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GOLD! Sharing my lifetime experience in export/import. Product sourcing specialist.

Discussion in 'Product Creation, Inventing, Importing, Sourcing' started by Walter Hay, Sep 17, 2014.

  1. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    I have numbered the points you raise so that it is easier to follow my answers.

    1. No. The fact that they are listed as manufacturers means nothing. Almost all suppliers on Alibaba are listed as manufacturers, but in the majority of cases that is false.

    2. Some manufacturers are also trading companies, and that applies in particular to state owned businesses, but as a general rule if they have the word trading in their name, or if they identify themselves as traders, I would not bother with them.

    3. That is true. Genuine manufacturers tend to specialize. That is part of the Chinese culture, where certain cites are almost entirely devoted to manufacturing one type of product.

    4. Traders and wholesalers tend to require large MOQs and they are usually inflexible about reducing the number. One reason is that they want to make a killing on the first order because people often find that they can buy cheaper elsewhere. Another reason is that they often do not have a formal agreement with the actual manufacturer. They use images from the manufacturer's website or catalog, make a sale, take a deposit, and then hope to get the manufacturer to supply them at a price that will give them a profit. The bigger the order, the better chance they have of getting the manufacturer to supply them. If they won't, they will usually refund your deposit but that often takes a long time.

    5. 1) Yes, but you must read the report, because not all who have supplier assessments are manufacturers and that will be stated in the report. The reports can be 10 - 15 pages, but if they are manufacturers their capacity will be stated, so it is worth reading.
    2) Gold status is worth almost nothing in relation to their capability, reliability, or trustworthiness.

    6. I recommend a small number of safe sites, including HKTDC, which is a relatively small site, but you also need to follow safe sourcing practice. It takes me 83 pages to teach that. That is why I don't just publish my recommended sites.

    Walter
     
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  2. tak
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    thanks for the info. Pretty much confirmed my suspicions that I've been dealing with traders. Would it be safe and sound to ask for the ICP number via email?

    On one site, they had a hk domain. Site itself looks pretty professional and legit, though I do not see anywhere on the site that number.
     
  3. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    If they have a .cn website and do not clearly display an Internet Content Provider (ICP) number they are breaking the law and that in itself is usually sufficient for me to say keep away. If you ask for a number and they send it to you via email, that is no guarantee that it is legit. They would not dare publish a fake number online but in an email to you they would not care.

    .hk domains come under a much more liberal jurisdiction and no such number is required. The more liberal rules and regulations in HK are a major reason why huge numbers of Chinese businesses have an office in HK. They will usually transact all their business there.
     
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  4. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Sourcing From Countries Other Than China. Is it Worth It?

    Rising living standards in China are making Chinese products less competitive.

    I have a friend who imports vinyl products and has built a big business out of it, although he now finds local manufacturers are giving him some stiff competition. This is one reason I recommend that would-be importers consider countries other than China. Government labor regulations there are increasing costs and as a result many Chinese companies are moving offshore!

    Does that sound familiar? It is part of the cycle of chasing low labor costs. Japan was once the cheap source, then Korea, then Taiwan, then mainland China, and now Chinese companies are setting up in lower cost Asian and African countries.

    I am a retired importer but I still maintain my contacts. One of my long time contacts in China reports that his factories are now compelled to provide ever increasing perks to his 6,000 employees as well as higher wages and shorter hours. He says his labor costs have risen 40% in the past 3 years and he is planning on expanding offshore, although he won’t close his factories in China.

    As evidence of this changing scene, a number of US companies are now returning their manufacturing to the US.

    So where does this leave people looking for cheap products to resell? Well there are still plenty of them available in China.

    Those looking to source products there should be aware that many factories turn out two quality standards of the same product. One is made to meet a price demand and the other is made to meet a quality demand. The interesting thing is that the price difference is often very small.

    I have directed many people to other countries where they have been able to obtain better quality at the same price as in China, or sometimes they have bought similar quality but at a lower price. In some cases they have found unique products not produced in China.

    Sourcing from China is easy, although many people get burnt for that very reason. They think it is so easy that they can be careless about sourcing. They treat it as casually as buying from their local store and they blindly accept everything they read on B2B sourcing sites.

    Sourcing from other countries will require greater expertise, but I have taught many people how to do it. Those who do begin sourcing in other countries may well be one step ahead of the competition in a few years’ time.

    TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
    Introduction. Dealing with myths and misinformation.
    Some things you should know or do before you start product sourcing.
    Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
    The difference between Alibaba and Aliexpress.
    Traveling to China to visit factories.
    ■ Do your suppliers use child labor or slave labor?

    Q & A 1
    ■ Alibaba and the 2236 thieves.
     
    Last edited: Oct 24, 2014
  5. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Q & A 2.

    Q:
    I would like to know approx. how much cash one needs to begin buying products from overseas?

    A: It is possible to start with a few hundred dollars, but that is doing it the hard way. It is critically important to first do your homework on product selection. I am not an expert in that area but there are others on the forum that can help in that regard.

    If you have selected a product that you are very confident will sell, and you know the price that it will most likely sell at, as well as your selling costs such as postage to your customer, eBay, Amazon, and PayPal fees, that will tell you the maximum landed price you can afford to spend on buying the product.

    To work out the landed cost you should first get the total of the unit price + freight. Then add the duty calculated on that total. Remember that in most countries there will be duty exemptions for shipments below a certain value. It varies from country to country. After adding duty, then add Sales Tax. This final total is your landed cost.

    If the final figure is at or below what you have worked out as the maximum landed cost, you can then proceed to check out a sample or multiple samples. If you have thoroughly researched the manufacturer, you might choose to import a small quantity as a sample shipment in order to reduce the freight cost per unit. Freight on single samples can cost almost as much as freight on 10, 20, or 50 items.

    You start selling after checking the goods, and assuming you have done your homework properly you should be getting profitable sales. You need to put aside all the sale proceeds ready to place another order. If sales continue to be good, you rinse and repeat until you have built up your business to the point where you can a) take out some profit and b) order some other product/s.

    I have had quite a few people tell me about their success stories after starting off with only $300 or $500, but If I was starting off again, I would like to have at least $1,000 to spend on inventory.
     
  6. SeanyHang
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    SeanyHang Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Hey Walter!

    Great thread so far! I'm pretty damn new to importing as I only just started in August (but got a jumpstart on how to do it well from a course I'm taking) and I've been having pretty decent results with Alibaba. At the moment I'm still searching for a great product with good margins and decent volume.. but I'm in the green with what I have so far - so I can't complain. I think I'm going to pick up your book in a few days anyway when I have some time to sit and read it, just to get a different perspective on the importing game (and find out what those SNEAKY more-reliable websites are you keep mentioning.)

    Maybe I scrolled over it and you've already answered this question - and if so, my apologies - but why don't you like to use trading companies at all? If I can find a good trading company with great customer service offering a product that I can definitely make a profit on - then why not go with them? Is it because they could possibly run out of stock? Because the prices are a bit higher? Do you just think that trading companies smell bad?:D

    Thanks in advance for the response and like I said - great thread, keep it up!
     
  7. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    A major difference between dealing with a manufacturer and a trading company is profit. Their prices are not just "a bit higher" they are usually substantially higher. I received a message from one of my book buyers in the UK who had previously bought from traders and he was over the moon. He wrote: " I bought a product in China for £1 ($1.60) and after spending another £1 on packaging, I sold it for £25 ($40)." He went on to report that he had never thought that traders were making so much off him.

    That case may have been exceptional, but I have had similar experience. In the early days of my importing business I dealt with the one and only trader I ever used. It was because I knew him from the days when I was exporting to China and I knew he was technically brilliant in the product field I was interested in. It worked well, but before long he set up his own manufacturing and that is when his prices to me dropped substantially. He now employs 6,000 people and my former franchisees still buy from him.

    Another problem in dealing with traders is that many are opportunists who don't carry inventory, and often don't even have an agreement with a manufacturer. They use pirated images from a manufacturer's website or catalog. quote big MOQs and advertise as a manufacturer. When they get a sale they take a deposit then try to get the manufacturer to supply them at a price that gives them a profit. If the manufacturer won't or can't supply, they have to give a refund, but that is a slow process and sets you back in getting a product to market.

    Traders are usually inflexible with big MOQs because they need them to impress the manufacturer.
     
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  8. sle3pyguii
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    sle3pyguii Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Have you imported from non-Chinese websites before? If you have, do you know if they also take PayPal like the Chinese sites?

    Btw, thanks for making that eBook. Great resource.
     
  9. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Yes, my former franchisees and I have imported from Vietnam, Malaysia, Brazil, Italy, South Korea, Taiwan and Turkey, as well as mainland China.

    The sad fact is that it is very unusual to find a genuine manufacturer that will accept PayPal.
     
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  10. SeanyHang
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    SeanyHang Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Very interesting.. I'm definitely glad that I haven't run into any problems yet! If the price is really that much different I'm going to go ahead and put in a little extra time to check the assessments and make sure I'm finding legitimate manufacturers.

    As I said before - great job with this thread. BTW does your book go over any of the legal standpoints when it comes to importing or is that going to be something that I'd be better off just sitting down and talking to a lawyer about (obviously I should probably do this anyway sometime soon)?

    So what do you recommend in this case? Escrow? Using WU or T/T is just asking to get scammed, isn't it?
     
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  11. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Like all who give advice, I must declare that I do not give legal advice. Having said that, there are things in my book that do relate to legal issues, but they are there only as a record of my experience.

    When you have time to read right through it you will find for example that I suggest ways to avoid breaking certain laws when importing some product categories. The people to contact are not always lawyers.
     
  12. SeanyHang
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    SeanyHang Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Can't say I blame you - was probably even a little silly for me to ask :woot:

    So what do you recommend in this case? Escrow? Using WU or T/T is just asking to get scammed, isn't it?
     
  13. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Unfortunately few suppliers will accept Escrow, except many on Alibaba , but a lot of others there won't. The safest method and virtually foolproof is payment by Letter of Credit. (L/C)

    This is almost identical to escrow, but is done through the major banks. Cost may be more than T/T but it is completely secure as long as you have been scrupulously careful in setting out the specifications and all order details. It is usually only economically viable for larger orders, but if you want maximum safety, that is the way to go. I can give more details on L/C if you like, (it may help other fastlaners) but I think you will find all you need to know when you read the relevant section in the book.

    Payment by WU is an almost total no-no, with the exception being when you have established a good relationship with the supplier and have had a number of satisfactory transactions. There is still a very small risk because the cash can be collected almost anonymously.

    Payment by T/T is very common and has a small degree of safety in that you will only pay to the supplier's business bank account. If you have done your due diligence, including following my advice about correlating post and telephone codes you should be satisfied that the vendor is genuine. Some of the B2B sourcing site reporting systems that I refer to in my book can give you a great deal of confidence and if you have read those reports on your chosen supplier I expect that you would not be worried about paying by T/T.
     
    Last edited: Oct 24, 2014
  14. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Q & A 3.

    This Q & A is very fresh, being from the thread “Caught in Alibaba Hell” but I include it because it shows the consequences of limiting your search to the one B2B site, and I think more people will benefit from my answer if I put it in my thread. I hope there is no rule against this.

    Q. I have spent countless hours on Alibaba, searching, posting buying requests and responding to quotes. I think am being very clear in what I am sourcing and even including pictures and I still get replys for things which don't meet my needs or questions, that were already answered in the request. And then when I do find something I think will work, the cost for a sample is 2000% higher than the actual item. i.e a ball that cost 0.30, is 60.00 for a sample. Aliexpress hasn't proven much better.

    I am sourcing SOLID (hollow is everywhere) rubber balls with a 1/2 hole in the middle, the size of a tennis ball, but smaller or larger will be needed in the future.

    Right now, I am really not trying to purchase 500+ balls

    A. I got a notice about a reply on this thread, so I came back to look. When I saw that you did not appear to have made much progress, I decided to do a quick search of one of my favorite B2B sourcing sites.

    Within 3 minutes I found hard rubber balls, complete with hole, various sizes, can be made to your specs, with no mold charge, any Pantone color, MOQ 100 pcs. Unlike most manufacturers they will accept payment via PayPal.

    Prices quoted are way below many of the prices you will find on Alibaba, and half the best price. Also on Alibaba the MOQ is 1,000 - 5,000. I suggest it would pay you to buy 100 @ 15c each, because the freight on them will be not a lot more than you have been quoted for a single sample.

    If you like to start a conversation with me I will give you a link to the factory's website. They meet all my requirements for a safe business to deal with.

    TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
    Introduction. Dealing with myths and misinformation.
    Some things you should know or do before you start product sourcing.
    Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
    The difference between Alibaba and Aliexpress.
    Traveling to China to visit factories.
    ■ Do your suppliers use child labor or slave labor?

    Q & A 1,2,3
     
  15. BusinessBen
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    BusinessBen Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Hey Walther,

    Nice post. I'm starting to see what you meant about alibaba and wholesalers...

    I'm currently in a similar situation. I'd like to only place an order of 100 items and 100 accessories. I would also like to get branding to protect my amazon listing. However my manufacturer said they require a minimum of 3000 units for silk screening or 3000$ because of "company support for new client initial promotion" if I want to use their brand. Does this sound like I'm dealing with a manufacturer or wholesaler?
     
  16. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    It sounds a little strange to me. It would be rare for a supplier in China to do anything to provide any kind of support for new client initial promotion, except perhaps a small discount, and even that would be very rare. Using "their brand" does not necessarily indicate that they are the manufacturers. Also if it is their brand, the silk screens would already exist, and although moderately labor intensive a multi-color screen printing process should not cost you a dollar per item.

    I think they are just trying to justify a high MOQ and such an approach would usually indicate that you are dealing with a wholesaler.

    There are many ways of applying your own label/logo etc., and I have had a lot of experience in that field, so if you are willing to confidentially tell me the nature of the product, I may be able to suggest a more cost effective method.
     
  17. BusinessBen
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    Hey Walter,

    Applying my own label is a good idea, however it wouldn't be possible. Their brand name is etched directly on the product, the only way to remove it is to order 3000 units. I want to make sure this is not a wholesaler as I don't want unnecessary labels and markups. Do most manufacturer's have a website for their brand? The name of the brand is different from the manufacturers name. I also find it weird that their label is etched and they want mine silk screened.

    P.S. Do you have any tips on how to get a lower MOQ?
     
  18. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Hey
    Ben,

    If their brand is etched and they want to screen print yours, that means that it is not molded or manufactured by some other method with the name already there.

    Etching can be done by various methods. If the item is metal, it can be laser engraved, or photo etched. In either case it would not be very costly to set up. I am guessing that it is probably not colored, in which case laser engraving of 100 items could be done quite economically in the US, or most western countries. Photo etching can also be done locally but the set up cost is substantially higher.

    I suggest your best way to order a small quantity is to tell them you want to buy 100 pcs unbranded as a trial order. You can then have them engraved locally to test the market. If they won't agree to that, you are definitely dealing with a wholesaler.
     
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  19. ddzc
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    ddzc Gold Contributor FASTLANE INSIDER Speedway Pass

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    Hey Walter,

    Awesome thread! Extremely helpful.

    A few questions,

    1. What sourcing strategies and resources do you use when seeking a manufacturer outside of China?
    2. Continuation from question 1....how have you sourced for quality manufacturers who are not on alibaba, khtdc, made-in-china, etc?
    3. I know you mentioned your profit margin rate of 250% after landed costs. I've probably spent countless hours on product research and any generic product in any industry available on platforms like alibaba is literally impossible to resale at a rate of even 100%, let alone 250%. With my research, any generic product found on alibaba is already being imported and sold on platforms like ebay and amazon for 0-25% profit margins tops after all fees like shipping, taxes, duty, paypal, ebay/amazon, etc. The only way I would be able to see such margins is by creating a unique product and brand (which I'm in the process of doing). Other than such a method, as an experienced veteran, what tactics would you recommend to reach such margins?

    Thanks!
     
  20. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Hey ddzc,
    1. If you know what products are a specialty in certain countries, you will then need to find a B2B site relevant to that country, but if you just want to browse while looking for ideas, you will need to search websites for any country that has an export industry. Some of the sites that I recommend are annoying and not easy to use, particularly if you are just browsing, but once you take the time you can find some real gems in the form of unique products that are not already being sold in the US or, UK etc.

    When browsing, it is best to start searching in product areas that are of interest to you, even if you may not have previously intended selling such products. At the same time you should keep your eyes open for other product categories that just might be worth looking through.

    2. The sites you mention above do have some international businesses (including US companies) offering products, but they mostly have suppliers listed from China. There is another very big source that I have used extensively in the past, but I simply can't disclose online because my contacts there would not appreciate an huge influx of inquiries from newbies. It is a source that is generally only known to the big boys in importing and it was for a long time my main sourcing site. Of all the user unfriendly sites that I have encountered this one is the worst, and working your way through it is tedious, and will lead to many dead ends. I give step by step instructions in my book on how to use it, but I know that very few of my book readers actually persevere with it because it is so slow to get results.

    3. A major stumbling block to getting high profit margins via Alibaba is that the vast majority of advertisers falsely claim to be manufacturers but are in fact traders or wholesalers. They add their margin to the manufacturer's price before they quote you, so away goes at least 25% of the possible margin. If you deal with real manufacturers you will get the best price, and I advise against haggling to get that best price.

    The landed price I always worked on included door to door courier delivery or EMS. There were many times when the margins were way above cost X 250%. One of my franchisees once wrote to me (letter on file) "....it is nice to make that occasional $50,000 profit for 1/2 day's work." His landed cost on one such order was around $7,500, and his selling price to the single customer was just under $60,000. I can quote him because I can prove it to the FTC, but I can't quote my own figures without opening up my tax returns from my business that I sold a few years ago.

    The main tactics are:
    • Find a product that is not already being sold in your country. You may need to look past the big advertisers and look for the small businesses. Or you may need to look in places other than China.
    • Communicate slowly, slowly, with a small manufacturer until you build a rapport.
    • Remember that you are an unknown quantity to them, just as they are to you. Build trust.
    • Avoid allowing price to be the main point of discussion in the early stages.
    • Don't ask MOQ. Wait until they tell you. Then request a quote on that quantity.
    • Tell them you would like to place a trial order for x amount. (X = MOQ ÷ 5 or 10) and request quote. Single samples may be necessary first if the unit price is high.

     
  21. ddzc
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    ddzc Gold Contributor FASTLANE INSIDER Speedway Pass

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    That was a super fast response, really appreciate it Walter.

    I have sourced quite a few in demand products direct from the manufacturers, but I tend to always find others importing the same or similar products and undercutting the competitions with ridiculously low margins. In order to crush competition like this you would need to re-design, create better quality, brand the products and market them better...which is all doable, but the margins are still low, not even 100% on many items. I'm currently importing to the U.S as opposed to Canada so I can increase my margins a bit. The import tax plus 13% HST rate on imported good in to Canada kills any margins, plus the shipping from Canada to anywhere is extremely high and a bunch of my products weigh in at 40-50lbs. I'm really interested in that site for sourcing because I'm always looking for unique products to bring in to North America where I don't have to go through the pricey process of building a unique product from scratch (molds and prototype building isn't cheap) - I'm going through the process now with a product of mine.

    Based on the example provided, sounds like a nice B2B deal. I'm looking to break in to B2B wholesaling. When it comes to importing for B2C (Ebay, Amazon), it's a tough game because of the amount of sellers already doing so and undercutting one another to the point where there's no margins leftover. I'm currently doing some importing and B2C online sales, and the only way I profit nowadays are with upsell techniques, but still the amount is minuscule, so it's time to make some drastic changes with the way I operate.

    Love the tactics, thanks!
     
  22. Walter Hay
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    Walter Hay Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    I have always believed that chasing hot sellers is a losing game. When I ran my own manufacturing business, the one where I exported to Asia Pacific countries including China, I developed what was almost a monopoly by introducing superior products of my own formulation. In one industry I did have a monopoly until I refused an offer from an overseas company. They tried to destroy me by selling at 1/2 my price, but their product was inferior and I had incredible customer loyalty. A number of them rang me to ask If I would like them to obtain samples for me to check out.

    As it happens I lost 1 customer, who returned cap in hand 3 months later asking for my help to remedy the production disaster that had cost them 10 times what they were paying me annually for my expensive product.

    Even when importing, I quickly gained a 90% market share in the major part of the market, despite having higher prices. But I had superior quality (sourced from China and Malaysia) and I gave service such as they never dreamed of.

    Both businesses were B2B and it is easier to gain market dominance selling B2B. B2C can be a nightmare due to the price cutting that is the only way many people know how to get orders.

    I have one book buyer who has had great success as a wholesaler, but he fell into it by good luck. He started importing for his own market stall, and other stallholders soon wanted him to supply. He now supplies stallholders nationwide. A big part of his success has been that all deliveries are COD. Financing inventory for customers has been the downfall of many growing B2B enterprises.
     
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  23. Dicky Dee
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    Dicky Dee Contributor Read Millionaire Fastlane

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    Hey @Walter Hay i got a question for you. Could you offer any advice for an importer who wants to import into another country and sell there? Im from Canada and as @ddzc mentioned taxes and shipping here are through the roof, any input is greatly appreciated.
     
  24. Dicky Dee
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    Dicky Dee Contributor Read Millionaire Fastlane

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    Also how much cheaper are U.S. duties taxes compared to Canada?
     
  25. SeanyHang
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    SeanyHang Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    Just wanted to say that I went ahead and picked up the book!
     
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