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How to start business with China

April 17th, 2015 No Comments

Many people dream about organizing business with China. Why do they choose this country?

What are the advantages of having business with China?

Firstly, it a great range of products. It may be a surprise for many people but in Russia there is only 30% of products that Chinese market offers.
Secondly, it is a high level of marginality. Low cost of purchase and high cost of sale. May people guess about it but not many people know a markup for Chinese goods may reach 1000%.
Thirdly, rather good quality of goods. For many people it is a revelation. However, despite the point of view low-grade goods, a situation in this sphere has improved. Chinese partners are interested in long-term partnership that`s why they pay a lot of attention to the quality of goods. Many of them give guarantees for the goods. As a result. People come to them again. Now it is much more profitable to make goods in China. Almost all world brands have industrial powers in China. Quality of goods is controlled. The main thing is not to make a mistake in choosing the partner.
Now there is a majority of firms on the market that offer an intermediary service in commerce with China. At the same time they scare a potential businessman with many difficulties: Russian customs house, fraud… Everyone who decides to work with China will have to deal with these problems. These firms also offer a service of their representatives in China who will help you to look for the goods, deliver it to Russia and problems with customs house. In fact, they are ready to do everything, starting from searching the goods and finishing with its delivery to the storage. It is necessary to notice that these warnings are partially true. If you have enough money, their service will be useful for you. It will help you to avoid mistakes and losses at an initial phase and keep your nerves. But the cost price of the goods increases to a great extent. You should understand what kind of business you want to start. Of course, if you have an idea to organize business or production in China then it will be better to go to China on your own and explore everything there. But usually beginners do not plan to make large investments. Sometimes they do not even make any investments. So, let`s talk about the variant of starting a business with China on your own and do it without mistakes.

What to start with?

Business always starts with choosing a niche and China is not an exception. A common mistake of beginners is that they try to bring goods that no one had brought before. It is very difficult to make it popular. They will have to make great investments in commercial and promotion of it on the Internet. Moreover, there is a danger not to get into the trend and goods will stay in the storage for a long time. It means that it is better to enter a formed market and begin with the goods that are sold very well. It is possible to study the demand by the number of search queries on the Internet by asking friends and acquaintances and learning the range of goods in the internet-shops. Having chosen a product that you are going to sell it is time to offer it for sale on the internet having indicated a delivery time 30 days. You can test the product on your site and if it is in demand then your choice was right.

Where to buy goods?

In China there are many trading sites where you can order everything you like. Certainly, you will have there what to choose. For example, taobao.com is a very popular resource but you should know Chinese there. So, let`s stop at two English-speaking resources: alibaba.com and aliexpress.com.
It is rather easy to find a supplier by means of Alibaba. This site is convenient for the search of any kind of goods. You will see there a comfortable button Post buying request: if you haven`t found necessary product, you can leave a request, having pointed all characteristics of the product you need. Very soon you will receive at least 10 offers from suppliers. There are many comfortable options on the site. For example, you can compare all received quotas. Also you can connect a supplier in the chat and ask him all necessary questions. And of course you can receive information about a seller, his deals and etc.

As a rule, on this sites there is a limitation in weight, quantity and price.

Prices are usually presented according to FOB delivery. It means that seller delivers goods to the nearest port and deals with export issues himself. Customer is responsible for delivery to Russia and does it on his own. While making an order you can choose delivery conditions. Service offers such delivery conditions as CIF and CFR. In this case delivery cost will be included and supplier will send goods to the port. Using CIF delivery cost will be included in the cost of cargo insurance. You can also use a service of inspecting goods before departure. One day of such a service costs 90 dollars and it is not cheap. But this service guarantees that goods will be qualitative and there will be no problems with them. It should be noticed here that no one is going to cheat the customer. But unfortunately Chinese seller very often mix or forget something. So, it is recommended to use this service at least before the first order. Almost all trading sites offer it. Also you may use a service of protected payment Escrow. It is a kind of payment when the seller will receive money after the customer`s confirmation that he has received goods and has no claims. Service costs 5% of payment sum.

If you are interested in the following goods: clothes, shoes, leather goods, jewelry and etc., it is better to use aliexpress.com. It is a part of Alibaba. A great advantage of this resource is that you can order any amount of goods. By the way, if you haven`t chosen what to buy, you can do it on the site. You can see week best-sellers there. These goods were ordered more often. By means of the chat you can talk with the seller. It is convenient. You can also send an e-mail to him.
The site offers such an option as Buyer protection – it is the same thing as Escrow. The system guarantees full refund if the seller doesn`t fulfill his responsibilities. It is not recommended to transfer money directly to the seller. It is better to do on the site.

You can see information about the supplier on the site. You can see when the enterprise was founded, time of registration on the site, the seller`s rating and his feedbacks. It is better to deal with the sellers with at least 95 % of positive feedbacks. You can see the feedbacks at the bottom of the page. It should mentioned here that sellers with a high rating are unlikely to bargain while other sellers can lower the primary price after the process of negotiations.

How to deliver goods from China?

There are many variants of deliveries. You can choose between airmail and courier services. Airmail delivery is free. But it takes a lot of time. And it has a limitation in weight – 2 kilos. You should also realize that it is conditionally free because delivery price is included in the price of the goods.

Courier services deliver goods rather fast. It usually takes them 5-10 days to deliver the goods. As a rule parcels that are more than 30 kilos are not accepted. Greater shipment is cheaper to deliver by sea to Vladivostok. Delivery time may take up 10-30 days. In this case it is better to appeal to a logistic company that will carry out a forwarding. And railway transportation is convenient for huge companies while delivering to any part of Russia. Delivery time may take up to two months.

How to make customs clearance?

Everything that is connected with the customs usually scares the businessmen. Certainly, it is difficult and mixed but you can easily sort everything out. Everything depends on experience. There are two ways: first – import for personal use, it is free of duty. And second – commercial parts. There are different conditions of customs clearance. Everything depends on the price.
If shipment is small, you can formalize it for an individual. You can bring goods for personal use duty-free. Cost shouldn`t be more than 1000 euro (including delivery), and weight 31 kilo. In other cases you will have pay a duty that is 30% of the cost, no less that 4 euro for 1 kilo. You can learn the rules in detail on the portal that is devoted to the customs: www.tks.ru.

Unfortunately, because of new customs rules, almost all delivery services don`t want to deliver goods to individuals. The rules of customs clearance have become stricter. If you buy rather cheap goods in small amounts you can use the following delivery services: DPD, Pony Express and SPSR that haven`t stopped delivery to individuals. But you should remember that according to new rules the customer should order goods to the place of his registration and show a bank card that he had paid for the goods. Moreover, on the 3rd of February there appeared information that Russian Federation government made the limit of duty-free import of goods to 150 euro for one parcel. And now it is still not clear how many parcels will be allowed for sending duty-free.

If you have your own company, you can make a direct contract with a supplier. In this case it will be important to get all necessary documents from him. Otherwise, you may have problems with the customs. Your company should register at the customs as a participant of external economic actions and prepare all necessary documents and report with tax authorities. It is better to ask a broker to deal with customs clearance. Cost of one declaration usually starts from 17 thousand rubles. If you don`t have personal legal entity or you just don`t want to deal with customs clearance on your own, you can ask a logistic company to do it. It usually costs about 30 thousand rubles. By the way, the size of duty may depend on the broker. A good broker will be able to prove a real cost of the goods. Otherwise, you will pay such a sum as customs sets.

What business-model to choose?

At last some words about business-model. As a rule, its choice depends on the starting fund.

It can be a retail or drop-shipping. If you deal with retail or wholesale you need to have all goods in stock. An advantage of this model is fast shipping but disadvantage is risk of suspension of goods. For the realization of this model you can trade either online or offline. It is better to use both variants.

If you don`t have money for buying the goods a system of drop-shipping will suit you. Advantages: goods that are not in stock, you can work with all regions. Disadvantages: such a scheme is not for all goods, customer is responsible for the customs. As a result 85% of clients leave.

What should you be able to do?

So to speak, these are necessary conditiions to succeed in business with China:

  • Right choice of sphere.
  • Good choice of a supplier and work with him.
  • Ability to choose an optimal way of delivery.
  • Knowledge that is necessary to work with customs successfully.
  • Choice of market, commercial, effective work with a client.
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