Most amateur would be importers very likely visited a particular country on a vacation and came across a product that was so cheap that they instantly felt inspired to import it into the United States. They concluded that almost anyone they knew would pay for the product three if not five times its purchase price at the country of origin, hence they immediately believed they had a great business idea to pursue.
While this is not entirely far-fetched approach to starting an import business, it is only the beginning to learning if your product may be a winner.
Obviously, the would be importer is in love with his product, assuming that everyone will feel the same way. But will they? No! Not unless you have done your homework.
To decide who will buy your imported product must be based on analysis of your target market. Knowing who your buyer is, what he wants and how much he may be willing to pay for it must proceed import shipment analysis that must follow next.
Being familiar with a country you wish to import from and ideally having some contacts there already, especially with product suppliers, the manufacturers – exporters themselves, are undeniably important factors, but before jumping to conclusions of how much money you will be able to make you need to calculate the landed cost of your product.
The landed cost of your product implies the sum total of your product cost after you have cleared the United States Customs, meaning after you have paid freight, US customs duty, the customhouse broker charges and any other charges you will have incurred in association with bringing the product from overseas.
Cost of freight, duty and broker charges need to be prorated and added to your product purchase price. Once you will know your total cost and divide it by the number of pieces of your shipment and add the prorated figure to each piece of your goods you may establish that the landed cost of your product is just too prohibitive to allow you to markup the product as much as you thought you would.
If you should chose to ignore what your calculations may suggest, you could discover that few if any customers are willing to buy the product at the price you marked it. Such approach to doing business is likely to lead to failure.
Although there may be a buyer there somewhere for your product at any asking price, remember you cannot run your business on hope of finding that specific customer whatever time it may take. You must run your business on a well-calculated product turnover ratio. Simply put, if the product does not sell fast, turn over fast enough, you either have a wrong product, wrong customer or you are selling it at a wrong price.
If you discover your product landed cost is too high you can’t just increase its price in order to maintain the same profit margin you wanted. You just may price the product out of the market.
In order to maintain the same profit margin you may very well realize can be done only if you decrease the prorate of your product landed costs. Provided you are buying from the right supplier at the best possible price, to lower your product landed cost can typically be done only by increasing the volume of your shipment.
If you bought 500 pieces and the size of the shipment is one cubic meter and the prorated landed cost is just too high the only way to bring the landed cost down per piece will be by bringing in a container load of the product, or similar solution of increasing your purchase order .
But to do that you will have to spend more money for purchases, more on freight, more on duty, more on broker charges etc. Do you have the necessary budget to buy to follow through? If not, that product you thought you will make so much money with is not for you! You have to forget importing it and look for another product.
There is more to import business than meets the eye.
- What Product Should I Import?
- Is import export business for you?