We are living in a wonderful technology age whereby small businesses can order any type of products from overseas at the click of a button, however, the personal risks involved with importing these products can be taken too lightly.
Irrespective of the amount or means of your purchases, the industry of importing is an implementation that shouldn’t be taken carelessly, especially by first-timers.
Seasoned business owners in the import-export industry have one thing in common- that is a precise business plan on their road to success in the industry which helps to reduce the potential risks. Planning your importing schedule will go a long way in reducing your business’s exposure to needless risk and costs.
SETTING UP IMPORTANT COMPLIANCE
It is imperative that you make sure the product you are working on to import is actually allowed to be received into Australian borders.
The last thing you want to face is wasted time and lost financial expense trying to research and market to potential suppliers only to be advised the product will not be allowed to be imported into the country.
There are many reasons why products can be prohibited from entering into Australia; such as safety concerns and international trade embargoes with specific countries. To check if the product can be imported:
- Discuss with the Australian Customs and Border Protection Service to find out the validity of importing the product and the permits, duties and regulations it might be subject to if you can do so.
If it can be imported then:
- Check with the Department of Agriculture and Water Resources to find out if the imported item will need to be inspected on arrival in Australia.
EVALUATE PRODUCT DEMAND
As with any new product, the basics of market research apply:
Do your research and talk to potential customers to establish the wants or specific needs of your chosen product. Target the type of businesses that might fit perfectly in selling or marketing your product and find out what the consumer base typical are.
As soon as you have established your target market in mind, you need to determine their size and future growth capacity by using demographic and statistical data from the Australian Bureau of Statistics.
It’s best to look for consumer markets with confident long-term outlooks that are being ignored by other businesses.
SO WHAT ARE THE RISKS
The risks with importing can be diverse.
- Your product delivery can be lost in transit
- You have put yourself in a position where your working capital is taken up in import orders leaving you short for future shipments or supplier payments.
- A supplier that is undependable
- If foreign exchange rates move you risk losing margins on your products
- Cost of production increasing due to unforeseeable reasons from your supplier.
Make sure you have a contract that provides you security if your supplier fails to deliver on time. Its best practice to talk with a Foreign Exchange Specialist to devise ways which you can protect you from fluctuations on the exchange rate and how to get a trade finance line of credit
Lastly, you can also consult an adviser with experience importing products for your selected industry to act as a mentor for detecting risks and possible solutions.
COSTS AND PRICING
Until you are in a position to estimate your costs and pricing, you will be able to calculate your breakeven point and how much product you will need to import to realise and start seeing healthy profits.
As well as the standard costs of marketing a product (sales costs, domestic logistics, advertising and so on) imported products also come with their own set of specific costs.
- Customs duties and levies
- Customs brokerage fees
Unforeseen costs in importing can be substantial. If you underestimate shipping costs, for example, or the value of the Australian Dollar declines noticeably, you may find you have no profit margin left in your product at all. It’s important your preparation prior to any order noting all possible likely costs before you go any further.
The importance of sharp pricing is the same as with any merchandise. Pricing should be subjective by:
- Demand for the product
- Your competitors pricing
- Target market price acceptance (what is the consumer willing to pay)
If you are fortunate enough to have an exclusive contract allowing you to retail or wholesale the imported product you are bringing into Australia, or the conditions or paths for your competitors to try and copy you are to difficult, then you should consider charging a premium for your goods.
KNOW YOUR SUPPLIERS
- Last but not least, make sure you know who your suppliers will be.
- Ask for references from their current customers (plus contact details so you can talk to them directly if possible)
- Try and visit them in person if possible. If that’s not possible, make sure you receive samples before you make any orders
Dealing with suppliers overseas has its frustrations especially when it comes to language and/ or cultural barriers. Try and get an understanding on how they like things to be done and learn to be patient to help reduce the chance of ongoing mistakes or misunderstandings.