Every business comes with certain risks. While some of these risks can be avoided, others cannot be escaped. Just like every other business, importing products from China and selling them locally also comes with its fair share of risks.
Countless people have started businesses that are based on importing products from China and many of them are able to make huge profits while doing so. That said, importing from China is in itself a big risk as compared to sourcing products locally. However, things like low cost and high demand make it a lucrative business option. If everything goes right, you can make a huge amount of profit by importing products from China. All you need to do is mitigate the risks associated with this business model. If you are successful in doing so, you will be on your way to building a highly profitable and successful business.
Not sure what kind of risks we are talking about? In this blog post, you will learn about the rising risks of importing goods from China and how to mitigate them.
Risks of Importing Products from China
Here are some common risks associated with importing products from China. Make sure you understand these risks and find a way around them before you start importing stuff from China.
1. Communication Barriers
The first and most crucial risk of importing products from China to sell locally is the communication barrier. We all know that China is not an English speaking country. Dealing with someone from another country is in itself a difficult task and it becomes even difficult when they don’t speak English. Even if they are fluent in English, communication breakdowns are common and very much expected. You might not be able to completely understand what they mean and vice versa.
Also, language might not be the only problem in this picture, China has a market-driven by its unique culture and you need a dealer who understands Chinese customs. If you wish to avoid communication breakdowns and barriers, it is best that you hire someone who has experience in communicating with Chinese suppliers and manufacturers. You will find plenty of such agents who can communicate with the Chinese on your behalf. This reduces any miscommunication and misunderstandings between the two parties and will keep you on the right track since day one.
2. Not Building a Close Working Relationship
Doing business in China is different from doing business anywhere else in the world. While business relationships are important everywhere in the world, in China ‘guanxi’ is everything. Guanxi means a relationship in China. Your order will be at risk if you don’t have a close and good working relationship with your supplier. Unless you have a close relationship with your suppliers and manufacturers from China, you won’t know if they are committing to the same thing that you think they are committing to.
Understanding how businesses work in China can take years. It is not written in any textbooks and you will need to experience it firsthand to be able to understand it. Therefore, if you are starting a business of importing goods from China, then it is extremely crucial to understand how a better understanding of Guanxi can improve your business in China. If you are not sure you can handle it yourself, it is best to hire someone who has experience of working with the Chinese before.
3. Products Aren’t What You Expected
Since you cannot always travel to China to see the quality of the products you have ordered, the products might not be what you expected. You may also get something entirely different from what you had ordered. There are high chances that the manufacturer or supplier will not be sympathetic enough to refund you or fix the issue. Even politely explaining your concerns might not nudge them and you are left with low-quality products that will not give you any profits.
If you happen to run into such a situation, it is best to involve a sourcing agent in the deal. Chinese suppliers and manufacturers don’t want to hurt their relationship with sourcing agents as it is a matter of more than one order. They will be happy to fix their mistake if a broker talks to them and makes them understand their mistake. They will also be more careful in complying with your future orders. This will eventually help you build a better relationship with your manufacturers and suppliers as well.
4. High Freight Costs/Unexpected Costs
High freight and other unexpected costs are also a huge risk when ordering from China. If your order is large and bulky, then you will need to use shipping instead of air freight. While it is cheaper than getting your products by air, it can prove to be expensive especially if you are not using the full container. Many times, the process of shipping becomes much greater than the cost of the products. Thus, it becomes unfeasible to get products from China as you will not really be making any profits.
If you are using the shipping and don’t have a full container load, then it is best to find someone who can share the container with you. This will reduce the freight cost significantly and you will be able to save money on shipping.
5. Copying of Your Products
Another big risk of importing products from China is that your products may be copied. It doesn’t matter how many trademarks or patents you have to protect your product. If someone wants to copy it in China, there is nothing stopping them. They may manufacture counterfeit products that look exactly like yours and sell it to other customers. You really don’t have any legal recourse and it is difficult to take any action to stop such manufacturers in China.
The only way you can mitigate this risk is by working only with trusted manufacturers. Manufacturers will also not want to risk losing your business if you are a big client. Similarly, you can use a broker who has multiple orders with the manufacturer. This will keep the manufacturers responsible and they will not try to get into anything illegal when you are paying them so much for the products.
How to Mitigate the Risk of Importing Products from China?
Now that you understand the risks of importing products from China, it is important to find ways to mitigate these risks. After all, we all know that importing from China is by far the cheapest option you have for your products. It also helps you increase your profits that you can never make it the same quantity if you manufacture your products in your country.
Here are some sure shot ways of reducing the risk associated with importing products from China.
1. Plan Your Objectives
First things first, you need to be clear about your business objective. Think about what you are trying to achieve. Many business owners are looking for the cheapest product options and that only comes from China. If you are looking for the cheapest product options, then you must choose a reliable source. Just searching on the Internet for the cheapest option and ordering from them can be a huge mistake.
If your plan is to sell the products that nobody yet sells in your country, then you must ensure that it is legal to do so before ordering them. Consult a legal professional before you make any final decisions to ensure that you don’t lose any money or get into legal trouble.
2. Find a Reliable Purchasing Agent
Doing business with someone you cannot personally meet is difficult. It also comes with a lot of risks and repercussions. If you wish to avoid getting into any issues, then it is best to find a top-rated sourcing agent to source from China to help you out. Sourcing agents in China will verify the manufacturer and save you from any frauds and scams. They will also find out the quality of the products and deal with customs clearance and logistic arrangements. You don’t have to worry about not being able to control everything when you have a sourcing or purchasing agent working for you in China. Furthermore, they can also purchase the products on your behalf and reduce the communication barrier between you and the manufacturer. It will also save your time, efforts and resources.
3. Find and Select the Suppliers
One of the most critical steps of importing products from China is finding the right suppliers. There are not only communication barriers but also cultural differences and geographic distance that you have to take into account when importing from China. You also need to assess if the supplier you have chosen is reputable and creditworthy or not. It is important to find the best suppliers that you can to import your products from China. You can go on the Internet and find reviews about suppliers before hiring them. You may also ask your purchasing agent to find out how reputable the suppliers are. Ask around in your circle for recommendations and you may be able to find a trustworthy and credible supplier.
4. Ensure the Product is of High Quality
It is important to ensure that the products you are importing are of high quality. Otherwise, you will not be able to sell them off at the price you had in mind. Spending a little extra money on samples is always a great idea than getting a useless lot. With samples, you will know what you are investing in and whether it is worth the cost or not. As a business owner, you must invest time and effort in finding the best products and your customers will be willing to pay you for it.
Hence, never order something in bulk without asking for samples of the products first. It will save you a lot of hassle later on. Research about the products and the suppliers and read as many reviews as possible. Ask as many questions as you want about the product unless you are satisfied.
5. Have Everything in Black and White
Just because you are ordering something from China doesn’t mean that you shouldn’t have everything in black and white. You should have a clear contract signed by both parties to set out the delivery and payment terms you have agreed to. This will reduce any issues or misunderstandings with the quality and delivery of products you have ordered. You must clearly mention the payment method that will be used for the products and the currency that you will pay with. This will keep everything sorted and you will not face any issues with the suppliers and manufacturers later on.
We would recommend you to also read: The Importance of Contracts with Chinese Suppliers
6. Trust Your Gut
If your gut tells you that there is something wrong, then trust it. Intuition is a great tool and can help you avert big risks. If you feel that something is off about the supplier or the manufacturer, then it is best not to go ahead with them. Choose someone else. However, keep in mind that it can also be due to cultural and communication differences. But you should be able to identify scams by the way they conduct their business. Listen to what the other party is saying and then do what your gut says.
Just like any other business, importing goods from China also comes with its risks. However, with a little carefulness and effort, you can mitigate these risks and get into a good business relationship with your Chinese counterparts. It is important to understand that you are dealing with people who live in a completely different time zone, speak a different language and have an entirely distinct culture. If you are not sure how to deal with the Chinese distributors, suppliers, and manufacturers, you should find someone who has experience of doing it. Finding a purchasing agent is the best option as it reduces the communication barriers between the two companies. They can also help you find if the suppliers and manufacturers are credible or not.
Follow the above-mentioned tips on how to mitigate risks when importing from China and you will be good to go.
