Doing business with China today is no less profitable than decades ago. However, nowadays, there are special nuances of foreign economic activity. Before you start doing business with Chinese suppliers, you need to know where to start, how to look for suppliers, deliver goods with maximum benefit and sell them in your country.
Guide to doing business with China in 2022
Any entrepreneur who is engaged in trade and buys goods from local wholesalers, thinks about starting work directly with foreign suppliers. And not surprising, because the wholesalers’ margin on imported goods reaches about 90-100%, especially for goods from China.
Working with foreign suppliers requires the entrepreneur to be as attentive as possible to all potential risks and costs associated with foreign economic activity.
Choosing LLC or IP?
Everyone can do business with foreign companies: both legal entities and individual entrepreneurs. When importing goods, you need to remember one feature: at customs, in addition to duties and fees, you will need to pay VAT, and this obligation applies to all importers, regardless of their taxation system.
Often this becomes an unpleasant surprise for companies on the simplified and patent taxation systems, which usually do not pay VAT and, accordingly, cannot accept the paid VAT for deduction. In this case, the goods for them will become more expensive by 20%.
The optimal taxation system for conducting international trade transactions will be OSNO, where you can take VAT paid at customs for deduction; or USN (income-expenses (15%), where it is possible to offset the paid VAT as expenses and thereby reduce the taxable base).
What to buy from Chinese suppliers?
Cooperating with China does not mean receiving only products under Chinese brands. Why? Because production facilities of many European and American companies are located in China. Even Finnish Nokia mobile phones are produced in this country.
The manufacturing process is controlled by European and American developers, the products pass the Quality Control Department. Therefore, you can get budget goods from little-known companies in China, as well as genuine branded products for sale. Start by researching in-demand products.
To date, the most popular niches are:
- equipment (mobile phones, computers, household appliances);
- cars;
- shoes and clothes, accessories;
- toys;
- interior goods;
- furniture;
- materials, tools for repair and construction;
- goods for outdoor activities and sports;
- spare parts and accessories for cars;
- decorative and care cosmetics.
Which scheme to choose for working with China
Modern businessmen choose one of two options:
- resale;
- dropshipping.
Each of them has its pros and cons.
- Reselling is an old option, perfect for those who are going to trade offline. Businessman pays for goods when placing an order for delivery.
When the seller receives them, he/she makes a markup and sells them to his customers. Their profit is the difference between buying and selling. The disadvantage of such a system is the need to invest primary capital. The upside is that you can sell at almost any price, and the buyer does not have to wait for delivery.
Keep in mind that experts’ predictions about the future of offline stores are not the most favorable. They believe that every year more and more buyers will purchase goods via the Internet. We advise you to start your business on online platforms.
- Dropshipping is a business on goods from China without investment.
Deliveries are made from the manufacturer or Chinese supplier directly to the end user. The advantage of a business is that you don’t have to rent a retail space and don’t even communicate personally with buyers. It is enough to create your own online store or business card site for sales. In the second case, you will be able to sell one or two identical products. Ideal for working with Chinese products that have just entered the market. The online platform is designed to sell a large number of various copies without investment.
The principle of operation is the following:
- the buyer orders and pays for the goods;
- you order it from the supplier and pay from the money received from the buyer;
- you receive the goods and send them to the buyer.
As in the previous case, the difference between the two prices is your profit.
It is also possible to work with an online store using the resale method. To start a business, you will have to rent or allocate a place on your own territory for storing goods. But in this case, you have a plus: buyers will have much less time to wait for delivery.
Marketplaces are another amazing option to start a business from scratch. In this case, you do not need to create a website, spend money on its promotion in search results and advertising. Your product will immediately be available to a huge audience.
To make it stand out from hundreds of others, immediately start creating unique cards with high-quality photos and videos. Make markups only after studying similar products on the platform.
Where and how to find a supplier?
The question of finding a supplier in China can be devoted to a separate article.
When you search for a supplier online, you most likely will not incur any costs, except for the delivery of product samples before placing the main order. However, already at this stage of work, it would be rational to involve a partner company specializing in working with China, which will not only help you choose the best option among the many proposals, but also verify the reliability of the selected supplier.
China is characterized by a cluster organization of industrial production. Guangdong Province (Shenzhen, Guangzhou) is the main supplier of electronics, Shanghai and Ningbo are more specialized in the production of chemical products and industrial equipment. Yiwu – accessories, souvenirs, clothes; Foshan – furniture; Shantou – toys; Guzhen – lighting.
For example, goods from the “household” category (mops, gloves, rags, etc.) can be searched on various Internet resources that offer a large number of suppliers. Low-value goods, as well as clothing in relatively small quantities, can be purchased from markets in China, such as Yiwu.
Sophisticated equipment and exclusive goods, as well as technological innovations, are best looked for at thematic exhibitions. Before buying the main batch of goods, it is imperative to obtain product samples from the supplier to make sure that you receive exactly the products that you saw in the photo on the Internet.
If you’re looking to buy in bulk and are serious about quality, it’s wise to travel to China and visit the factory, preferably with a Chinese-speaking guide. This will allow not only to thoroughly check the selected supplier, but also to discuss the terms of payment, packaging and delivery of goods on the spot.
Guide to doing business with China in 2022
To be continued…
Stay tuned for part 2.
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