Asian Time Zone

Are you planning to import products from China to Sweden? In this guide, we explain the basics that all Swedish importers must know before ordering from China. In addition, many products are not suitable for import from China.

Overview

• Which goods should not be imported from China?
• Why you need to create your own brand
• Quantity Requirements (MOQ)
• Lead times
• Import of smaller volumes
• EU regulations, labeling & safety requirements
• Quality control

Which goods should not be imported from China?

China is strongest when it comes to products that must be assembled by hand. This is why virtually all electronics products are manufactured in China, mainly in Shenzhen. The same advantage is also found in a number of different machines and consumer products, such as wristwatches and jewelery. After all, it is China’s relatively cheap labor that is the basis for its success as an industrial country.

Raw materials

Thus, China is not the right country when it comes to importing raw materials or materials whose production is largely automated. Instead, China is a major importer of raw materials, which are then used by the manufacturing industry.

Fake products

In addition, it is also not possible to import branded products (for example Nike or Apple) directly from China. Even if products from brands such as Adidas and Rayban are largely manufactured in China, this does not mean that their products are available for import. In fact, their products are often more expensive to buy in Shanghai and Beijing compared to their stores in Stockholm.

That multinational companies would allow their subcontractors to allow small businesses in other countries to buy and sell their goods on Ebay – at factory prices – is obviously a pure fantasy.

But, then it is crowded with so-called “iPads” and “Genuine Raybans” on the internet. However, there may be two things in particular:

• Frauds
• Illegal copies

There are also those who believe that the real factories are “open at night” and produce the same goods, which they then sell online. However, it is a pure myth, and although such incidents may have occurred ten to fifteen years ago, parallel imports are illegal.

Some electronic products

There are also some product areas where there are no profits to be made, even if the goods themselves can be purchased. Examples of such goods are TVs, computers and mobile phones. It is impossible for a small company to match the prices offered by, for example, Sony and Samsung.

If you are going to get into electronics, you need to develop something new – whether it is hardware or software. However, it is impossible to compete in any way with large companies in this area.

Avoid products with very small margins

It is not possible to enter an industry and expect to compete on prices today. Even if it had been possible, it is in itself a very risky strategy as prices go up and down all the time.

Chinese factories cannot “freeze prices” because commodity prices go up and down all the time. This in turn of course affects the costs of materials and components throughout the chain. In the last ten years, labor costs have also increased in China – which also raises costs for factories.

It is also worth mentioning that the state of China is becoming increasingly efficient when it comes to taxation of domestic companies, something that perhaps not all factories previously included in their calculation.

In short, you need to have a good margin for price increases. If you only have a few percent margin, it’s only a matter of time before you start making big losses.

Create your own brand

The only way to get good margins as an e-retailer today is by creating your own brand. This does not have to be something new and radical, but companies like Tom Hope and Daniel Wellington have shown the way when it comes to creating brands in established product segments.

It is also not free to sell products. Advertising on Amazon, Facebook, Instagram and Youtube is not free. It is not uncommon for companies today to spend more on PPC marketing to sell their products than on the product itself.

Without a margin for online marketing, you will not be able to compete with other companies. It is certainly not the case that the cheapest and best product wins – but it is the product that gets the most exposure.

Fortunately, it is easy to get your logo printed on the product when you import goods from China.

Lead times

This can also be said about lead times. International trade with developing countries takes time. It can also be the case that things go wrong during production, which can lead to production having to start all over again. Only it takes an extra month.

Example

• Production of prototypes: 1 – 6 months
• Mass production: 1 – 2 months
• Shipping: 1 – 5 weeks

Factories are not service companies

Many importers in Sweden are often skeptical about paying for quality control and lab tests themselves. “Should not the supplier guarantee that the product is of a high quality?”. Well, in principle it may seem so, which I also agree with. In practice, the situation is different. To begin with, there is no universal definition of what “good quality” really means, something that is also directly linked to price.

There is also a reason why Chinese suppliers manufacture goods at lower prices than ditto in the West. This is partly due to cheaper labor, but it is also due to the fact that they do not offer anything extra. See it as flying with Ryan Air – nothing extra is included.

This also applies to other services such as design or lab tests. Should suppliers offer design service, lab tests and other services, they will be forced to offer a higher price – with the result that customers go to other suppliers. According to ZhengSourcing.com, manufacturers in China usually have very small margins themselves, often around 2 – 4%.

Quantity Requirements (MOQ)

A recurring problem for small businesses with limited resources wishing to import from China is the quantity requirements, which can be relatively high. To understand why a factory in China has a quantity requirement, one must understand the dynamics of the line between your factory in China and its subcontractors – which can consist of everything from suppliers of materials to workshops that perform parts of the production.

The result is that your supplier must make the same demands on its own customers as it does not pay to buy more material than the factory can sell.

If you plan to import from China with a limited budget, this problem can be solved in part by adapting your product range to a few similar materials – this opens up for your manufacturers in China to reach the subcontractors’ quantity requirements while you can get a slightly larger spread on your assortment. Continue reading and I will explain how it can be done. You can also click here to read more about quantity requirements.

Import of small volumes

It is possible to import smaller volumes, but only if you have a well-planned strategy. First of all, it is impossible for a manufacturer to produce 20-30 copies of a product. They need manufacturers 300 – 500 copies for it to be profitable.

If you have a small budget, you must therefore limit yourself to a smaller number of products. However, you can increase variation by adding details or making simpler modifications. An example of this is to create a collection of wristwatches by using two different dials (MOQ: 500 pcs per design) and then combine these with different bracelets (MOQ: 50 pcs per design). Thus, one can create variation, while the supplier can make a profit.

Another example is reusing materials, but creating different shapes. The cutting itself is a fairly simple and fast process that does not significantly affect the supplier’s margins. It was also exactly what we did once to help a customer get a larger range.

They import bathroom rugs, and wanted to buy several different models. After negotiation with the supplier, we came to the conclusion that they could agree to cut into three different shapes, and dye the material in three different colors – without raising the quantity requirement. The only condition was that all carpets were made of the same fabric. In the end, our customer got nine different products to launch, instead of just one.

What absolutely does not work is to ask the supplier to take a loss, in exchange for promises of larger orders in the future.

Imports of stock items from China

Yes and no. Of course there are stock items, but then they are almost exclusively goods manufactured for the domestic market in China. These products are not manufactured in accordance with EU regulations concerning chemicals, electrical safety and other aspects. In practice, imports of stock items are excluded from imports from China.

Continue reading and I will explain why it is critical to know about applicable EU directives when importing from China.

EU regulations, labeling & safety requirements

Within the EU, there are a number of regulations to deal with. Examples of such directives are REACH and RoHS. Imports of products that do not meet regulations are illegal and can lead to a sales ban.

When you import from China, you can never assume that the factory knows the standards and other requirements that apply to your particular product. It is therefore important to review existing test reports and ask if they are aware of specific standards.

Our recommendation is that you contact the Swedish authorities to ask which regulations apply to your particular product. Remember that it is always your responsibility that the product meets all safety and labeling requirements – not the factory.

Lab tests

It is a legal requirement that certain products must be lab tested before they can be sold in the EU. This applies, for example, to certain types of toys and electronic products, as well as cosmetics. The Swedish Customs and other authorities may request that you present a test report, which proves that the product meets all applicable regulations.

For most products, lab tests are not a requirement. However, authorities can still request that you show test reports, and then it is very good to have already done tests.

Note that lab tests are always paid for by the importer, and not by your supplier in China. However, most large test labs are in place in China, so it is rare for the product to be tested in Sweden.

Quality control

Quality control of a product before delivery is a mandatory step in manufacturing in Asia. Note that there are no practical possibilities to return goods to your supplier once you have paid for and shipped the goods.

However, you can hire a company on site in China to handle quality control in the factory. This way you save both time and money.

common questions and answers

How many different products should we import?

If you are in the start-up phase, I recommend that you first and foremost focus on a specific product. It is too expensive to import an entire range of products. The companies that succeed in importing from China are the ones that have a clear focus from the beginning. Daniel Wellington is a shining example that many are familiar with.

How long does it take to import from China?

Expect it to take at least 6 months to go from specification to delivered product. It takes time to find manufacturers, develop samples, produce a couple of hundred units that will then be quality checked and lab tested – and finally shipped. However, it goes much faster (2-3 months) with future orders.

Can we import on our own or do we need an agent?

Today, it is relatively easy to find factories on your own via Alibaba or Globalsources. In addition, there is a lot of information about imports from Asia, which makes it easier to handle everything from payments to quality controls. However, expect that it will take time to move from idea to finished product.