Last Updated on October 9, 2020
Summary ↬ This is one of the best businesses for starting on a shoestring. You don’t need a dime, you don’t need an office, you don’t need staff, and best of all, you don’t need any inventory. The potential is unlimited. You can sell any amount of something that costs you little or nothing. What you deal with can be tangible or intangible, big or little, expensive, or cheap.
Common Mistakes in the Import-Export Business
Almost everyone who has never run a business thinks they can succeed at import-export. Some do succeed. Most fail dismally. The failures are almost all because individuals feel they will make a fortune by bringing to the Third Word some “essential” product they feel is missing from the local scene. Like Bovril! This is a disgusting brown fatty paste British love to spread on bread. They bring in a load of something they enjoy, like Bovril from their home country, and expect it to sell itself. The goods then rot in a warehouse (if they ever clear customs in the first place).
Going in the other direction, our potential tycoon finds a handicraft product in the third world that he thinks is cute. Maybe it is a pencil sharpener in the shape of part of the male anatomy. You think “It will sell like hotcakes in London or San Francisco”. However, the reality is that once your shipment arrives, you can’t sell it. Or maybe it has bug-eggs in the wood that gets the shipment confiscated and burned at the port of entry. More often, the cute novelty product isn’t properly marketed. Never exposed; nobody buys it.
“Almost everyone who has never run a business thinks they can succeed at import-export. Some do succeed. Most fail dismally.”
Let’s look at the proper way to enter this business. The first step is to have a brilliant idea for a product or service. Yet we must realize that not all brilliant ideas are going to make it. That’s why you need to test your idea/product on a small scale before you roll it out big time. You should never risk any serious money. The sad truth is, in my case, as a young man, I never really tried to make it big. My comfort zone was just to buy and sell enough to pay expenses. I would put away enough for a round-trip air ticket home, and when I had that, I quit and went back to my dull, nine-to-five job.
Then on my next trip (always to Thailand), I found some new ways to support myself without a job. I never got beyond small-scale deals until much later in my life. I realize now that I could have made much more money by simply concentrating efforts on promoting my best products to my best customers. That is the idea in Tim Ferris’ book, The 4-Hour Workweek. But I didn’t. I was always looking for something new. However, for whatever it’s worth, this is my remote job story from when I was in my early twenties.
Find the Right Product to Import
Suppose you’ve learned to love a tropical fruit like Durian. It tastes like vanilla custard but smells like puke. You think it is the greatest discovery since sliced bread. Will people in your hometown agree with you? Before you commit all your hard-earned savings to your “brilliant idea” for exporting a shipload of Durian to Londonderry, please do some necessary homework first. Try out your idea on a very small scale. Can you give it away on the street and make a funny video of customer reactions?
If things work out in a small way, then you can get publicity and expand your business, sell more, add more outlets, and therefore, bring in the customers — slowly but surely. Can you sell Durian in frozen form? As an ice-cream topping to a few restaurants? Will it get a good reception?
“Before you commit all your hard-earned savings to your “brilliant idea”…Try out your idea on a very small scale…”
The biggest mistake that would be import-export people make is to actually buy a load of the product first and then try to sell it. The secret in any business is to sell the product first by way of a sample, and then (being sure of an exclusive supply) bring the actual goods in for delivery to pre-sold customers. This is almost impossible to do with perishable food products. Get something else.
How Can You Sell Something without Buying It First?
There are few if any successful importers, exporters, or traders who are buying things with their own risk capital.
How to do it?
You find (or have created for you) a patented, unique product from a manufacturer that isn’t being sold in your target market. You sign a contract giving you exclusive rights to market and sell this product in a certain country or area, for a certain period, like a year, for instance. Prices and terms are spelled out. Your exclusive distributor contract is renewable each year for, say 20 years. The usual condition is that you must sell a certain minimum quantity each year.
Most manufacturers are glad to have someone push their products in a new market. Normally you will get all the samples and brochures you need. You may (if you area a proved marketer) get a cash advance to cover your expenses as a “manufacturer’s representative.” You should try to wangle a deal where you take no risks with your own money and where possible — can draw an advance against future commissions.
Make Your Mistakes on Someone Else’s Money
Being a manufacturer’s rep is not a hard job to get. You will be essentially a salesperson on a contingency commission. This is the best way to learn a little about importing and exporting on somebody else’s dime. There are many factors and variables in the business so it is always best to make those inevitable mistakes on someone else’s money. Alternatively, work at any job with an existing importer or exporter for a while. Learn the business as an employee. Work for free or subsistence as an apprentice. This is the best way to go, but not the only way to go.
From the Manil Stores to Distributorship Business
There is another approach. My ex-girlfriend Joan once on a trip with me noticed that well-made children’s clothing of a certain brand, unknown in the West, was on sale in the bigger department stores of Manila. These items were to her experienced eye (she had worked in a children’s clothing store) colorful, attractive, and just as well made as similar products abroad. The designs were new and original. Nevertheless, the most interesting thing to her was the retail price in Manila.
It seemed to be about 20% of the retail prices in her hometown, USA. When she checked with the manufacturers, the prices were around 5% of USA retail since the Manila retailers sold at a 4 to 1 mark-up from wholesale. She felt she was on to a winner. Was she?
Joan approached the manufacturer whose half-Italian, Milan-educated daughter designed the clothes. They already had good sales in Italy and exclusive representation there. Joan asked for the USA rights for a trial period of six months. She asked and got the rights to purchase all her needs at their wholesale catalog prices for a year. She was to be the exclusive USA distributor so long as first-year gross (wholesale) sales were over US$100,000 and her sales went up by at least 100% each year until they grossed a million. The seller drove a hard bargain.
However, the truth is that any seller or manufacturer will be happy to renew a distributorship deal if they see steadily improving sales. In other words, if you don’t always hit the sales target, they won’t take away your distributorship. Not unless there is a competitor around who wants to eat your lunch.
Joan then took samples (provided free) to the States. Knowing or discerning who the buyers were, she came back with $500,000 worth of orders, representing $150,000 in potential commissions to her. Everyone involved was happy. Joan thereafter took on other non-competitive lines and became a “peso-millionaire” in a year. She hired staff to run her trading company business and was able to retire in her mid-thirties.
The important thing to remember is that nothing, no matter how good it is, “Nothing Sells Itself”. Marketing was, is, and always will be the essential element in any business.
After she sold out, bored and without a business to operate, Joan as a single mother started giving seminars titled “How To Start Your Own Successful Import-Export Business”.
Summary of My Experience in Export-Import
In general, don’t be like me and try to foist a new product, especially food on a public that doesn’t already have a taste for it. The only people who have ever done this successfully have been huge co-operatives or government marketing boards with millions for publicity. New Zealand pushed the Kiwi fruit successfully. The Kiwi fruit didn’t smell bad. Moreover, there was an established niche market for “gooseberries” — the old name. If you try to push smelly Limburger cheese or durian fruit on consumers it will probably be soundly rejected.
One of the few new foods to make it in recent years was called “Gulaman” from the Philippines. It is sort of a jelly-like substance without much taste that is said to be “good for you.” Like tapioca, it comes dried in packages.
“…If you try to push smelly Limburger cheese or durian fruit on consumers it will probably be soundly rejected…”
It becomes something like “Jell-O” when water is added. Thus, being dried food, it has a long shelf life. I believe an American discovered it in Manila, renamed it “Sago” and spent a lot of money promoting it in Japan. He ultimately became a millionaire and sold out the Sago brand rights to a big Japanese trading company. Now the internationally popular product is made in Japan for export elsewhere.
Generally, for your first venture, never deal in perishables. If anything goes wrong, your product gets rotten fast. Then you have a dead loss. We don’t like the bad odds you will get as an importer of short shelf-life products.
Pricing Your Product For Import
Mark up at Least Seven to One. You can make money on a cheap item or an expensive item, but whatever you are pushing, you’d better be sure that it will sell at a high enough mark up to give you enough profit to make your whole exercise worthwhile. Many people think you can buy something for a dollar and make out just fine if it retails for two. Wrong!
If something retails for two dollars the wholesale price has to be way under a dollar. You may have two dollars in transport and customs duty, another two bucks in advertising and promotion still another two dollars in miscellaneous costs like finance charges, storage, transshipping, and the big one – store or salesman’s commissions at the point of sale.
Before you go into a deal, look for a 20 to 1 mark-up from your cost to the retail price at the destination. What you buy for a dollar hopefully should sell at retail around $20. Is this a hard and fast rule? Not at all, but for a first venture, with a small quantity, you’d better have a good mark-up. Seven to one would be a minimum.
At best, you should have all goods pre-sold at the destination before you purchase them.
“Many people think you can buy something for a dollar and make out just fine if it retails for two. Wrong!”
In any successful business, marketing is 98% of the equation.
The product in most cases is 2%. Still, the product is important. People have to like it and return for seconds. If you have too many returns or bad word of mouth, sales will dry up fast. It is up to you, as the marketing genius to give the product some magic, some consumer appeal. This is why marketers often use celebrity endorsements. Paste-on temporary tattoos would be a hard sell. However, if Lady Gaga proudly displays one on her body to fifty-million video viewers, those tattoos will fly out of your store.
If the product is a smelly cheese, probably all the marketing in the world won’t move it. On the other hand, probably anything can be sold at the right price and with the right approach. Most beauty products are just perfumed pork fat or vegetable fat sold at hundreds of times their cost.
Even I once bought a successful anti-dandruff shampoo that smelled like burning tar. A TV commercial said it would eliminate dandruff or your money back. It worked for me. However, there were a few repeat sales because no one liked the stink. Later on the same outfit, Head & Shoulders marketed a pleasant smelling formulation. Then it became a major brand. Similar story with Sensodyne toothpaste. Moral of the story — if any product can be marketed as “New and Improved” it can sell better than the original version.
The Importance of Test Marketing
Mail order or internet market testing is always a good, relatively cheap way to see if your sales pitch is good and your product will move. Do not buy some handicraft items in Southeast Asia or China, thinking that you must purchase as much as possible during your first trip because it will be expensive to return for more. Buying novelty products without performing any test marketing will usually spell disaster. Having given you that warning, though, much money can be made if you are sensible.
Similarly, don’t send a whole lot of goodies to Bangkok or some other exotic place without first finding out if your intended buyers in the community will actually like the product. How long will local Customs Officers take to clear your goods? Once I had to wait two months for a container of my goods to pass through Customs, simply because the goods were new to the country. They had to be analyzed to determine safety, chemical content, and the proper duty rate.
That sort of delay sours your buyers and can cripple a business idea. If Christmas merchandise arrives late, it won’t even be accepted.
Importing goods into the UK or USA
The economic recession being experienced in Europe and the USA 2010-2011 makes importing and selling products a little difficult, but then there always has been an art in selling (i.e. the art of marketing). You just have to know what products to sell, at what price, and which sector of the market to aim for.
Products can be made in Asia far more cheaply than in Europe or the USA because of low wages and low overheads. A typical factory wage is Baht 125 per day — about $4. This is one reason why developing countries think that all white people are millionaires. Europeans or Americans can receive more than a Malaysian or Thai skilled worker by simply getting on the dole. However, due to the adverse publicity of Third World countries and a warped sense of logic held by many white people, Asian products are often considered “cheap” and not worth buying. A customer may refuse to buy Thai products you import because of the perceived use of slave labor. These are real problems to deal with.
Many customers came into my Thai import shop in London. They would get into discussions with me about Thailand, its poverty, child labor, slave wages, and poor standards of quality. They were “save the world” types who never had any first-hand experience outside of their own country. These same people in order to save the world, would not buy a thing in my shop. Then they would walk into a department store and spend $200 on a jacket that I knew was made in Thailand. They would only see the “Marks and Spencer” label.
“…You just have to know what products to sell, at what price, and which sector of the market to aim for.”
In deciding what products to import from Thailand, I had to deal with this perception of “cheapness” or irrational feelings that the customer would somehow be “supporting a bad government that allows prostitution and child abuse.”
Lately, I see that stores similar to my old import shop with big signs announcing that they are in favor of sustainability, morality, and fair standards. They display posters of happy smiling people working on the “organic, natural, & green” products sold in the store. Phew! It’s all marketing.
Customers harbor many misconceptions and prejudices when it comes to shopping. Be aware of customer concerns by talking with them. Test market. If you don’t you may never know why your marketing efforts don’t work.
My Consumer Girlfriend
I am lucky enough to have a girlfriend with a great sense of style. She will buy embroidered blue jeans and other high fashion items at 2-3% of the high-end retail prices. She always looks good and dresses in high style on a low budget.
But most consumers are not like her. They want status symbols, prestige labels prominently displayed. She is a smart girl but would never consider becoming an entrepreneur, using her good taste to buy wholesale and sell retail, or even better, to become a middleman in business to business deals. If she needs money and is unemployed she will look for a job. Most people are like her.
How to Learn Import-Export Business
You can regularly find advertisements online in the National Press classified ad sections, promoting the idea of starting your own import/export business. If you correspond with some advertisers, you may be asked to pay to obtain literature explaining all the facts, details, and information for becoming their sales agent.
The literature is obviously of interest to people who are clueless and have never been involved in the business. If by an authoritative successful marketer, these things could be good reading for beginners. However, I do not recommend that you pay any extortionate fees. Just start with all the free stuff and use your nose for BS to sort out the valuable information from the pie-in-the-sky schemes.
Better and much cheaper would be the many blogs, e-zines & news-stand magazines. These magazines are full of adverts from established businessmen looking for agents. The magazines are a great source of contacts in the import/export business world. Magazines can be subscribed to, and adverts placed within them, without taking any courses. These magazines survive through selling advertising space and your requests to have a look at a sample will be welcomed.
As in all such things, though we have said “Don’t get a job if you want to make serious money,” the exception to the rule is this: If you can find a successful person in the import-export business who will take you on as an assistant, even if it is for a slave wage — or as a free intern/trainee — it is better than making mistakes and losing most or all of your life-savings on your first deal.
Become an Import-Export Agent
One of the benefits of chatting up tourists in third World bars frequented by other English speakers is that you may find that they are, in fact, businessmen looking for local opportunities.
Gain their confidence by showing just how genuine and helpful you can be. Once the businessman has returned home, he will need someone to look after the local side of his affairs in your area. Often a physical presence is needed to resolve business problems since telephone calls or emails in the 3rd world don’t always get a response. As an agent, either you can charge for time spent on a client’s affairs, or, if you come to an understanding, you may receive a retainer or a commission on goods bought or sold with your help.
Networking at Trade Fairs
Every city and town seems to hosts trade fairs. If you contact the “commercial attach?” at any consulate or go to any local Chamber of Commerce, they furnish you with details of upcoming Trade Fairs. Visit these fairs to get a feel for the selling business.
These fairs are a great meeting place for new contacts. Find the English-speaking stalls and chat with the stallholders. Find out if they have any local agents. Ask what services they could use locally. Your time and efforts can be offered (perhaps on a no-risk-to-them, contingent fee basis) if they have no agent. If they do have an agent, s/he will probably be at the booth. If you are an enterprising person and self-starter and would like to start as a “go-fer” and go for this and go for that — you may get a job right away.
It doesn’t hurt to have a nicely printed business card to offer. Order 500 printed cards that describe you as an import/export agent. Make it easy to contact you and have your photo on the card so people remember you.
Read literature on the import/export business so that you know the standard terms used in the business: For instance, CIF means the price includes Cost+insurance+ freight. FOB means the seller only pays to the point where the Freight is loaded On Board. The carrier is arranged by the buyer in an FOB deal.
It helps if you are knowledgeable about terms like “packing credit,” “documentary letter of credit,” “indent,” “ECGD,” “lien,” “sight draft,” “mates receipt,” etc.
Without knowing these terms it will be obvious you have no experience. If you are indeed a complete newbie, you might as well admit it and say you are “eager to learn the business” and will work hard for subsistence until you are worth more.
Next Stop to Learn about Import-export Business
It should be obvious that this business requires contacts (products & services) in at least two countries. You buy (import) wholesale in one place and (export to) sell (at a profit) in the other.
There are books or directories entitled “Product Guide to XYZ.” XYZ being a country or a region. You will find these directories of manufacturers, importers or exporters both online and at any public library. Normally these guides or indexes are segregated by product. They list business names, addresses, telephone numbers, fax numbers, email addresses, websites, and contact names. You’ll find hundreds of color adverts of products for sale. These directories are updated daily, and they are free online.