Tips for buying product packaging from China

Imagine Apple selling iPhones in ziploc bags instead of the glossy cartons we are used to. It wouldn’t be the same thing. Well designed and high quality packaging adds plenty of value to your product. In this article we will explain what you need to think about when buying product packaging from a Chinese supplier – including design options, materials, warning labels and marking requirements.

“Do I need to find a packaging supplier on my own?”

No. While few Chinese suppliers are manufacturing product packaging in-house, most have established relationships with sub-contractors specialised in packaging and printing. Therefore, you don’t need to bother with locating a product packaging supplier by yourself. However, In case the suppliers sub-contractor is not able to provide a satisfying product packaging, you may still source one on your own.

That said, it comes with certain complications. The packaging must still be delivered to the final assembly supplier. Unless you have a reliable partner in China, I don’t suggest you attempt to manage such a transaction.

Product packaging design

When buying product packaging from China, you basically have two options. You either use an existing product packaging, or you design one on your own:

Option #1: Custom designed product packaging

This approach is somewhat complicated. First of all, you must design the packaging according to the product shape and dimensions. Never rely on your supplier to make final adjustments to your packaging design. Chinese suppliers are accustomed to a “make to order” approach, and simply forward clients product packaging designs to their sub-contractors. Unless you have previous experience designing product packaging, you may want to get help from a professional. If you decide to do it yourself, keep track of the following specifications:

• Material (e.g. PVC plastic)
• Lock type
• Surface lamination (e.g. glossy)
• Thickness
• Outer dimensions
• Inner dimensions
• Printing (e.g. Silk screen printing and Offset printing)
• Pantone colors

Customized product packaging also requires additional tooling. Tooling costs are always paid by the buyer, but varies depending on the type of tooling. That said, product packaging tooling costs are usually quite low, and rarely adds up to more than a few hundred dollars.

Option #2: Using a factory designed product packaging

Using an existing product packaging design comes with two benefits. First of all, the packaging design is already tested and based on your products design and dimensions. That’s quite a bit of time and money saved right there. Secondly, the tooling is already paid for by the supplier, or its sub-contractor, and can be used free of charge.

Even if you do decide to use a factory design, you can still add your own touch by customising the layout. The layout must of course be based on the packaging design and dimensions, but most suppliers can provide you with a digital template.

Labelling requirements

Product packaging design is not all about posh artwork. Importers in worldwide need to ensure that the product packaging is labelled according applicable labeling regulations. In many cases, labeling requirements are part of a safety standards, such as CE (Europe) and CPSIA (United States).

Failing to comply with the applicable labeling requirements may result in a forced recall, or even a lawsuit. Keep reading and I’ll explain why.

Warning labels

Certain legal acts and directives requires the importer to attach a warning label to the product packaging, in case a product contains a regulated substance. In the case of California Proposition 65, which regulates hundreds of substances in consumer products sold in California, such a warning label shall include one or more of the following sentences:

WARNING: This product contains a chemical known to the State of California to cause cancer.

WARNING: This product contains a chemical known to the State of California to cause birth defects or other reproductive harm.

WARNING: This product contains a chemical known to the State of California to cause cancer and birth defects or other reproductive harm.

Such labels are certainly not going to make your product fly off the shelves faster. The only way to avoid warning labels is by verifying, through laboratory testing, that the regulated substances are within the legal limits. While California Proposition 65 is only relevant to business based in, or selling to consumers based in, California – similar warning labeling requirements are also outlined in the Federal Hazardous Substances Act (FHSA).

In the European Union, warning labels are not as common as in the United States. A logic explanation is that the EU decided to outright ban or strictly regulate substances under the REACH directive. Essentially, you need to ensure compliance or you are not allowed to sell the item at all – with or without a warning label. In South Africa, the law pays specific attention to the wording of labels and how products are advertised. The objective is to create an equal platform for all products by stating, for instance, having only facts and not confusing the consumer by word of implication.

Marking requirements

Certain directives, including the CE directive in the European Union and FCC in the United States, require the product packaging to contain graphical symbols.

Country of origin

Consumers have the legal right to know where a product has been made, before they make a purchase. If the country of origin (e.g. Made in China) printed on the product unit, is not visible through the product packaging, the country of origin must also be printed on product packaging.

Minimum Order Quantity

The Minimum Order Quantity, or MOQ, for customised product packaging (layout and/or design) is usually no less than 1000 pcs. The packaging MOQ is not controlled by the manufacturer, but the print and product packaging sub-contractor. This may cause certain complications when the product quantity is lower than the packaging quantity. While it’s hard, mostly not possible, to make the sub-contractor to cut the MOQ requirement – most suppliers still agree to store excessive product packaging for future orders.

Thereby, you can order a product packaging volume that exceeds the actual number of items made for your first order, without wasting money on excessive inventory. That said, make sure your supplier keeps your product packaging in a dry and clean storage area. Make that a clause in the sales contract.

Product packaging regulations

While labeling requirements concerns the item inside the packaging, there are also directives and legal acts specifically regulating packaging design, mechanical properties and substances. In the United States, the Poison Prevention Packaging Act (PPPA) regulates packaging for household items that may be harmful to children.

Most packaging regulations require the importer to ensure compliance with one or more ASTM (United States) or EN ISO (European Union) standards. Contact us today, if you want to know more about how we can help you ensure compliance when importing from China.

This article was originally published here. We re-published with permission from our content partner, ChinaImportal, an e-commerce platform that assists businesses looking to import products from China.

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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.

Water producer's success story in Ghana

Voltic's successful distribution strategy primed it for investment from leading brewing and beverage company, SABMiller.

By Tielman Nieuwoudt

In the early 2000s, Voltic Ghana’s leading bottled water producer faced a common problem encountered by many beverage companies in emerging markets. How to sell water to the bottom of the pyramid (BoP) with hundreds of informal vendors already selling sachets at cut throat prices? The BoP water market held significant potential, but with low prices and little brand loyalty among consumers, it was viewed as a segment with high volume but with very low value. At the time, Voltic’s focus was concentrated on higher income Ghanaians servicing high-end outlets including hotels, bars and restaurants.

Rethink the business strategy

The company clearly had to rethink its business strategy in order to compete. Voltic realized that transporting water from centralized bottling facilities to the respective markets and high traffic areas was costly. Furthermore, with smaller package sizes the transportation cost per liter would increase, as sachets (or pouches) are not really known for stowability. Poor infrastructure and transport utilization in emerging markets likely compounded the problem. So, Voltic took a radical step to decentralize its bottling through more than a dozen franchisees and in the process, brought their water product closer to the market.

Selecting the right partners and sharing cost

Franchisees are local entrepreneurs with the ability to invest and grow the business. This includes bottling (including quality control) and distribution. In this partnership, Voltic pays for just over half the capital cost, with the rest of the costs covered by the entrepreneur. Voltic and the franchisees split the operating margin.

Branding and pricing

Voltic introduced a new brand called Cool Pac and priced it at a slight premium above the numerous informal competitors. In the BoP segment where water functions more as a commodity, Voltic changed all of that with a strong emphasis on the brand and quality. Even though Voltic outsourced bottling and distribution, the company maintains close control over all brand building activities.

Route-to-Market

The sachets are distributed using a network of informal street hawkers. Sachets (500ml) are sold to consumers for $0.03 per sachet  on a cash and carry basis. Today more than 10,000 street hawkers sell nearly 480,000 Cool Pac sachets daily.  Following Voltic’s success, in 2009 Voltic was acquired by SABMiller.