Starting an Import Business Takes Less Money Than You Think
The biggest misconception about importing is you need lots of money for a large minimum purchase order, or you need to buy enough to fill a 40-foot container. In fact, that initial purchase order you place with a new supplier may take less money than you think.
Minimum Purchase Order Requirements
Every day, businesses large and small are looking for new suppliers with fresh ideas and products. In the early days of the relationship, suppliers and buyers will treat each other with caution. The importer will want to ensure that he can trust the new supplier and the new item will sell quickly. A supplier will want to be sure the importer can come through on a purchase order with a valid letter of credit (L/C) and can move his product in the market as promised. Because of this, nearly all initial transactions are done on a small trial basis, even by big corporations with big budgets.
The small order from your company may actually be the same amount as the initial order from a major department store or mail-order catalog. What will be of more interest to the supplier is your business model: who are your customers and how are you reaching them? If you are selling to the end consumer, are you doing this from a brick-and-mortar storefront with a geographic region that is limited? Or do you have a website with impressive traffic? Are you an eBay Power Seller? Are you well connected with a community of buyers? Do you have established relationships with retailers and a team of sales reps that assist you in moving product on a wholesale basis?
The answer for those questions are more important than the size of your initial purchase order. Offshore suppliers are looking to grow long-term relationships and are willing to work with you to establish trust. Minimum orders are often a guide to what they would like to see on a re-order basis. Remember: everything is negotiable.
From a cash-outlay point of view, the dollars needed depend on the product you will import and the shipping method you use. If you are buying children’s apparel and want an initial selection of products that have an average offshore cost of US$1.00 per unit, a $500 initial purchase order will give you a nice selection of styles, colors, and sizes. If you plan to import teak furniture and need to ship by sea freight, the shipping costs may make sense only if you fill half of a 40-foot container. And if the teak furniture ships as knock-down furniture, it may require $10,000 to buy enough units to fill half of a container.
Shipping Small Sample Orders
The logistics of getting a small order imported may pose a greater challenge than meeting a minimum purchase requirement. Imported goods travel by either sea freight or air cargo. The product you carry will place you into one of these categories. For example, it doesn’t make sense to ship jewelry parts by freight, and furniture is too heavy for air cargo to be practical. But what about a sample order of apparel? Or pet supplies? Automotive parts or toys? These small sample orders can either be shipped via air cargo (at a higher cost, but with maximum speed) or consolidated on a ship with other items from the same country.
Shipping via air cargo is relatively simple for a supplier who may book directly with the air carrier. The order arrives quickly and clears customs quickly, and you are ready to test the market within a matter of days.
If you are shipping less than a container load by sea, you will wait longer to receive your initial order. Your goods will be held in the country of origin until a consolidator can bundle your goods with other products to fill the container.
Your shipping costs on a small initial order may eat up a good deal of your gross profit margin. But the initial order is a trial run at your dream. After you test the supplier, determine the marketability of the goods, and review potential profits, you can reorder on a larger scale. This will result in lower shipping costs per unit.
Other Business Expenses
Along with your initial purchase order, there are other ordinary business startup costs, such as licensing, accounting software, business logo design, marketing collateral, and more. These startup costs are outside the scope of this article and they vary, but are usually relatively small.
Given that a successful importing company can be managed by one person and given the ease with which an online store can be set up with moderate costs, it’s conceivable that an importing company can be started with US$1,000 to US$10,000 or less, depending on the cost of the product to be imported. There are hundreds of success stories of small business owners who buy directly from suppliers overseas and sell the products on eBay as a most basic example. Your business model may be quite different, but recognize that importing does not have a high cash requirement to break in to.
Most importing companies are small operations, especially in the early days. Because so much of the ongoing value in an importing business is the ability to develop relationships, the product or commodity you trade in may differ from one season to the next. You may move product merely for its profitability. Or you may stick with one product industry and become specialized in that item.
Many entrepreneurs find ways to cut corners in the early days to be able to launch their business. Sharpen your pencil and calculate typical startup costs for your business, including cost of space (if leasing), employee salaries, etc. Then add an estimated minimal sample purchase-order budget required of your product. Get clarity around your marketing strategy, and ready yourself for selling your importing business to suppliers overseas.
Locate several suppliers with a solid reputation, introduce your company, and ask for preliminary prices. Explain that you’re in the early days of your business and focus on the energy you will give to moving the supplier’s goods to market. Keep the upper hand by stating what your minimum purchase order amount will be to test the waters, not what the supplier wants of you.
As you can see, how much money it takes to start an importing business depends largely on the product and the required shipping method, not the minimum purchase-order size. Whether you have $500 or $5,000, you can start an importing business.
