10 tips before you import
Importing stock from overseas is a lot more complex than picking up the phone, placing your order and waiting for the goods to arrive. There's a lot to consider before you go ahead and place your first import order.
We’ve put together 10 tips to help you decide whether the allure of cheaper prices or better products from overseas is as good an idea as it might seem at first glance.
1. Is there a local market for the goods you want to import?
Importing for resale
You’ll need to make sure there is enough demand in your local market before you start to import goods for resale. Identify your potential target customers and conduct a survey to get a feel for whether importing will be profitable. If there is limited demand, you could end up sitting on a pile of stock that you’re not able to sell and making a loss on the deal.
2. Are you legally able to import these items into New Zealand?
Before you spend time, effort, or money on further research, you should make sure you’re allowed to import the goods you plan to bring into New Zealand. There are a number of restrictions on items you can import. These range from outright prohibitions, which apply to things like chemicals or medicines, to restrictions on particular products or items from particular countries.
3. The costs of importing
You’ll need to find out all the costs and charges you’ll need to pay before you place an order with an overseas company. These costs could include:
4. Is importing actually cost effective?
Once you have an idea of the final landed cost of an item, you’ll be able to check whether importing will be a cost-effective option for your business. There are a lot of additional charges you’ll need to pay over and above the cost per unit from a factory overseas, and these can add up. You’ll want to be able to make a reasonable return on investment after all these costs have been taken into account.
5. Can you afford to import?
It’s important to make sure you can afford to finance the cost of importing. Importing is cash intensive for two reasons. The first is that given the high shipping or transport costs, it's more cost effective to place a few larger orders rather than a number of smaller orders – so import orders are often large, and therefore expensive.
6. The risks of importing
There are more risks associated with importing than buying locally, and you need to be aware of these to manage them effectively. These include the following quality and delivery concerns:
7. Dealing with exchange rate fluctuations
Exchange rate fluctuations are another potential risk you could be exposed to as an importer. You’re probably buying goods priced in a foreign currency, which means exchange rate fluctuation can affect the final amount you’ll end up paying in New Zealand dollars. The rate could move in your favour or against you.
8. Choosing a reliable overseas supplier
The cheapest supplier is not necessarily the best supplier to deal with for imports. It's more important to find a reputable supplier. You want to find a supplier who you’re reasonably sure:
9. Dealing with overseas suppliers
Dealing with suppliers in a foreign country often involves a steep learning curve. You might be dealing with people who don't speak the same language as you, and whose culture and values differ from yours. The potential for misunderstanding and miscommunication is much greater than when dealing with local suppliers.
10. Trading terms and customs requirements
Trading terms
Before you sign an import order, you’ll need to understand trading terms used by importers and exporters, and you’ll need to be sure that both parties have the same understanding of these terms.
Next steps
Things to do next include:
- Establish that there's a sustainable demand for the product you plan to import and that you can import the item legally into New Zealand and sell it at a reasonable profit, or use it in your manufacturing process to increase your margins.
- Draw up a list of reputable suppliers and ask whether they have the capacity and equipment to supply your import needs. Draw up a short list and have them supply samples to your specifications if applicable.
- Engage the services of a freight forwarding or customs broker to assist you with understanding the trade terms, and talk to your bank to understand the financial implications of the orders you are thinking of placing.
- Negotiate the terms of trade to protect you against non-delivery, later delivery, or goods that do not pass quality control tests. If the item is critical to your business, have a back-up supplier in place in case you need it.
