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It’s perfectly doable to launch a custom designed and branded product on a low budget, it’s just that you’ll need to get ready to compromise on materials, colors and sometimes even quality.
In this article, I explain what can and can’t be done when importing products from China as a small volume buyer.
1. Small volume buyers can’t always get what they want
Manufacturers in China set their MOQ requirements based on the MOQs set by their material and component suppliers. If you, for example, want to buy a 100% cotton fabric in a certain Pantone color, you must buy a volume corresponding the suppliers MOQ requirement – or they cannot sell you the product.
The alternative is to buy ‘standard materials’ that the supplier or its subcontractors use on a regular basis for multiple consumers. However, this means that you’ll have to settle for what’s available for the time being.
You cannot select colors or make other changes to material quality. Rather than getting that red cotton fabric in your preferred Pantone color, you’ll get a red cotton fabric available as a standard material – which enables the supplier to sell it at a lower volume due to the simple fact that many buyers use the same material.
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2. Buying small volumes can result in quality inconsistency
A while ago we worked with a US apparel brand that had severe quality issues due to changing materials. They were buying a wide range of clothing styles from their supplier in China, but only about 100 or 200 pcs per style.
As a result, the supplier could only use standard fabric and other components.
I called their contact person in Dongguan to better understand the situation. He quickly clarified that they did indeed change materials every or every second order.
Not because they want to, but because of the low volume per SKU forced them to use standard fabrics – which they run out of from time to time.
When they eventually do run out of certain fabric, they have to go to local wholesalers and find a similar fabric. Yet, it’s never exactly the same.
This dynamic makes it difficult, if not impossible, to offer consistent quality as a small volume buyer. You have to settle for what’s on offer, but that itself changes too.
The solution? To reach the fabric suppliers MOQ. This ultimately enabled the apparel brand to get the same fabric for each order.
However, the fabric MOQ (e.g. 3000 meters) is more than they could use for one batch. Instead, they opted for buying fabric made specifically for them but kept the surplus material in the suppliers’ warehouse for following orders.
As such, they successfully managed to keep the order volume per SKU small, while ensuring that they get the same fabric quality each time they place an order.
The key takeaway here is that small volume buyers cannot expect negotiations to do the trick. You need to understand how the MOQs are structured, and how you can work with your supplier to set up a supply chain that works for them too.
4. Why small volume importers still should buy from manufacturers
Trading companies can even make it more difficult to buy smaller volumes, as you cannot communicate directly with the factory to work out how they set their MOQs and whether you can reach some sort of compromise.
Product certification and laboratory testing are mandatory when importing electronics, children’s products, food contact materials, cosmetics, and many other goods. These certification and testing costs are often counted in the thousands of dollars – on a per product basis.
If you do manage to buy small volumes of power banks, for instance, you still can’t get around the high fixed testing and certification costs for your products.
6. Branding your product as a small volume buyer
The goods news is that small volumes generally doesn’t make it more expensive or difficult to get your product branded with your logo. Logo prints and engravings generally add less than 70 cents to the unit price and don’t have an impact on the MOQ requirement.
As such, a small volume buyer has no reason to not get their products branded.
There are no downsides, but a big upside to investing in a brand rather than only selling products.
7. Invest in product quality and don’t attempt to compete on pricing
This one should be fairly obvious, but small volume importers still tend to make this mistake over and over again. Forget about competing on price with giant corporations such as Wal Mart. No matter which product you plan to import from China, you won’t get the same price as they do.
Small volumes and razor-thin profit margins are like oil and water. They don’t mix. Low-profit margins result in huge risks. A small mistake or a late delivery can erase months of profit in a whim. It’s a dead end.
This means that you need to find a way to increase your profit margins. However, your buyers are not idiots. They won’t pay a premium price for a below average product. Making a supplier and product selection primarily based on price is one of the most common mistakes made by small volume importers.
The cheapest product is certainly not the best product, and you won’t be able to motivate a high price. Instead, you need to make a supplier and product selection based on quality.
Buying a quality product doesn’t mean that you have to invest millions of dollars. In fact, the price difference between a “low-end product” and a “high-end product” is often rather slim.
Let me give you a sound example: Watch cases can be made in Zinc alloy and Stainless steel. When buying from a Chinese manufacturer, a Zinc alloy watch can be as cheap as US$5 while the stainless steel version costs three times as much. However, potential mark up on a Zinc alloy watch is slim.
You can’t sell one for more than US$40. This is certainly not the case for a Stainless steel watch that can fetch up to US$400 (well, ten times that if you happen to own a brand named Rolex).
Do you get the point? A small additional investment can make a drastic quality improvement that in turn results in even more drastic improvements in your profit margins.
8. Shipping small volumes from China
Freight costs always favor big buyers. There are still a few things you can do to avoid prohibitively expensive shipping fees.
LCL stands for Less than Container Load, which enables importers to share containers. Rather than booking a full container load yourself, you can book volumes as low as one cubic meter.
Co-founder of Asiaimportal (HK) Limited and based in Hong Kong. He has been quoted in and contributed to Bloomberg, SCMP, Alibaba Insights, Globalsources.com, China Chief Executive, Quartz Magazine and more.
Hey there, I’m Fredrik!
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