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How to keep product costs down as a startup importer

By Fredrik Grönkvist

Going from idea to packaged and delivered product is often a lot more complex and costly than one might first thing. There are plenty of failed Kickstarter funders that can testify to that.

As a Startup, with limited resources, time and money are working against you. In order to succeed, you must go the most out of the small funds you have.

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In this article, we share our experience, to help you keep costs down as you launch your product. Keep reading, and learn how you can take a more lean approach to importing from Asia.

 

1. Focus on one or two products. Not more.

Don’t try to start off by launching an entire collection of products – especially if these are so different that they require separate manufacturers.

Every product is an investment, in terms of time and money. Finding the right manufacturers, drafting specifications sheet and buying samples, take a ton of time and quite a bit of money.

If you spread too thin before you even have something to put on the market, chances are that you’ll never get there in the end.

As a Startup or small business in general, your only strength is your expertise. You must be focused on one product.

Look at companies like Daniel Wellington, the Wristwatch that conquered the world. They started off with just one product.

That seems to have worked out pretty well for them, considering that they turned a $15,000 investment, into a business generating tens of millions of dollars – in only 4 years.

 

2. Keep your design and feature requirements simple

It’s typical that Startups, be in software or e-commerce, run out of money as they try to perfect their product into infinity. As you launch a product, you cannot afford to get hung up on features that don’t really matter.

I’ve seen time and time again, how importers set design and functional requirements, that are either very expensive to reach – or even impossible.

In most cases, this is due to a lack of experience. There are physical limits to what can be done in manufacturing.

Also, too many design details or functions increase the risk of severe delays, or even failure to produce a single product sample.

Indeed, you should not compromise on design requirements and functions that are core to your business model. That said, keep things as lean as possible – and further develop your product once it’s proven on the market.

 

3. Don’t spend too much on new tooling

Every custom designed piece of metal or plastic requires an injection mold. The more custom designed pieces of metal and plastic needed to assemble your product, the more money you’ll end up spending on tooling.

If you want to keep costs low, you should try to use existing tooling to the extent possible. For example, you could put off a new product packaging design until the next order.

Then again, it’s rarely possible to develop a product without investing a single dollar into tooling.

 

4. Start out with just one target market

The United States and the European Union has different sets of regulations. So does Korea, Japan, Russia, Singapore, Nigeria and India.

For every market you attempt to enter, you need to provide a new set of compliance documents and test reports.

This takes time and costs money. Third-party laboratory testing is not free. In fact, it’s a major expense on many importers balance sheet.

Testing costs are charged based on the number of products, or materials, and the number of different regulations (to which a product shall be checked).

In short, you’ll save yourself a lot of time and money if you decide to focus on one market to begin with.

 

5. Manage the process yourself, instead of hiring an agent

A reliable procurement agent, based in China, is invaluable. But, if you are bootstrapping, and you must choose an agency based on their low cost, you are far better off getting it done by yourself.

Why? Because:

a. They’ll make sure to squeeze money from you using supplier kickbacks.

b. They’ll select the supplier offering the highest kickback, not the one that is able to provide the product you want.

c. They don’t consider product compliance, quality management systems or CSR when they select manufacturers. If you don’t know why that could spell the death for your brand, then read this article.

d. There’s no transparency in your supply chain. You don’t have a clue who you are dealing with.

Most of these low-end agents offer no value whatsoever. It’s rather the opposite. They are a liability.

But importing from Asia is a lot more than just sourcing and price negotiations.

You need to consider IP protection, product certification and testing, labelling requirements, quality control and social compliance audits.

There’s no single person, or even company, that can cover every single part of the process. If you come short of anything below three or four million dollars, you don’t have enough to simply outsource all this.

You will need to learn how these things work. Nobody will start a business for you, and especially not your supplier.

It’s not their job to know which standards apply in your market, or how a product shall be labelled. Neither is it their job to patent your designs or design your packaging.

There are no shortcuts. Those who expects an easy ride, and others to do the job for them, should not even consider getting into hardware.

But for the gritty Startup founder, opportunities in the e-commerce space (and not only on Amazon) are plentiful.

And while you’re at it. Go check out new Buyer’s Guide Package. It might be what you need to shave a few years off the learning curve.


Fredrik Grönkvist is the co-founder of ScandinAsian Enterprise in Shanghai. Since 2010, he and his team have helped hundreds of companies worldwide, primarily in the EU and US, to develop and manufacture products in China. He is also the main contributor on www.chinaimportal.com, a leading knowledge base for small- to medium-sized enterprises importing from Asia. For further questions, you can contact him on www.chinaimportal.com/contact-us/.

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