet all necessary international quality standards and hire an independent representative on the ground to inspect and certify the quality of the end product before shipping. Returning goods shipped from overseas is often not an option. Loads are generally bulky; and the process involves a great deal of paperwork and bureaucracy, not to mention the expense. Experience shows that, where products have been returned, the average financial loss involved can be as much as 70% of the value of the order.
Some buyers enter the relationship on the assumption they are about to be fleeced. They treat their suppliers persistently with scepticism and suspicion. This is counterproductive. Of course, the best approach is to proceed with caution, especially at the outset. But because of the distance between you and your supplier, a degree of trust will be essential if the relationship is to grow in the longer term. Start by placing small orders, and if the supplier earns your confidence by delivering as expected, gradually build up the trust you have in them as the relationship deepens.
The other side of the coin – assuming every manufacturer has your best interests at heart – simply isn’t realistic either. There’s no substitute for carrying out your own due diligence, to make sure you are dealing with a reputable supplier. Ask to see a current customer list and take up references from companies already dealing with that factory. Arrange for a credit check to be carried out; and if at all possible, make a factory visit to inspect their premises, machinery and the quality of their output. If you can’t visit yourself, it’s often possible to find an independent third party on the ground who’ll make the necessary checks and report back. If you have no existing contacts in the area you’re working with, MangoB2B could help put you in touch with independent, third party inspection-companies, quality control professionals, experienced and qualified in quality control and assurance to help with every stage of the process (in other words, individuals not already associated with the factory in any way).
Be as clear as possible about your specifications – what you expect the finished product to look like – from the outset. Don’t assume the manufacturer will ask if they aren’t sure on any aspect. To fulfil the order on time, they are more likely to come up with a solution themselves and it may not be the one you’re expecting. Make sure there’s no room for misunderstanding, not only in the essential features of the product you’re commissioning, the materials to be used and so on, but right down to the nitty gritty, such as packaging details.
To this end, drawing up a clear, comprehensive written contract will help avoid the confusion that can often result from differing expectations between the importer and the overseas supplier. It’s surprising how often enthusiasm on both sides to work together means this step is overlooked or rushed through. A contract should ensure that each aspect of the process is clearly defined – what will happen; when it will happen; and the responsibilities of each party at each stage. To ensure the contract can be enforced locally, make sure it’s written in both parties’ languages – when trading with China for example, only the Chinese contract is enforceable in that country. Always allow for an arbitration clause to help smooth the path if disputes do arise – this can be less costly than resorting to the law to resolve matters.
The clear majority of overseas vendors are interested in building a profitable working relationship with you; and thereby raising their profile in new markets. They are not, contrary to what you may read in media, simply out to take your money and run. But obviously there will be cultural and language barriers, and often you won’t get it right first time. The key to building a successful relationship is to be open to learning from others’ mistakes. Invest sufficient time at the outset to cover as many of the bases as possible. Take time to understand the business culture and ethos of your overseas partners. This will help you to avoid problems further down the line.