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Progress Of China sourcing/Ecommerce Startup in Spain

A detailed account of a Fastlane process...
A

ANON29512

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I made this thread as a source of motivation, accountability, recreation and a source of value to others.

My company: We officially started in 2015, March 1 in Spain, Valencia. "We" means me and my brother, Adam and David. We first came to Spain in 2014 Aug, to check out the place for ourselves (via Spanish internship). We then proceeded to do the LLC (S.L. here) which was relatively painless (public sector seems to be okay, at least comparable to Hungary), but private sector is very bad (ex. banks, phone/net providers, all companies in general). We saw lots of reasons how we could add value to this market, which I detail a bit more below.

We're Hungarians not Spanish, despite we choose this market for the followign reasons:
- very underserved market (in terms of costumer support, offers, web infrastructure, treating the customer as inconvenience), language barrier (keeps out good foreign competition; higher barriers to entry), weak competition.
- market is big (47m) and easy to enter other Europeans markets as we grow (Portugal, France, etc.)
- cost of living and doing business a lot cheaper then other Western Europeans countries
- It's a nice place to live, sunshine!
- Situation in Hungary so bad, we were planning to move anyway after I finished university
- Amazon (and Ebay) still new here, but growing so we got to hurry up

Master plan:
We're sourcing products directly from Chinese manufacturers, and sell them online via our website and other online platforms. This way, one our biggest competitive advantage is price (we can undercut everybody and still make 50-150% profit) along with providing great service and customer support, fast and cheap delivery, a great buying experience through our website, product differentiation, own-label products (we tell the Chinese what we want!), etc which makes a nice, stable, varied foundation for our business. Basically optimize, provide the most value and treat the customer as king, which isn't as common here as you would think (not like USA or GB at all).

By the way, we're in the electronics and DIY-tools industry. We decided we won't niche down, as we plan to be a big marketplace (like kogan.com/au), which we feel is still possible to do here.

Progress so far (4th April):
Our website is up, and we're giving dropshipping a try until we wait for the Chinese products. Wholesalers usually give prices higher than large retailers, so we ditched them. DS seemed okay, but prices are barely good enough to make 10-15% profit margin plus competition is rough. Basically, we don't have a competitive advantage here, so this we do just as an experiment. On top of that, the dropshipping companies' (2 of them) communication is shitty, terms not clear/transparent among others, so we're pissed at them. Plan to give them the finger as soon as possible. Feel like this about Spanish companies in general.

Chinese products are being manufactured and will arrive in May (2 shipments). Until then, we figured we might order some products from Hungary, which has similar margins as the chinese products while undercutting everybody.

So, March revenue: 0$ (mostly setting up website, payment gateways, bank account, etc.)

April's going to be our first profitable month! :)
 
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Threenuc

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What's the strategy behind undercutting people? It's generally advised against in the importing threads, since you get price wars. Also, when you undercut, are you sure that the competition won't drop down to around your price? In that case you wanted to make more money, but you decided to undercut and ended up not getting any benefits yet selling at a lower margin (no benefits because competition drops down to your price).

It sounds like I'm criticizing but I'm not, I'm just asking since I'm not sure what's your perspective on that.
 
A

ANON29512

Guest
What's the strategy behind undercutting people? It's generally advised against in the importing threads, since you get price wars. Also, when you undercut, are you sure that the competition won't drop down to around your price? In that case you wanted to make more money, but you decided to undercut and ended up not getting any benefits yet selling at a lower margin (no benefits because competition drops down to your price).

It sounds like I'm criticizing but I'm not, I'm just asking since I'm not sure what's your perspective on that.

Hi Threenuc,

I encourage criticism and your question is totally legit!

We will certainly experiment with different prices, but there's are 2 things that prevent price wars or at least help us pull the longer straw:
- we get one of the best prices since we order directly from the manufacturer
- prices are already quite high (way overpriced imho)

We scanned the price range of an item, and will try selling at the low end (when starting out, at least). So as you can see, prices vary greatly already, but are quite high. People are selling way higher than us, probably with way less profit.

I think I didn't tell in my first post (it's long enough already), that we did some successful selling on Hungarian auction sites for years, where price wars were and are killing the business. But this is fundamentally different, because if people compete with us, they sacrifice their (thin) profit, while we have way more leeway.
 

Kamil G

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Hi

I am founding similar business in my country and i am curious of Yours results. Waiting for update....

PS.
Few questions:
What kind of electronic do You want to sell?
How much money have You spend for first order?
What was Your way to move from Hungary, make a research of market, learn spanish etc?
 
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A

ANON29512

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Hi

I am founding similar business in my country and i am curious of Yours results. Waiting for update....

PS.
Few questions:
What kind of electronic do You want to sell?
How much money have You spend for first order?
What was Your way to move from Hungary, make a research of market, learn spanish etc?


Thanks Kamil, I hope your business goes well too! Which country you're doing it?

1. As our first order, we buy different kinds of eletronic scales (commercial, indstrual, etc.) and winches. We plan to get into electronics later, now we focus on tools-DIY ("bricolaje").
2. I wouldn't like to disclose exact amounts, but it's in the five figures.
3. Well, as I said I first arranged my internship at a Spanish company to physically check out the country. I was studying Spanish before that, and I really improved here too. Language is a definite must in every non-English speaking country. It's impossible to survive without the local language (I was B1 I'd say). We found an English speaking Spanish gestor, who is an administrator of official/formal business, including making your company and accounting.

Market research hmm... We checked online retailers, google search results and competitors, national seller platforms, google keyword planner tool to gauge demand. Moving here was relatively easy, just find a flat for a week through airbnb, look for flats by calling real estate agents (in Spanish of course...). Sadly real estate agents ask for one-month comission which is very annoying, and it's impossible to do directly through owner, another business opportunity here!

Meanwhile we got our formal documents, bank account, register company etc. Overall it was harder in the beginning, but now we're quite seasoned about how things go here, but it definitely was hard. Like finding a good bank... oh banks here are horrible! We once sent a large amount of money with bank transfer and they made us wait aprox 20 days till it arrived and we weren't able to reach anybody who could help at BBVA, one of the biggest bank here. Definitely avoid it like the plague. They act like they're from 60's banana republic. And they bailed them out!

One thing I noticed is companies here don't treat the customer well and they usually fail to notice obvious avenues of optimization. Lots of unmet needs here, and I can assume in Europe in general. I could go on and on about those, but I'll keep it short. :)
 

Kamil G

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Thanks Kamil, I hope your business goes well too! Which country you're doing it?

We start now. During this month we want to build up our website and then start to advertise our business. We doing it in Poland. I have partner in china who take care about supplier and i take care about clients. At the beginin we are focused on jewelry because of our strong connections in this industry.
 
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ANON29512

Guest
We start now. During this month we want to build up our website and then start to advertise our business. We doing it in Poland. I have partner in china who take care about supplier and i take care about clients. At the beginin we are focused on jewelry because of our strong connections in this industry.

Ecommerce is a fast growing business in Poland, I wish you good luck!
 
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ChrisJTurner

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Sounds like you have a plan!

I used to work in this industry for a fair amount of years looking after a £10m account (I was working for the man), so I think if you focused towards the manufacturer industries, you will see some success.
Many of them use purchasing groups that purchase on behalf of the manufacturers and generally take between 5-10% to handle the account.
It might be an idea to find out who these purchasing groups are; and let them know what you are doing.
If you'd like to know any more information on that, feel free to send me a PM.
 
A

ANON29512

Guest
Captain's Log, Stardate 03.05.2015.

I've been through a lot of action since my last post. We got a few surprises like our social security being 260EUR each month instead of 60 as discussed with our gestor. Appearantly if you're under 30 you're only eligible to get this cut in taxes only if you're a natural person (sole proprietor?) and not when you're associated with an company/LLC. Whoops, as my gestor said "It was only for 6 months anyway". Yeah, it only grew sixfold, no problem. By the way, we would have gotten reduced taxes for 1.5 years albeit progressively increasing every 2 quarters. But no problem, hey!

We got freight forwarding done, so our first shipment is on it's way and will arrive in aprox 3.5 weeks! Until then we're constaly optimizing our site (appear more trustworthy) and trying out marketing channels in order to score some (pre)sales. So far 0 sales, mainly because people can't wait almost 3-4 weeks to get the best prices in the country presumably. I think as we get closer to the date we'll start seeing increased interest. I'm confident people will buy our products when they're here. It's good that we started doing stuff so early and improve on things (website, marketing channels, trust etc.).

I also talked about ordering Hungarian merchandise, but it's taking a lot more than expected. First of all, the packaging took a lot more time, then we realised we need an international VAT number to be able to export the goods. So we expected our shipment to arrive next (this) Monday latest, but I think it'll take another week.

Right now we're looking for warehouses which are really cheap around here. We almost good a real good one for 500eur + VAT/month for a ~300m2, but another client of their's were chosen (we haggled around 25euros and 1 months of deposit from 2).

Overall, we're going relatively good. Lot of unexpected things happened but we handled it quite well. Being an entreprenour definitely is difficult in the beginning. We'll see how this month turns out! Until then, hasta la vista.
 

Walter Hay

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@Dimitron, I know it's too late now, but for the sake of other readers, I would like to suggest that a five figure initial order is a huge risk. Many suppliers in China can be unreliable to say the least, and it is advisable to try them out with small initial orders.

Also, although I have only ever sold B2B, I am inclined to agree with Threenuc that undercutting is not a good business strategy. When I started my B2B importing business my prices were nearly twice as high (I know retail is different) as my main competitor, but I sold the superior product mainly on service. The quality was a bonus. I took over 30% of his market within 2 years and a few years later, 90%, effectively putting him out of business.

Best wishes,
Walter
 
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A

ANON29512

Guest
@Dimitron, I know it's too late now, but for the sake of other readers, I would like to suggest that a five figure initial order is a huge risk. Many suppliers in China can be unreliable to say the least, and it is advisable to try them out with small initial orders.

Also, although I have only ever sold B2B, I am inclined to agree with Threenuc that undercutting is not a good business strategy. When I started my B2B importing business my prices were nearly twice as high (I know retail is different) as my main competitor, but I sold the superior product mainly on service. The quality was a bonus. I took over 30% of his market within 2 years and a few years later, 90%, effectively putting him out of business.

Best wishes,
Walter

Thank you for the advice, Walter!

Indeed it's a big risk, and we did quality control inspections, and trust the manufacturer as we already sold their products in Hungary and several large Australian and US retailers buy from the same place. We didn't just find it on alibaba and the likes. We could have ordered a sample though, but in this case we trusted them.

I read your thread that you build a great import/export empire in China, and I think in B2C ecommerce price is one of the most important for customers, along with comfort and speed. This market is also big and growing, and not as competitive/evolved as the US market. Even if somebody did the same thing as us, we could compete and not get bogged down in a price war, as we indeed want to focus on prodiving additional added value apart from price, like an optimized/personalized website and marketing, good customer service, fast, safe and cheap delivery, execution and whatnot. But a good price is the basis of all this (I'd say products are a bit commoditized, so if you can buy the same thing from X then why not?) and you wouldn't believe how expensive products are here in general and how bad other's websites are. So I'm thankful for everybody's advice, but we'll be fine. In any case, we'll experience what reality will be. :)
 
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Walter Hay

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I am pleased to learn that you are dealing with known suppliers. That makes your risk very much lower.

As a matter of interest, the poor customer service that you have seen in Spain does seem to be a problem in many countries, although Spain, Portugal and Italy are among the worst I have found in the EU.

In my own country it was poor customer service reported to me by friends and relatives in a particular industry that led me to choose that niche. I always gave more than was expected and it paid off handsomely, so I wish you success.
 
A

ANON29512

Guest
Buenos días all.

Just wanted to write a short update. The goods finally arrive to our warehouse 9-10 days ago and things started to pick up finally, and our plan is validated. We're finally talking about a fastlane business here, gentlemen. Lessons learned:

  • Preselling doesn't work, even if you have the best prices in the industry (albeit it depends on product type and how well-known you are). The products I sell is only needed when the costumer says "Oh shit, I need this now!". It's not a television that you can wait a month for. It's not a "I'd love this" but an "I NEED this". We offer competitively priced 24h shipping. It was sure a relief after almost no initial interest, but it finally started rolling after stocking up. So far, no complaints or problems. Everybody's happy.
  • Certain marketing channels don't work, some work better. Google adwords and PLA is a flop, even though we expected this to be our best traffic source. We spent 25 euros and got 2 confirmed sales (which exceeds costs fortunately) but overall traffic is of relatively low quality from this source according to google analytics. The shitty outdated free advertisement sites work much better, and a lot of clients call me on phone before purchasing. Was scared initially, now I'm a pro telephone handler en Espanol.:cool:
  • Do what others can't or won't do (barriers to entry). Everybody can go to a wholesaler and start selling online. Of course then your business doesn't have strong foundations and likely will fail. We decided to choose importing with our own labeled products in a country where we barely spoke the language. Never choose the easy way.
  • Cash on delivery and picking up in warehouse is really popular here. People prefer to pay when they see and feel the product. No problem with that!
Further plans:
  • Expanding into Portugal and France to boost sales.
  • Widen product range to boost sales (import more).
  • Start to optimize the hell out of the website to increase conversions. Currently between 10-15% conv. rate but only daily 20-25 visitors.
Expected Monthly Profit based on the average of the last 10 days: 3.000 euros
 
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ANON29512

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"Short" heads up after more than 2 months of starting.

We had a second container of goods arrive of a different product range a couple of weeks ago. They also seem to sell well and our monthly revenue is growing fast. This weeks we had days when we had to ship 10-15 orders a day. Interestingly, this last 2-3 days were quite weak, we get only 3-6 orders per day (seems like 0), despite finally setting up a Google PLA campaign succesfully for our new products. Google PLA by the way is actually converting at a quite good rate, around 8%, so we are satisfied with it. Hadn't tried any Google related advertising other than PLA and text ads, but the latter is expensive and ineffective so we dumped it for the time being (advice on what to try out next would be appriciated). We are constantly trying out new ways to get ourselves in front of our target audiance, and this week applied for 1-2 price comparison engines which hopefully will increase sales. Thinking about trying out Amazon but don't have business credit card.

Personal life-wise, my partner and I had some problems, mainly with his overwhelming negativity, him "not enjoying life" and personal lifestyle which is quite boring and mundane, and watching it makes me sad and angry, and it also affects me too. This seems to improve when we're selling well, but that quite an unstable fundation to base one's happiness on, don't you think? So we had a intense discussion (yet again) and he seems to have shut up a little, but I fear he will forget it slowly. As I read once, if you base your identity on only one thing (ex. finance/work), and don't have anything else going on in your life, if something goes bad (losing money, bad day at work, etc.) you won't have nothing to fall back on. Basically my partner and his attitude had been my greatest problem all along, and we almost separated a few times. His F*ckin negatitvity... Funny, because we don't have any real problems in life, moneywise we're okay, lots of opportunity to be social, parks, beaches, doing sports everyday... He just can't stop putting his life on hold, like he did for many years... And this bothers me and I won't be tolerating it.

So I think that's all. Apart from working, I try to focus on living a eventful, happy life, step-by-step, in this new country of ours. I don't believe I should be suffering and making sacrificies while building my business. I believe one should be happy and enjoy the present moment, and that will make me motivated and keep building/working. I know if I'm burned out that leads to nothing good. I believe happiness is the cause of success, not the other way around.
 
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A

ANON29512

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Happy new year fellow fastlaners.

Just wanted to give a quick sitrep. I'll be very concise:

What are the good things that happened?

1. Business. My company has had a slow start (mainly due to ordering goods conservatively to see if there's demand), but since August it was picking up, and since then we constantly have had 20-25k EUR sales per month. Not bad considering we have 20 products (4 categories). Unfortunately the growth has stopped and we're stagnating on this level of income. Luckily, we have approx. 5 diferent categories of products arriving until the end of February (all very sought after, according to our research), meaning we're doubling our inventory, which means we might just double or triple our sales soon. Not taking into account spring season, when we should see demand naturally increase.

2. (absolutely fabolous) New location. Until the end of November, we've been living in a 60m2 ground floor apartment (quite small for 3), where it was dark and the neighbourhood was full of gypsies and people who didn't care, so mentally we had a tough time, and it was definitely harder to stay motivated with all the garbage, unconscious people, shouting all the time. Working, eating and recreating on the dining room, no privacy, nada.

Now we live in a 160m2 apartment on the 9th floor, with a 30m2 balcony, illuminated, 4 rooms, IKEA furniture, close to beach and city center, with sauna, pool, squash and padel court, etc. World class home, literally for very down to earth prices (850 EUR/mo + utlity), cool owners. Of course, the process was that we had failed to get 9 other flats beforehand and had highs and downs in mood throughout the month, fearing we might don't get a flat, in Valencia houses are ugly and old. Overall, I felt very stressed and it was a tough month.

What's coming up?

1. Going all-in. Our main sponsor (our mom) has given most of her money to us, and now it's invested in merchandise, almost doubling of what we have. All products reseached and should sell better then what we currently have. The business looks pretty stable now and we are expecting great growth this spring.

2. Employee. At the same time, we foreseeing the hire of employees, which especially delights me, as I had enough of being the customer support guy and could really use the help of a native Spanish speaker when it comes to marketing and whatnot. Will focus on high-leverage tasks, such as improving webshop, marketing, processes, customer satisfaction.

3. B2B. Since Spain is still primarily an offline country, we concocted that as an importer we won't restrict ourselves only to online marketing. We have and are contacting big retailers to become their suppliers.

4. Expanding into UK. We always knew that UK was a good market (initially my partner want to go there), but after seeing the search numbers in google there is no comparison (should have done it beforehand eh?). With the same products we stand a good chance of competing in the market and we're just getting started.

Obstacles and challanges

Our webshop is, unlike 99% of webshops out there, a generalist webshop, as our goal is to become a marketplace where people will do their shopping needs, kind of like kogan.com.au, not being a particular expert niche shop. Our value proposition is saving the customer money, coupled with great customer support, great products (differentiated commodity items really), fast shipping, easy and enjoyable online buying experience or customer satisfaction. I always feel all the ecommerce ideas out there don't help me, since my webshop is not niche, our visitors are not homogenic/non-segmentable (and so marketing is hard to focus). So whenever a see an article on how to kill it with facebook marketing, email marketing, twitter, pinterest, whatnot I think "How does that shit apply for me!?"

We already give one of the best prices, so what do I send out in an email marketing campaign? -5% discount? Free shipping (doing this already)? What do I post on facebook? Quotes? Especially considering the products are technical DYI/hardware/tools category. I feel like we're not niche nor a big market place yet, so I don't see how we can improve our marketing or branding. The only growth pushers are getting more products and once we reach hundreds of products people will start recognizing as a big seller with good prices, until then I'll just continue paying for ads, selling on marketplaces.

However, everything is going great and on the long term we'll be a dominant player in the online retail ring in Spain.

Cheers
 
A

ANON29512

Guest
Hi guys,

Quick update.

Since my last post a lot of things have happened.

1) I quit the company in May and returned to Hungary, Budapest.
2) I took up a job as a service desk agent (lol) to make ends meet (my first "real job" lol)
3) I started an ecommerce education website where I teach people how to build successful ecommerce businesses. Still in the beginner phase.

What made me leave was a combination of things.
1) I didn't enjoy what I was doing that much.
2) I didn't enjoy living and working with my family

In a hindsight, I was really burned out... which could have easily been avoided had we hired an employee to handle all the routine tasks like customer support. My partner thought I was lazy and a whiner... but after only 1-2 months of taking up customer support (after I left), he started to understand. Then he hired somebody finally. Jeez...

Now, I'm experiencing all the great joys of working for a big multinational company. I'm in this system where my time is clocked whenever I go out to breaks, and if I'm late, my quality scores decreases, and thus I'll be a bad employee if I do it too much. I have "okay pay", but working+commuting takes 9.5-10h a day.

Now I'm starting to miss my old life. :)

So what's the plan for the near future?

1) Moving back to where I started from. In January I will move back to Valencia. Mainly reason is that I wouldn't have to work a full time job, because it's just really damn time consuming. Plus my expenses are covered (rent, food, etc.), but I'll have to help out here and there. I'm curious what work I'll get.
2) I'm not going to be an official owner of the company again (even if I'd have the option, I wouldn't choose it), but since it's directly tied to my edupreneur business, I'm having an extra incentive to work on it (case studies).
3) While I'm there my main focus is building my email list of my edupreneur business and presell my video courses as soon as possible. Having loads of time will speed of execution of making valuable content.

Thus my dear reader, I guess I'm a quitter? :)

The main takeaway I learned:

1) Never share a company with people who you're not 100% compatible with or just tolerate. Even if you achieve external success, you'll feel miserable inside.
2) Always communicate and make sure to listen if the other person (be it partner or employee) doesn't like something. If the issue goes unresolved for extended periods of time, that person might decide to change things himself.

In a nutshell, that's it. If you're interested my edu site is stepbystepecommerce.org
 
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Samuriscimi

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Fantastic thread.

I'm living in Valencia now, (student) and I'm trying to figure out the market.
You're absolutely right that customer service isn't even a department in most companies.

I'm currently looking for a business owner to work for in return for observing his business and advice.
Do you have any contacts still here in Valencia you could recommend I reach out to?
 
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ANON29512

Guest
Fantastic thread.

I'm living in Valencia now, (student) and I'm trying to figure out the market.
You're absolutely right that customer service isn't even a department in most companies.

I'm currently looking for a business owner to work for in return for observing his business and advice.
Do you have any contacts still here in Valencia you could recommend I reach out to?

Hi Samuriscimi. I'm glad you found some value in this thread. If you are interested in starting your own business and would like some advice you can reach me at my ecommerce facebook community https://www.facebook.com/groups/1150282645053525/

I'm moving back to Valencia in Mid-December so we can even meetup personally if you'd like. My new educational site will be focused on deconstructing and simplifying the startup process of an ecommerce store with minimal startup costs. I'm working out a step by step formula (hence my site's name), that is is simple, minimizes risk and that you can follow.
 

Samuriscimi

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Fantastic, let me know when you get it set up.
And I leave for Morocco (some business development there) in late December- I'd love to meet when you get back.
 
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