It is not as simple as saying: “These are the best things to import.” What is best for you to import depends on your own particular skill set.
1: Commodity Products
Commodity products are things like lumber, concrete blocks, carpeting, and whatever, things that people use up and fundamentally buy based on price, or things they buy a lot of at a season period of time.
When I was in business with my Chinese partner, one of the biggest items we brought in every year was artificial Christmas trees. How many houses in America have an artificial Christmas tree up at Christmastime? Probably 95%, right? The downer is that there is an established price for those. An eight-foot Christmas tree is worth, say, $47.20. There are so many of them out there and they are fundamentally the same doggone thing; one is not a whole lot different to the other. They have that established price and the markets are driven by price.
If you’re selling bamboo flooring, it will have an established price of X dollars per square foot. People buy it in massive bulk because tons of people use it, and I would imagine the margins in bamboo flooring are extremely tight. Does this mean importing commodities is a bad idea? No, it doesn’t. It means that if you are going to import commodities you’re going to be a different kind of importer. The kinds of people who import commodities are typically people who look at importing as if it’s a stock trade. They can go to China, buy a million dollars worth of hardwood flooring with practically no risk, knowing the hardwood flooring is already sold by the time it lands here for $1.2 million. They can make a 10% or 20% return on their million dollars in 60 days. If you trade stocks, that isn’t a bad return.
There is the ability to import like that, but here’s the downer to that: in a commodities business you have to have the best price possible. If you buy wrong, you’re dead in the water. If you buy for more than the market, it is a zero sum game. It turns that profit margin upside down. Also, if you have a quality control issue, you’re dead in the water. If the boards are supposed to be 4 inches wide and they are 4.15 and it doesn’t fit anybody’s blueprints or floor plans anymore, you have a million dollars worth of firewood. The commodities import business is not my favorite kind of importing for these reasons. Also, you make such a low margin that it is not worth your time unless you are investing $1 million or $2 million at a time. It is hardly worth making 10%.
There is one way to make money in commodities and a good friend of mine does this. He brings in Freon for one of the largest automotive supply companies in America. It is a commodity, but he made the relationship with the factory and got that locked down. He then went to the automotive distributor and said, “Look, I can get you Freon for $30,000 a container. If you are willing to put up your letter of credit, your money, and take the risk, I’ll go all the work for you for 8% per container. I’ll handle all the importing for you.” He had a track record of being a successful importer. They wouldn’t just let Joe Anybody do this. These containers come in and there is $100,000 worth of Freon in a container. He makes $8,000 per container and they bring in several of them per month. This is zero risk to him.
There is a downer to that model: they could decide to screw him out of the equation and go directly to the source. However, if they’re smart, they won’t do this. The importer does a lot for quality control, and most of the retailers get the benefits of using a good importer who has a relationship with the factory. And of course, they’re scared to lose their money, too.
2: Gifts And Décor
The gift and décor market is a huge market. It could also include the fashion market. As far as gifts, décor, and clothing go, basically you need to have good taste or somebody with good taste, possibly a designer.
However, good taste to you may not be the good taste that sells. I was working with a home décor importer who sold all of his stuff to Walmart. I think I have a pretty good eye for design, so when we started working together I started bringing him designs of all these really high end candles and things I’d seen in New York at Bloomingdale’s and Bergdorf Goodman and all these high end department stores. Every time I’d bring something in, he’d go, “No, no, no! It’s all wrong.” I was getting all of my design ideas from high-end magazines and going to very expensive stores in New York, Europe. I’d bring in these fantastic, and he’d say, “All wrong, all wrong, all wrong.” Finally, I was so frustrated that I said, “Look, they have this here, here, and here,” and showed him the different stores. He got frustrated with me and he said, “You don’t understand. Only 5% of Americans have really good taste. We sell to everybody else.”
He knew his market. He knew exactly who his market was, and he knew they would buy the Jeff Gordon NASCAR candle long before they would buy a fancy, beautiful, frosted candle that looks like a cake.
The upside to home décor is that the margin is sick; it is ridiculous. The margin is sick and you’re probably looking at a purchase price of anywhere from eight to ten times your money. That is cost of retail.
3: Niche Markets
Niche markets might be hobbies. This is something where you have specialized knowledge of the industry. Maybe you are a model train builder and you know there is no real branded track. Maybe the trains are branded, but the tracks are not. I don’t know: I’m not a train guy. I’m just making this up. You may decide that the price you are paying for your model train track is ridiculous. It is, say, $10 a foot and you may be able to find it in China for .50 cents a foot. You know you have a market there. You can bring in the product knowing pretty much what the market is based on your specialized knowledge.
One of the best examples I’ve seen of this is a guy who used to work for Ford Motor Company. He was one of the guys who designed the little keyless clickers for locking and unlocking your car. I used to have a building next to this guy and every couple of days I’d see a 40-foot shipping container back up to his back door and they would unload it. The entire contents of those containers were keyless door clickers for cars. He sold them to car dealerships, to automotive parts companies, and so on, as a replacement for when you lose your car clicker.
Basically, these things sell for $150 to $200 a piece from the car dealer. This guy would sell the replacements to other people who would sell them for $50 or $60. He got anywhere from $12 to $20 wholesale for them, and he was paying $2 to $3 per clickie. He knew his market, and he knew his product. He found all of these different places, non-traditional places, to sell his goods. He sold them to retailers and to parts suppliers. He sold them to car washes, so when you’re walking through the carwash watching your car get washed and you go to check out there is a rack of these little key clickies. He sold them to locksmith companies. He’s getting anywhere from $12 to $20 wholesale and he’s paying $2 to $3, so there’s your margin difference.
4: Business To Business Goods
I had a company for a while called Cleveland Equipment Company. We had tapers manufactured for us, which is a piece of packaging equipment, and liquid fillers and heat-sealing equipment to shrink-wrap products with. All sorts of packaging equipment, which is real niche B to B stuff. I was able to get my one-third of wholesale buying price and still be ultra-competitive in the market.
I was selling directly to end use consumers. We did this via the Internet; we did it via trade shows. We had a repping network that went out and showed our products to other people. You want to become prime: this is your ultimate goal. This means you are the source for everybody to get their products from. In heat sealers we became a prime vendor, which meant we always had the product in stock and our stock was good. We had a lot of good quality control testing, we had a lot of units out in the field, and we knew that everything we had was good.
Here’s what happens when you’re prime: your market becomes global. We sold equipment to England, Germany, South America, Brazil, Iceland, Canada, South Africa, Australia, New Zealand, and all over the place, because we had kind of odd products for which there was a specialized need. We would bring in a piece of equipment for $700 that we retailed for $3,700, and that was a pretty normal market.
If I bought that same piece of equipment from the States, I would have paid $3,400 for it. Imagine this now. There are a lot of guys out there competing with me. They’re paying $3,400 for a piece of equipment and trying to sell it for $4,000. Well, I’m beating their brains out at $3,700. Once I come into the market at $3,700, they have to reduce their price to match me or they won’t sell any. But they’re already on a slim margin, so now they are making $200 or $300. What can they spend on marketing to get a customer? Practically nothing. I could spend $1,000 per customer in marketing and still make way more money than they do.
5: Lead Generation
I never used to look at products that were low dollar or very, very inexpensive little pieces, but I’ve since been corrected.
In most businesses, if you’re not already selling your products online, you will eventually be selling your products online. This is where lead generation tactics can come in.
One company I know imports guitar picks from a guitar pick factory in China. Their guy buys all the extra guitar picks they have that are overruns. He sells bags of guitar picks on eBay and he doesn’t make a lot of money on this, but if you’re going to buy guitar picks, you really want to buy them from him because he’s really cheap. But who buys bags of 1,000 guitar picks at a time? People who own guitar stores. He has used the picks to build a business of people and now he wholesales strings to them. He brings in guitars and musical instruments. He got them as a customer and now he can sell them all sorts of other stuff, so although he doesn’t make any money to speak of on the picks, he makes a ton of money from acquiring the customers. He’s grouping people based on a certain need. He is building a list of people that would probably want something else he has. That’s smart.
6: Importing To Rent
Importing to rent is another big market right now. We met a gentleman in Canton Fair in China who imports oxygen generators. A lot of people who have problems breathing have this little machine they can use that helps generate oxygen for them. Social Security and a lot of medical plans will pay a rental of a couple of hundred dollars a month to rent the machine for the patient, but they don’t want to buy them because they are quite expensive, around $4,000 or $5,000. This guy goes to China, buys the machines for anywhere from $500 to $600 a piece, and comes back to rent them for the same $200 a month. In three months, he’s in the black.
Plus, guess what that gives him? It gives him marketing money. It gives him much more money to spend to acquire the customer than his competitor. His competitor is 18 months down the road before he breaks even. My guy breaks even three months down the road. Who wants the customer more? There is no question that he wants the customer more.
In China, you can often buy a piece of equipment for about the same amount as a monthly rental in the States. You get a company like Home Depot, and they have a concrete finisher that rents for $50 a day, let’s say, which is $1,500 a month. The concrete finisher in China is probably $400. In less than a month’s time, it’s paid for.
There are guys going over to China, buying a piece of equipment, and then building a business around it. They then sell it as a business opportunity. They may go buy a power-plumbing snake. Those things are usually $2,000 or $3,000 in the States, but in China they are $300 or $400. So they package that plumbing snake along with a business operations manual, some ad slicks, and the use of a brand name, then they sell it either as a business opportunity or a franchise agreement to be ‘Mr. Super Rooter’ in their area. There’s another company that goes over and imports these floor steam cleaners that clean grout floors. Instead of just selling the piece of equipment, he sells the piece of equipment with a Grout Genie franchise thing. He’s able to put together all the pieces.
One of the cool things about importing things from China is when you can take something you’ve imported and add other things to it that add value. Then your customer is not just comparing apples to apples. You’re keeping them from saying, “This guy has the same piece of equipment over here for $20 less.” It doesn’t matter at that point. They are more buying into the business opportunity than the piece of equipment. It doesn’t even have to be a piece of equipment. It could be that you have a wholesale source of cell phone covers, and you get a pushcart in a mall filled with cell phone covers. You’re the direct importer. It gives you advantages. You’re building continuity and residual building.
7: Parts And Raw Materials
China does a massive business in materials like chemicals, stone, and granite countertops. A perfect example is a guy I know who imports aluminum extrusions. This is a big word for aluminum trim, the stuff that goes around a dry erase board, for instance. They’re on almost everything you pick up. Aluminum extrusions in the States sell for an average of $3 or $4 a pound. In China, they charge about $1.25 a pound for extrusion. Well, this guy had the greatest business in the whole wide world. You talk about a risk-free importing business. He would go to other manufacturing businesses and say:
“Hey, my name is Paul. I know you’re buying a lot of aluminum extrusions right now and I know you’re paying about $4 a pound for them because I know where you are buying them from. “What if I could get you all of your aluminum extrusions for $2 a pound and cut your price in half? Would you have any interest in that?”
He didn’t get a lot of nos. He would take their samples, send them to China, and China would send him back samples of the extrusions. He would take their order at $2 a pound, have it secured and locked down in a purchase order, and then he would tell them it would be six to eight weeks to get delivery. They were fine with that because they were saving half. All they have to do is plan out a little bit more.
He would take the order, deliver it, and then they would set up what’s called a JIT (Just In Time) Inventory. After the first order, after they saw everything, the quality was good and it was going to be okay, he would say, “Okay, let’s set up a Just In Time Inventory for you. How many extrusions are you using and when do you want them?” They’d figure out they were using one container of extrusions every two weeks, so he would place orders six weeks out, eight weeks out, whatever, and every two weeks they were getting another container of extrusions in the back door. Every two weeks he was getting another check. You call on that business one time, basically. The rest of it is just maintenance. No one ever says, “Hey, I really think I’d like to go back to paying $4.”
Another great area in the import trade is services. Sometimes these are service and product tie-ins. Sometimes it is a product matched with a service. This is one of the coolest ways of importing I have found in a long, long time.
I met a guy on an airplane going to China not too long ago who was an importer of trophies. I said, “Oh, you import trophy parts,” and he said, “No, I import finished trophies.” This was his business. If you have ever seen a trophy, the parts came from China. Most of the time they make the parts, but they assemble them and they do the engraving here in the States, then they sell them. But this guy has a factory in China that not only manufactures the trophy parts, but will also have each one assembled and custom engraved. He does this based on his orders that he gets from big Fortune 500 companies. They do a lot of plaques: a company like 3M may give him an order for 10,000 plaques to go on their distributors’ walls. The labor in China is less than a dollar a day compared to labor here. Figure in the equipment costs and the engraving equipment: a lot of times, it will blow your mind.
We were asking about granite countertops one time. The equipment you had to have to finish out the granite countertops once you got them here was going to cost something like a half a million dollars. I had a client who was building giant condos and every kitchen in every condo was exactly the same size. We needed the same piece of granite for 1,100 condos. I said, “What would you guys charge us to finish out this edge, cut the hole for the sink, and cut the hole for the drain?” The guy looked at me and said, “Oh, no charge.” They took the hole, they cut out a sink, and they made marble cutting boards and sold those as a separate product. The bottom line is that they are laughing at me all the way. They’re thinking, “What a dummy! We get a totally free thing for cutting the hole out.” For me, it was a matter of not having to invest a half a million dollars into equipment and have everything sent to me perfectly cut to go into the job.
I know another guy who exports truck engines to China to use Chinese labor to completely rebuild the motors. Once they’re rebuilt, they put them back on a container and send them back to the States. The labor to rebuild that engine in China is something like $200 instead of $5000. Even with the shipping there and the shipping back, he is still saving money.
There is another place I’ve seen doing the same thing lately: a dental laboratory here in the States that is becoming very, very big in a lot of the cities. When you get crown work, bridgework, denture work, and all that, they take all the molds that the dentists take, FedEx them to China, and in a matter of two weeks or so they are FedExed back to the States. The cost of raw materials inside a crown or a denture is almost nothing. It is almost all labor. They are able to build crowns, bridges, and dental work in China for .10 cents on the dollar versus the cost of a wholesale dental lab here in the States.
The good news is that once you’ve secured the vendor, you are virtually in a no-risk situation. Most of it is prepaid. Importing doesn’t always mean 40-foot containers and $100,000 worth of stuff at a time. As a matter of fact, it is pretty easy to buy almost anything in China $5,000 to $10,000 at a time. You will have to wait because your freight will be a little slower and your freight expense will be a little higher because once you start shipping less than container loads, the freight goes up quite a lot. However, many of the factories over there will sell you $5,000 to $10,000 worth of something. You don’t have to go over there and buy a 40-foot container of everything you look at.