Spring 2006
Importing for Profits

Global Trade Websites

CBP.gov: The US Customs and Border Protection's site contains up-to-date border wait times, statistics about importing, tips on avoiding problems at the border and announcements of new regulations. Use the site's search bar to locate the US CBP's importing guide: Importing into the United States: A Guide for Commercial Importers.

FITA.org: The Federation of International Trade Associations' site has articles on global trade, a trade glossary, a calendar of industry events and links to 8, 000 trade-related websites.

GlobalEdge.MSU.edu: Michigan State University's site on global trade includes country profiles, trade news updates, a trade glossary and a forum where visitors can exchange information and ask questions.

Gina Hope can laugh about it now, but eight years ago, the first time she and her husband Greg ever tried importing, 500 of the 1,000 red-and-gold Christmas ornaments she ordered from Kashmir arrived orange and gold. “If there’s any time that red must be red, it’s Christmas!” she says. Subsequent importing attempts have gone more smoothly for the Hopes, but every year they still laugh when they hang one of the orange-and-gold ornaments on their Christmas tree.

Gina Hope is president of Global Groove, (Chiang Mai, Thailand) a buying agency specializing in the gift and clothing industries that does business primarily in Thailand, Nepal, India and Indonesia. She believes that cart and kiosk retailers, even those who operate only seasonally, can benefit from importing, if they buy in volume. She estimates that by importing, specialty retailers can pay between 25 percent and 50 percent less than the prices charged by US wholesalers.

Requirements vary

Miguel Rodriguez, president of Shiva Imports, Inc. (Miramar, FL), has found that product suppliers in some countries are more than willing to sell to small retailers and don’t require the purchase of full containers—20- to 40-foot cargo boxes—of merchandise, while other countries prefer to sell only to large retailers who purchase full containers. “I don’t do a lot [of business] with China because they do a lot with Wal-Mart,” a company that routinely buys in huge quantities, he says, adding that most suppliers in China expect all buyers to buy in similar large quantities. To import from China, Rodriguez says, retailers should be prepared to spend at least $45,000 per order.

On the other hand, suppliers in countries such as Vietnam, India and Indonesia are more willing to sell in small volumes, he says. He also buys from suppliers in Korea and Japan when the need for a particular type of product arises. The key to importing, he says, is to first “determine which country is best for the product you need.” For accessories, China and Korea have some of the best deals, although for home décor items, he advises importing from Vietnam and Thailand.

No matter where the product supplier is based, retailers need to compare apples to apples in terms of quality. Rodriguez thinks very highly of the quality of products from companies in Thailand, for example, but adds that suppliers in Vietnam can now duplicate the quality of Thailand’s merchandise at a lower cost.

The secret to finding overseas suppliers willing to fill small orders is to “find them when they’re small,” says Hope. Large suppliers may have minimum-order requirements that may be much larger than a specialty retailer’s needs, whereas a small company may be more likely to accept an order of $100 or $200, she says.

In addition to finding suppliers with quality products, affordable prices, dependable delivery and responsive customer service, it’s also important to find the right products to import. Certain product categories are better importing choices than others when it comes to specialty retail, says Hope. For example, handcrafted items such as candles, wood items (except those made from protected hardwoods), paper products, ceramics, hemp merchandise, incense and jewelry—are “the best value for the money in the importing business,” says Hope. Better yet, these imports don’t require visas. Visas are how quotas on certain types of products are controlled. Thus, products that don’t require visas, like handcrafted products, are never in danger of being held up because of an imposed limit, she says.

Shipping snafus

imageRodriguez entered the import business as a way to stock a kiosk he and his wife opened in Florida’s Dadeland Mall in 2002. He had visited Thailand on vacation a few times and always brought back a few items as souvenirs: big wooden vases that cost $3 or $4, and bamboo candle holders for around $3. His friends loved them and encouraged him to set up a retail location selling similar items.

Little more than two months after opening their Living and Giving by Shiva kiosk, the Rodriguezes found themselves with a challenge many specialty retailers face: the need to replenish inventory quickly during peak buying periods. Right before Christmas, as a line of customers formed at the kiosk and four employees rang up purchases, the inventory supply dwindled fast. So Rodriguez did what he had to do. He imported more product and had it shipped on a rush basis. Because of the expedited shipping costs, his profit margin plummeted.

Planning ahead (when possible) helps keep costly surprises to a minimum, especially with shipping charges. Typically, shipping fees account for around 60 percent of the total cost of an order, the cost of the merchandise making up the other 40 percent, says Rodriguez. Unfortunately, because “smaller companies are not the priority,” smaller shipments are sometimes delayed while larger orders are processed first.

But Hope points out that as a percentage of the total, shipping costs decrease as the size of the orders increase. In her experience, shipping accounts for up to 50 percent of the total cost of the order on small orders, but as little as 15 percent on larger orders.

Rodriguez’s solution to the cost and delay of very small orders is a simple one, if the retailer is in the country of origin: “Sometimes your best option is to buy [the item] and carry it back,” he says. This is fairly easy to do with smaller home-décor items or articles of clothing, and even larger items can be boxed for air transport. “You can bring $1,900 worth [of goods] back on a flight,” he says, adding that travelers may be required to pay surcharges for heavy items.

Regulation complications

The laws and regulations for importing goods can be confusing. For Ronen Tregerman, CEO of RST, Inc. (Las Vegas), which manufactures the Sea Spa brand of Dead Sea skincare treatments, complying with the various regulatory guidelines is one of his business’s biggest challenges. RST imports the key ingredients in its skincare line, not for cost benefits of importing, but because the ingredients come from Israel—from the Dead Sea itself. “It’s our brand,” he says.

Because every country has its own regulations, he says, importers “have to master logistics and regulatory issues in order to have a smooth-running business.” Staying on top of every regulatory detail is the importer’s responsibility, he notes. Missteps can cause merchandise to be disqualified for import and destroyed.

Knowing the language of the source country helps, he says. If the importer doesn’t speak the supplier’s language, he suggests hiring a translator.

As an alternative, Hope advises hiring a global trading partner to help the process along. Global trading partners are companies that are in business to simplify business-to-business trade around the world. They can communicate with local suppliers and help with buying and shipping, shaving valuable time off what can be a lengthy purchasing process. Buyers who want to sell product starting in November, Hope says, should make their purchasing decisions in June or July.

Retailers who have their own product designs they need manufactured overseas, should allow three weeks for the production of samples, Hope says. Once samples are approved, production typically takes at least two to four weeks.

Shipping can take 5 to 30 days, depending on whether the shipments are made by courier (e.g., FedEx, UPS or DHL), by air or by sea. Shipping times will also vary depending on the size of the actual shipment, whether LCL (less than a container load) or FCL (full container load).

If shipping by sea, importers should allow another one to two weeks for US Customs and Border Protection inspection at the port of entry. There are 79 entry ports to choose from. It’s smart to choose the port closest to the product’s final destination, to minimize the per-mile charge for delivery from the port to the retail store or warehouse. The US CBP details its importing requirements on its Web site (cbp.gov) in a document titled: Importing into the United States: A Guide for Commercial Importers. The Guide covers the entry of goods, compliance, invoicing, duties, classifications, shipment markings (labeling), special requirements and fraud.

Tregerman, whose Sea Spa products are imported directly from Israel, recommends allowing 120 days for merchandise to be manufactured, shipped, cleared through US CBP and delivered. With such a long lead-time, planning becomes essential. Making sure there is a constant flow of product coming in means forecasting sales and ordering several months in advance. To avoid shortages, Tregerman says his company “always makes extra products and packaging to ensure we have enough.”

Price points

imageWhen retailers buy products overseas at a small fraction of their US retail value, they sometimes price the merchandise too low. That’s what Rodriguez did. Early on, when he priced the $3 wooden vases he bought in Thailand at $19.99, some customers wondered if there was something wrong with the vases, because other retailers were charging a good bit more. His sales suffered.

Once he raised his prices to between $24 and $69, right in line with other retailers, his sales picked up. Now the merchandise moves fast at the two stores he currently operates in Florida. His advice: price according to perceived market value, not standard markup percentages.

While the profit potential for imported goods is attractive to many specialty retailers, importing has plenty of risks. Some of the major ones that importers routinely encounter: poor product quality or damage, delayed shipments and higher-than-expected shipping costs.

Because smaller retailers have more to lose with even one delayed shipment, Rodriguez suggests that particularly small or inexperienced retailers consider buying from US wholesalers rather than attempting to import. Local suppliers “are responsible for merchandise, air freight and timing,” he says. “Any problems [that occur] can be resolved in the US.” He adds that it’s sometimes more difficult for retailers to get money back from an overseas supplier than from a US-based company.

Tregerman agrees that buying through US wholesalers might be a better route for some specialty retailers. He points out that when retailers buy through US wholesalers, inventory can be ordered on a weekly basis rather than several months out, and cash isn’t tied up in orders that won’t arrive for some time.

Clearly, importing has its benefits and drawbacks. For some retailers, importing might be the key to substantial profits. Others may prefer the security and dependability of buying from US wholesalers, and some will want to enlist the help of a global trading partner. Each retail business has its own needs, and each business owner must decide where and when the benefits outweigh the drawbacks.

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