In an ideal world, we would all shop local. A product sourced locally can be a great selling point, however in reality the cost of this can outweigh overseas manufacture, even if you factor in the import costs and taxes.
We would have loved to have our product made in Australia, but as a start-up, we had no choice but to source overseas. I didn’t know where to start, so I entered the often-criticised world of Alibaba. I suspect that most people have heard horror stories about off-shore production, but I think a bad experience can be avoided by doing due-diligence. An online wholesale marketplace where you can buy products in bulk such as Alibaba allows you to compare a number of suppliers; on cost, quality, as well as communication.
The latter in particular led us into some painful mistakes that undoubtedly cost us both time and money (and that’s not to mention the fact that I almost lost my mind with frustration).
I think the most accurate term for the encounter would be ‘lost in translation’. Ask three questions, get one answer back…if you’re lucky). I’d say that the back and forth cost us the best part of a year. If you have a chance to visit the factories, go for it, I truly wish that I had.
The second mistake is most likely the biggest I made. It seems blindingly obvious now of course… however, when you receive a quotation from overseas in dollars….it is almost certainly in US Dollars...and not Australian Dollars. As you can imagine, this was not a fact that I was looking forward to sharing with my business partner! Besides the jump in cost when I finally realised and used a currency converter, we were also heavily stung by a fluctuating exchange rate as the project dragged on and on. (If anyone reading this has experience of a supplier locking in an exchange rate at the time of order, we would LOVE to hear from you!)
Here are a few pointers to consider when finding an overseas manufacturer:
- SAMPLES - Be open to paying for samples, trust me, it’s worth it.
- MOQ – Make sure you ask about minimum order quantity when requesting quotations.
- FACTORY/MANUFACTURER - If you can’t visit the manufacturer/supplier, see if they have Skype or facetime to virtually show you around their facility and so you can ascertain their language and communication skills.
- A point worth mentioning is to ensure that the factory you use are all above board. Your insurance company may even ask for evidence of this. The factory may have a website or online photography which appears legitimate, however you don’t want to discover down the line that you are dealing with a sweatshop. (For our product, we requested their fabric certifications to Australian standards as well as an official policy that they did not employ child labour).
- Don’t be afraid to haggle on the price of the product or ask for a discount if the deadline drags on, all they can do is say no!
- DELIVERY COSTS - Always ask for approximate freight costs before you get started.
- IMPORT TAX - Be aware of costs at your port of arrival such as import taxes and duty as well as the customs costs themselves (believe it or not, our 850kg order cost $400 to get all the way from China and then over $2,000 on tax, duty fees and transport to only a few miles away!)
- Due to recent import duty changes, expect to pay 5% duty and 10% GST on top of the delivery fee (if your delivery is valued at more than $1,000)
- In addition to these costs, it is worth engaging a freight importer to deal with the manufacturer as well as customs at the delivery end. They can communicate with the manufacturer to ensure that all the necessary forms and information such as the certificate of origin are correctly completed to save any issues or delays).
By addressing these points up front, it will give you an approximate overall cost, and allow you to assess your final profit margin on each product. Personally, we chose to include the packaging and delivery fees in our final cost per item to ascertain the real profit margin. (More about profit margin and further costs in an upcoming blog).
This link provides a good overview about importing goods from China, and amazingly, it’s written simply in a way that I understood! https://www.chinaimportal.com/blog/importing-from-china-to-australia/
A well-written guide to buying from Alibaba can be found here: https://ecommerce-platforms.com/articles/buying-from-alibaba. It outlines the essential points to cover when choosing a manufacturer on Alibaba such as the company history, ratings, trade assurance and reviews of that supplier. As I said, spending time doing your due-diligence is paramount!
Co-Founder, Proud Baby