Differentiating Your Products (Even Commodities)

If you import non-proprietary (i.e. non-patented) products then building competitive advantage for your products can be challenging. Your competitors can import nearly identical products as you, possibly even from the same supplier as you. However, there are ways to separate your products from your competitors in these cases.

  • Stand by your products. Replace or warrant defective products. Be overly generous in accepting warranty claims.
  • Provide instructions, how-to’s, and other product literature.
  • Develop excellent product packaging and/or product photography/videos
  • Provide accessories with your products or package them in multiple quantities

For the first point, you are bound to sell a product that fails for a customer. Sometimes it will be because of a clear product defect and sometimes it will be because a customer misuses the product. If it’s the former, then make it easy for the customer to get a replacement. If it’s the latter and there’s any doubt about whether it’s a customer misuse issue or product defect issue, than err on the side of caution and give the customer a replacement.  If you don’t stand by your products, your customers won’t.

Second, many product importers are guilty of providing products with a brown box and nothing more. All products deserve some instructional materials that direct the customer in proper usage, assembly, etc.. Your supplier likely won’t provide these, so you must yourself.

Third, include packaging beyond a brown box, especially if you’re selling in brick-and-mortar. If you’re selling online, you might be able to get away with near non-existent packaging but it better be backed up with exceptional photographs, videos, and other media.

Finally, consider including accessories with your products when possible or selling them in multiple quantities. For example, if you import brooms, package dust pans with the brooms. Packaging products together immediately differentiates you from your competition if your competitor requires the consumer to purchase two products in two different locations. You can create similar advantages by selling products in multiple quantities. You can likely achieve economies of scale by selling 2/3/4/etc. widgets in one sale opposed to an individual widget and subsequently pass these savings on to the consumer while maintaining your profit margins.

This list is of course far from exhaustive but it goes to show that you can differentiate your products, even if they are commodities.

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FCL Freight vs LCL Freight

When shipping your goods from China (or nearly any other country) you have a couple of options in terms of Sea Freight: you can fill up an entire container (FCL, or Full Container Load) and have it shipped to you or you can fill up part of a container (Less than Container Load) and share it with a bunch of other people. For LCL shipments your freight forwarder will arrange to have your container filled with other people’s shipments (there’s no shortage of demand for LCL freight in China!). Don’t worry- you don’t have to call around to a bunch of factories in China asking if they would like to share a container with you.

There’s pros and cons to both methods. An exhaustive list would be longer than this but below are some of the main thoughts along with things which might not be entirely obvious on the surface.

FCL Pros/Cons

+You and your supplier control entirely how your freight is packed
+Transport costs in your home country can be lower
-You need to order bigger/and or your supplier might persuade you to buy more product than you really need

For me the biggest advantage of FCL is you and your supplier can control entirely how your goods are packed. You’re renting the entire container and you’re free to do what you like with it inside. You can fill the entire thing with packing peanuts if you want. For transport from your home port of your container, it generally works out cheaper pound for pound (or CBM for CBM) than FCL (generally in my experience I’ll pay around $300 to move a few pallets or $1000 to move an entire container which can hold dozens of pallets).

The biggest downside to FCL is, of course, that you need to fill the container or come close to filling it. I’ve heard a general rule of thumb is that you need at least 15-20 CBM worth of goods to make filling a 20′ container worth it. If you make an order to fill an entire 20′ container it’s not unheard of for your supplier to come back to you after production and say that it turns out all of your goods won’t fit in a 20′ container so how about you order a 40′ container worth of goods instead.

LCL Pros/Cons

+Good option for smaller shipments
+Reasonably priced
-Goods can go missing and/or get damaged more easily
-Pound for pound (or CBM for CBM) more expensive
-Can take longer

LCL is a great option for smaller shipments, especially below 15CBM. If you’re somewhere in the 5CBM-15CBM range then LCL freight is generally your go to option. And overall, LCL freight is very affordable: around $50-150/CBM generally at the time of writing.

However, there are serious draw backs to LCL freight, most importantly in terms of loss of control. If you’ve ever seen YouTube videos showing FedEx or UPS man-handling packages, throwing them around, and cramming them into the back of a delivery truck then you’ve seen a comparable example of LCL freight. While it’s harder to throw around a pallet full of products than a small box from Amazon, fork lifts can work magic and damage with your shipments! With that being said, shipments do tend to be handled with some degree of care.

With LCL shipments there’s also a lot more room for things to go wrong. When you have a pallet of goods being crammed in a container with a dozen other people’s products, there’s an increased likelihood your pallet will go missing or get mixed up with someone else. It’s rare (and hopefully insurance covers any such cases) but it does happen. LCL shipments can take longer, simply by nature of the fact the freight forwarder must arrange to get multiple people’s shipments loaded into one container and unloaded once it arrives.

Conclusion

In conclusion, the vast majority of the time you’ll have little choice in how you ship your products.  If you have 30CBM worth of goods, LCL freight isn’t really an option. If you have 5CBM FCL freight equally is not an option. However, in the border-line cases where you have 15-20CBM worth of goods, it’s important to keep the pros and cons of both LCL and FCL freight in mind.

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Quality Fade: My Experience

How to avoid having the quality of your products gradually fade

How to avoid having the quality of your products gradually fade

A lot of importers fear receiving a shipment of downright horrible, unsellable products. While this can happen, in my experience quality issues normally occur as a very subtle, gradual deterioration. The term quality fade is a popular term used by importers.

How quality fade normally occurs is that your first couple of shipments will be of excellent quality. For example, over time your supplier may switch a stainless steel fastener for a cheaper aluminum faster or switch to a different fabric for threading. Some people might differ in opinion, but my belief is that most suppliers aren’t trying to screw you over by selling you garbage products. They’re making subtle changes that they hope neither you nor your customers will notice (and of course increase their profit margins in the process). And the truth of it is, if no one noticed or cared about the changes they’re initiating, the changes probably wouldn’t be a huge deal. The problem is, often suppliers go too far and make changes that are noticed.

The most important thing you can do to reduce your changes of experiencing a very bad dose of quality fade is diligence. The opening up of China has meant there are now more importers than ever who are careless in terms of quality control. Suppliers have likely dealt with foreign customers who don’t even mention quality fade issues when they occur and make the false assumption that maybe Western companies don’t value quality as much as they’ve made out to value it.

Expect to experience quality fade at one point or another. If you follow the steps below though you’ll lessen your chances of experiencing a devastating dose of quality fade:

-Expect quality fade to occur, don’t simply hope that it won’t occur.
-Document every important product specification in detail in POs/emails/etc.. If you specify stainless steel fasteners and your supplier switches to aluminum, the chances are that your supplier won’t straight up dupe you and ignore these agreed to terms.
-Have either you or a third party inspect your first large order with a supplier before it ships; Do the same for the second  big shipment where complicity is more likely to set in and your supplier is more likely to test the waters by dipping their little toe in.
-If you experience any quality fade issues inform your supplier immediately and put them on notice that you are diligent and will notice any quality fade.

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A Secret Weapon for Doing Competitor and Supplier Research (Part 2)

In a previous post titled A Secret Weapon for Doing Competitor and Supplier Research (Part 2) I discussed how you can use public customs data to do research on your competitors and suppliers. While it’s not hard to see the value in such information, this post will give a quick example of how valuable it can be.

Lets pretend you are in the automotive industry. One of your competitors is very likely to be Autozone Inc, the second largest retailer of after-market auto parts in the U.S.. You notice that Autozone is selling wiper blades for extremely cheap and you wonder a) how they get them so cheap and b) where they get them from. By accessing free customs data information through a website such as PortExaminer.com you can find out this information easily. See the image below.

Public copy of Autozone's Bill of Lading

Public copy of Autozone’s Bill of Lading

By simply searching for Autozone on PortExaminer I have been able to find dozens of copies of Bills of Lading that Autozone has used to import various products into the U.S.. From the Bill of Lading shown above I have been able to determine that Autozone has imported from Unipoint Electric MFG Co. LTD in Taiwan. Further down (not shown above) it says that they imported 1262 wiper blades.

By simply googling the name Unipoint Electric MFG Co. LTD I’ve found their website at http://www.unipoint.com.tw. The information above doesn’t tell me what exact type of wiper blades they imported or how much they paid. However, I do know that Unipoint Electric MFG Co. LTD likely sells a reasonable quality product at a reasonable price by virtue of the fact that they’re selling to a major retailer like Autozone. Chances are, Unipoint Electric MFG Co. Ltd would likely be happy to sell to you directly as well provided your order is large enough (and we know their MOQ is likely not any higher than 1262 pieces).

Public customs data information isn’t the be all to end all for doing competitive research, but for the limited time and money it takes to perform, it’s an excellent arrow in your quill.

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A Secret Weapon for Doing Competitor and Supplier Research (Part 1)

Import records like Bills of Lading are largely public information in the U.S.

Import records like Bills of Lading are largely public information in the U.S.

If you’ve been importing long enough you’ve probably found a competitor selling the exact same product as you but at a lower price. You wonder if your competitor is simply sacrificing margins or if they’re getting their products for cheaper, and if so, from who.

Or if you’re just beginning working with a supplier and they tell you that they supply Walmart/Home Depot/<insert huge retailer here> and you wonder if they’re in fact being completely honest.

Thankfully, thanks to public U.S. customs records, this information is easy to find. In the United States, customs data is public information. That means that any company that imports something into the U.S. (and any company that exports anything to the U.S.) leaves a paper trail behind them that is open to nearly anyone’s eyes.  You can theoretically access this all directly through the U.S. government but most people opt to use a third party website such as a Panjiva or PortExaminer. Most websites are paid but some are free (as in the case of PortExaminer) or offer a number of free searches per month.

You can simply enter the name of the supplier or competitor you are researching and you will be returned, theoretically, all of the recent import/export activity for that company. Why theoretically? Well there’s some serious gaps in the information:

  • Most websites only give you access to U.S. import/export information
  • Information is only as good as the information filled out in customs declaration (describing something on a customs declaration as Auto Parts doesn’t exactly tell you what type of auto part it is being imported)
  • Many Chinese companies hide their activities by exporting under the name of another company/trading company
  • Not every record is available for one of any number of reasons

Even with these short comings though the information you can get about suppliers and competitors can prove very valuable. In a follow up post I’ll show you just how valuable this information can be.

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A look at product labelling and warning requirements

 

product-warning-labelOne of the things importers (and especially people new to the game) often overlook is the importance of product labelling, especially in regards to consumer safety.

We’ve all seen product warning labels before- some venturing on the absurd in terms of their inherent “no sh** sherlock”ness. Now while we can argue the merits of a Starbucks warning label warning that coffee is hot, regardless safety labels can be important for protecting consumers as well as protecting you from an expensive product liability claim that could potentially bankrupt your business and/or you.

I recently had a product liability lawyer review my obligations for a certain type of car rack I was considering importing. Below are some of the take aways from the consultation. Keep in mind product liability advice is very specific to jurisdiction and product, but there’s some good general advice nonetheless.

  1. Products that are inherently dangerous and/or complex require a higher responsibility from the importer in terms of warning the consumer of any dangers. The dangerous part is fairly common sense. However, the complex part not so much. So for example, a step ladder is a fairly simple product that most everyone knows how to use.  Just because someone might use it as a skateboard ramp doesn’t mean that you have a duty to warn not to use it as a skateboard ramp. This would be considered abnormal use. An exercise treadmill on the other hand, where not everyone has knowledge of, would require more warning to consumers.
  2. If you know there is a specific foreseeable risk with your product you must warn of it. Any product can be misused and it doesn’t mean you need to come up with every conceivable way someone could be an idiot. However, known common misuses you must warn against. Listerine is a popular example. The makers of Listerine know people have ingested it to get drunk and therefore they warn against not doing so.

So what can and should you do when it comes to product warning labels for products you import?

  1. Assume your suppliers will include no warnings.
  2. Review your competitors warning labels and liberally “borrow” from them. This is also important because if all of your competitors are warning against drinking mouthwash to get drunk, it makes it tougher to argue that you didn’t know consumers were doing this.
  3. Ensure product warnings are clear to consumers. Putting warnings on your website probably doesn’t suffice. Putting them on product packaging and instructions probably does, and moreso if the warnings are actually on the product.
  4. Know your product. The more you know a product the more you can predict and foresee potential dangers.

 

 

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My dad’s first time experience of importing from China (due diligence warning!)

A few months back my dad was looking to buy a relatively expensive inflatable boat (around $20,000 in Canada). Rather than pay the local retail prices here in Vancouver, he decided to get his friend to help him import one from China (his friend imported smaller inflatable boats on a regular basis). He ended up paying around $7000 as a landed cost and he was over the moon about the great deal he got.

Then a few days ago we’re chatting and he tells me about the crappy Chinese factory he bought his inflatable boat off of. He had gone to start the engine on his inflatable boat only to find the fuel line was totally corroded. It turns out the Chinese factory had used a water line for the fuel line. The water line couldn’t stand up to the corrosiveness of gasoline and corroded away within weeks.  Thankfully nothing too negative came out of things (he simply replaced the fuel line for around $5) but it could have been quite dangerous.

An oversight on a $5 fuel line could have had horrible implications for a first time importer

An oversight on a $5 fuel line could have had horrible implications for a first time importer

As we’re chatting my dad explains to me that he practically had to beg the factory to sell him the boat with the fuel tank and fuel line in it, as they normally only sell them without. In fact, his friend (who he was coordinating this all through) even warned him beforehand that he had heard ‘fuel line horror stories’ from numerous inflatable boat manufacturers in China.

Now my dad can be forgiven for many of the critical mistakes he made as a recreational importer. But lets examine a couple of the mistakes he made:

  • He was informed that a service he had requested was rarely performed by this factory. Subsequently, it was probable that they might be guilty of an oversight like using a water water line instead of a fuel line.
  • He was aware that problems relating to fuel hoses were common place.
  • He never looked into whether fuel tanks and lines were regulated by a government agency.

He could have easily taken a couple of steps to avoid what could have been a disastrous outcome:

  • On the PO, he should have clearly described the required specifications of the fuel hose. On a relatively complex product like an inflatable boat you can’t describe in detail every functional part of it, but you can describe the most important areas, especially those that have been known to have issues in the past.
  • He should have arranged either a pre-shipment inspection, that specifically requested the inspector to examine the fuel hoses, or at the very least inspected it once it arrived.
  • He should have researched the regulations for fuel tanks/lines coming into Canada. His shipment was not inspected by customs but if it was and there were regulatory requirements for fuel tanks/lines, his first time importing experience could have been even more sour.

Again, my dad can be forgiven for these simply mistakes, but for the professional importer, these are critical duties of our profession.

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Know the seasonality of your business

How does the seasonality of your industry affect your suppliers?

How does the seasonality of your industry affect your suppliers?

Many experienced importers know to place their orders with Suppliers well before Chinese New Year and often Christmas as well. However, it’s important to consider the seasonality of your own business as well.

My company imports many outdoor recreation products which are extremely seasonal- most of our demand is in the summer months. Subsequently, I like to place orders and time them to arrive sometime in Spring (i.e. April or May). Subsequently, I would place our orders early in January to allow more than enough time to receive the orders. I was noticing, however, many of our Suppliers would not end up shipping our products until June, July, or even August – critically late for the seasonality of our company.

Through the pain of all of the lost sales, I took note of the sad irony that our orders were arriving at almost entirely the wrong time: as soon as our season was over! Eventually I clued in: nearly all my Supplier’s clients were placing orders with the goal of receiving them some time in April or May. Subsequently, our suppliers would get extremely backed up around this time.

There  was an extremely simple solution to all of this: if I knew my Supplier’s clients were ordering with the hopes of receiving their goods in April, I simply had to order a month earlier with the hope of receiving our order in March. Amazingly our lead time went from well over 100 days to more like 45 days.

The takeaway from all of this is to be well aware of any seasonality influences of your business. If you’re importing snowboards, chances are you’re importing with the goal of having them arrive some time in late Fall. Guess what: so is everyone else! Set clear expectations with your supplier of when your goods must ship by. And, as always, whatever date you want your goods to ship by, insist to your supplier that they must ship 30 days prior to that!

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Guess what- there are factories outside of China! (and even in your hometown)

One of the main products my company imports are a stainless steel boat accessory. We’ve been importing these products for years and I’ve visited our main factory for these parts several times in China.

A couple of years ago, rather serendipitously, I had the chance to rekindle a friendship with someone who happened to be working in a factory building very similar products to the ones we were importing from China. I was floored. I thought “There are factories in Vancouver like the one in Dongying, Shandong making nearly identical parts?”. This seems like an obvious fact but for some reason I never even considered that I could actually source our product locally.

The greater epiphany came when we started chatting about the process I’d go through if I wanted to have his factory make us a few items. I would give his sales manager a call and discuss our product. I’d issue a PO or sign some kind of contract and we’d pay in full 30 or 60 days after our products were completed. I’d drop off a couple of our products and they’d make a couple of samples for me to review. Once the samples were approved they’d go into full production once they completed the orders ahead of my company’s. Finally, we’d pick up the products and issue payment 30 days or so later.

Consider that to the process I was taking with our Chinese factory. I would exchange a couple of emails with  them (whom I had placed several orders with before ever meeting or even talking with on the phone) and eventually place an order, often as informally as a description of the items in a mere email. We’d pay 30% down and 70% once the order was completed. I would invariably think our order was the only order they had (or at the very least, it was the most important) and be baffled when it took more than a couple of weeks to be completed. Finally, they would ship the products 5000 miles to our location and we’d hope for the best in terms of quality and deal with any issues after the fact.

It was an epiphany of sorts. Why was I applying such different standards, worst of all, looser standards, to our Chinese supplier opposed to what I would apply to a Canadian company?

Before working with a Chinese Supplier it’s worth asking yourself what your expectations would be if this same supplier was in your local country? Not all of your expectations can be equally applied to your Chinese Supplier, but many, if not most, can be.

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A Picture is Worth a Thousand Characters

Many importers, both new and experienced, can often be fooled by the English abilities of their supplier along with all of their staff. Requests for prices, shipping information, product information etc. are responded to with near perfect English (minus the inevitable difficulties in differentiating between plural and singular!). It’s an easy conclusion to make that your Supplier and all of their staff have perfect English comprehension.

This of course is a false assumption to make. Even if your supplier truly has perfect English (which is highly unlikely if evidenced by nothing more than my wife’s English after living in Canada for over half her life!) few if any of their staff members will. So when your contact sends instructions to their factory things will inevitably get lost in translation.

I had this problem recently with a supplier. We started importing a new product from a long time supplier and I asked them to package it in a white box (rather than brown box) with our sticker on the front. The first shipment used a brown box. I reminded them again on the second shipment and they sent a brown box with a small sticker on it (think the size of a postage stamp!). Finally I opened Photoshop and made a rough 5 minute drawing of how the box should appear (which essentially was a photo I found of a white box on Google with our logo super imposed on the box). The next shipment it was perfect.

When you are making product and/or packaging suggestions always use a picture when you can in lieu of words. Photos can be understood by anyone, regardless of language or literacy. So if you are importing hiking pants and you want to include a pocket half way down the leg, take a picture of the pants, open the picture in Photoshop or MS Paint (or other editor), draw a sloppy picture of where you want the pocket to appear on the photo and send it to them. You’ll see drastic improvements in receiving your products exactly how you want.

 

A rough example drawing of what you could send to your Chinese Supplier.

A rough example drawing of what you could send to your Chinese Supplier.

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