Importing brand-name products from China. Shortcut or dead end?

Found a factory in China that makes a brand-name product and plan to buy directly from them? Read this article to find out why this is a terrible plan.

By Fredrik Grönkvist

Why bother with creating your own brand when you can free ride on one that’s already well established? Many naive importers assume that importing brand-name products from China is a short cut to success. It couldn’t be further away from the truth. In this article we explain why it’s not possible and how an attempt to import branded products can ruin your business.

You’re not going to outsmart Steve Jobs

We receive many enquiries every week from small businesses looking for anything from Apple iPhones and iPads to Sandisk Memory Sticks and brand-name apparel. While many of these products are manufactured in China, large corporations like Apple maintain tight grip on their supply chain.

Considering the amount of money these companies put into development and marketing, do you think it makes sense for them to allow third-party importers to purchase their products for rock bottom prices just to dump the prices? The factories which produce branded products are legally bound to only sell to the owners of the brand or licensed distributors. So, unless you are a licensed distributor (a costly and difficult venture) you can't access these products.

The same thing can also be said about Chinese brands such as Huawei or Xiaomi. Huawei is a market player in Europe and America. They have huge resources to manage distribution on their own. Xiaomi has yet to launch their products internationally. However, their products are manufactured for the Chinese market and thus not compliant with European and American product safety directives, such as CE and CPSIA.

“What about night shift production?”

There are plenty of stories about contract manufacturers of brand-name products running night shift production. The products are “essentially the same” as the original since they are produced in the very same factory. But that’s not the only benefit – the prices are so low that even a small order can generate a decent return on investment. Sounds too good to be true? It is! Let me ask you something. If tech giant Sony is struggling to make a worthwhile profit in the TV industry, why would you think you can? There’s no “night shift production” in China. It’s a fairy tale told by scammers to lure naive business owners. Besides, even if it  existed it wouldn’t be legal. Why? Because parallel importing is illegal in most developed markets.

There is only one way to buy brand-name products: purchase them from the official distributor in your country or market. However, if this comes as news to you, then I honestly doubt that you are ready for such a business venture. Companies such as Samsung and Apple are, and can afford to be, picky about who they do business with.

China retail prices are usually higher than in the US and Europe

Guess what, an iPhone 5S costs up to 25% more in China compared to the USA. Sounds strange? It’s not. The difference between rich and poor in China is huge. It doesn’t make sense for companies to cut their prices. Those who can afford it will buy regardless of price. Well, almost. Either way, the average Zhou won’t be able to afford an iPhone even if Apple lowered the price with one or two hundred dollars. In other words, forget about importing brand-name products from China.

Counterfeit products, payment frauds and confiscated cargo

Those who attempt to import brand-name products from China are in general very inexperienced. In other words, they are easy targets for scammers. Thus, it should not come as a surprise that this industry, if it can be called that, is completely infested with scammers. While some of them won’t hide the fact that they are trading with fake products, other claims to supply authentic brand name products for amazing prices.

There are only three possible outcomes when importing “brand-name” products. You either receive fake goods or the scammer takes your money and runs. Well, you might say receiving the fake goods is at least something. No, it is a big problem because it is illegal to import fake goods for a commercial purpose (as in actually selling them). 

Apart from violating IP laws, counterfeit items are NEVER compliant with many juridisctions' product regulations and directives. Considering that fake products are often manufactured by criminal syndicates, this should hardly come as a surprise. Non-compliance with product certification standards (i.e. CE, REACH and CPSIA) can be just as disastrous as getting caught importing fake products.

Ensuring compliance with regulations in your country or market is critical. Importing non-compliant items is illegal and may result in having your items refused entry by the customs authorities – or even major fines in case someone is injured or property is damaged. There are several reported incidents involving fake products, phone chargers in particular, causing serious injury or even death.

Create your own brand

I hope have convinced you to not even consider importing branded products from China. Forget about free riding on other companies' names. If you are serious about importing products from China you should create your own brand. While it’s no short cut, branding a product ads a ton of value. Branding a “Made in China” product is easy. Most suppliers can offer a custom logo or product packing layout for a low cost.

This article is re-published with permission from Frontier's content partner, ChinaImportal, an e-commerce platform that assists businesses looking to import products from China.

10 things to consider when planning your marketing strategy for Africa

By Tielman Nieuwoudt

When supply chain management in Africa is the topic of discussion, frequently used words include inefficiency, bottlenecks, bureaucracy, corruption, poor infrastructure and the occasional “chaos”. It is easy to fall into the trap of grouping all African countries into the same categories. The growth on the continent has sparked renewed interest in overcoming retail supply chain challenges. 

Below are 10 issues impacting retail supply chains in Africa:

Lead times - Importing products in Africa remains challenging and lead times could be anything from four to six months. The African continent has the most landlocked countries, further increasing lead times.

Outlet base - The numerous traditional trade outlets (e.g. spaza, dukas or souks) remain the biggest segment of the market and modern trade is still in the very early stages of development.

Fluid outlet base - The outlet base is fluid with new shops opening and closing. Seasonality also plays a part as some shops might stop selling ice cream and cold  beverages during the rainy season.  In addition, not all shops or selling points are permanent structures and some are roving hawkers.

Alternative channels - Beyond the traditional outlets, companies also need to understand alternative channels. For example, in Nigeria, “Table Tops” and the “Go-Slow” channels are important channels.  “Table Tops” are tables, set-up as temporary sales points to sell a limited number of stock keeping units (e.g. mobile phone carts). The “Go-Slow” channel or hawking channel, sells various types of merchandise that is normally easy to carry or transport (e.g. biscuits).

Markets -  Markets in Africa plays an important role. In some cases products flow from agents, who sell product directly to wholesalers based in  markets. For example in Lagos (e.g. Idumuta) and Addis Ababa (e.g. Mercato), markets remain a primary purchase channel for a number of product categories.

Moving away from trading - As African markets become more attractive, companies are moving away from trading (e.g. export agent and wholesale) and adopting a more organised Route-to-Market system, employing distributors to directly service the outlet base.

Route-to-Market considerations - Moving goods to a large fragmented outlet base is difficult and costly. Small groceries often have limited cash flow and  space to stock products. Finding the right model can take time and patience. Outlets are often  situated in high density and congested areas and companies are increasing looking at alternative distribution means, including micro distribution to reach these hard to reach areas.

Poor execution and stock out - What happens in the last 10 meters of retail supply chains is really important. In African markets, customers often experience stock outs because of poor planning and in-store execution. As small groceries have limited space and cash flow, they often require more frequent deliveries, in some cases daily.

Intermediaries - As small groceries have limited cash flow and space, they often require an intermediary, such as wholesaler, to break bulk. The wholesaler is often in close proximity to these outlets and provide a basket of goods, and in some cases credit.

Consumer satisfaction is availability - Retailers that sell undifferentiated products compete on the basis of product availability. Having the right product in the right place, at the right time (and frequency), with the right brand, at the right price, may be what really drives customer satisfaction.