As a business owner, you are familiar with risk. Some risks you just have to take while others you avoid. Deciding whether to import from China opposed to sourcing locally is one of the biggest risks a business can make. Many things that can go wrong. But when it goes right, the profits speak for themselves. If you can mitigate the risks associated with importing, you're on your way to building a highly successful business.
Risk 1: A Breakdown in Communication
It’s not easy dealing with another country unless English is their mother tongue. While you may be dealing with someone in China who is fluent in English, it doesn’t mean there won’t be communication breakdowns. What you mean isn’t necessarily what is heard.
Solution: If you don’t have the experience in communicating with Chinese manufacturers, enlist the services of someone who has.
Risk 2: Failing to Build the All Important Relationship
You can’t do business in China the same way you do in Australia. Business relationships are important in Australia but in China 'guanxi' (relationships) is everything. If you haven’t developed a close working relationship with your supplier, your order is at risk. You may think your contact has agreed to your requests only to find they were committing to something very different. Understanding the Chinese business culture can take years, you won’t find the answers in any book.
Solution: Don’t assume you can work the same way as you do in Australia. Find someone with ten years’ experience in doing business in China – that’s how long it can take!
Risk 3: Goods Aren’t What you Asked For
If something goes wrong with your shipment, chances are you won’t be successful when you contact the manufacturer and (politely) explain your dissatisfaction. Many manufacturers won’t be sympathetic to the requests of a small business owner in fixing or refunding you.
Solution: Manufacturers are more inclined to keep a broker happy by fixing their mistakes. If there is the potential that a manufacturer will lose more than one order, they are more likely to comply with a request for the sake of future sales.
Risk 4: Being Over Charged
Price is not always an indicator of quality. It can take months for you to locate the right manufacturer willing to make your product for the right price. Some manufacturers won’t respond, some will quote a high unit cost. By the time you have found the right manufacturer for the right price, you’ve missed months of selling opportunities.
Solution: Use a firm that already has established relationships and cut the time it takes to find the right manufacturer.
Risk 5: High Freight Costs
If you have large bulky orders, you will be using shipping rather than air freight to import your goods to Australia. While it’s much cheaper than air, shipping costs can still be expensive particularly if you are paying the Less than Container Load (LCL) rate opposed to the Full Container Load (FCL) rate.
Solution: If you can’t fill a 20-foot shipping container but still want access to the FCL rate, partner with someone who can share a container and significantly reduce costs.
Risk 6: Your Product Being Copied
It doesn’t matter how many patents or trademarks you have taken out to protect your product. If someone in China wants to copy your product and produce it for other customers, they will. You have no legal recourse and a breach of your IP can’t be enforced.
Solution: Only use trusted manufacturers. Being a large client helps too because the manufacturer doesn’t want to risk losing your business. Using a broker who has multiple orders with the one manufacturer is the best defence in protecting your IP.
While many of these risks are scary prospects, there are ways to protect you and your business. The risks are the reason why our clients use our services. If you have any concerns about importing from China, contact Vara Allied on (08) 6161 8041 or contact us via email. We’ll be planning our next trip very soon.