International trade is a huge and growing industry with serious potential for profit. But, as in all ventures, the amount you stand to make depends on your ability to make informed decisions and take sensible risks. Managing your expectations is vital; for every one importer success story you’ll find online, you should expect there to have been at least ten failed endeavors behind it. Unfortunately, the prevalence of rags-to-riches stories of huge profits made with very little effort can lull first-time importers into a false sense of security. After all, tales of glitz and glamor are much attractive to read than sober, careful pragmatism.
This is especially important to keep in mind when browsing the Amazon sellers community, a loose knit community of people in online forums who help educate each other about best practices for sellers on Amazon.com. While these forums often do provide new sellers with helpful information, it’s important to be able to separate the good advice from the bad. In this article, we’ll point out some of the most common mistakes new sellers make due to uncritically following every piece of advice they find about importing and selling on Amazon.
1) Terminology: it’s “ODM,” not “Private Labeling”
When dealing with suppliers in China, using correct terminology is important for at least a couple reasons. The most obvious is the language barrier that exists between businesses based in the West and factories operated in China. Although most factories will have either English speaking workers on staff or access to interpreters, new sellers can save themselves from a world of frustration and delay by using exact, industry-specific terminology such as “ODM” rather than “private labeling,” which isn’t really used outside of the Amazon marketplace.
ODM, or original design manufacturing, is the industry standard way of referring to the common practice of ordering products from a pre-established template, and then tweaking or branding them according to the seller’s individual needs. Another reason to avoid using the term “private labeling” when dealing with Chinese suppliers is that it can be a dead giveaway of an inexperienced buyer. China’s highly competitive business environment and razor-thin profit margins often cause suppliers to seek to take advantage of buyers who may not be able to spot a scam or a raw deal. Don’t risk painting a target on your back by speaking like an amateur.
2) Don’t window shop factories. Come prepared!
It’s not a good idea approach a potential supplier until you have a detailed product specification sheet covering all aspects of the production of your goods. Don’t leave questions about what materials or components to use up to the sole discretion of the factory. Buyers who do so put themselves at risk of overpaying for the cheapest and lowest quality materials. Even if you’re an inexperienced buyer, factory owners are more likely to take you seriously and treat you fairly if you’ve shown that you’ve done your research and are upfront about your expectations.
3) Never rely on PayPal as your insurance policy.
Buyers who use PayPal as their only insurance policy are setting themselves up for disaster in the event of a factory deviation from the product specification sheet both parties originally agreed to. PayPal’s standard user agreement does not protect buyers from bait and switch. As far as PayPal is concerned, once your product is delivered to you, you’re on your own, regardless of how well your supplier actually upheld their end of the bargain.
4) Find qualified suppliers first, then negotiate price.
It’s not difficult to find success stories online of buyers who chose the first supplier they came across, or the absolutely cheapest supplier they could find. In the real world however, you may be more likely to win the lottery than to conduct a successful business this way. Unscrupulous suppliers in China will commonly offer impossibly low prices for the sole purpose of dazzling inexperienced buyers with the prospect of sky high profit margins.
Little do these buyers know, the sacrifices they’re making in terms of quality will actually end up costing them more in the long run than they’re saving on initial production. Instead, gather a pool of qualified and reputable suppliers and then start talking price. By playing one supplier off of another, you may be able to achieve a workable price without sacrificing quality or production standards. Your final price won’t be quite as low, but you’ll be more likely to receive a finished product that’s actually worth the price, rather than a poorly made product that isn’t worth anything.
There are no guarantees in life, and international trade is certainly no exception to this rule. But by educating yourself to be able to take smart risks, you can avoid coming across as an amateur and maximize your potential for success without having to rely just on beginner’s luck.