In my some of my previous posts, I gave some tips on how to determine products to import, and which ones to avoid.
Now it’s time to work out how many units you want.
Many people at this stage say, “I don’t know how many I want, because I don’t know how many I’ll sell”, or, “I just want a few to test the market”.
Knowing the quantity is important because you have to tell the supplier in order for them to give you a quote!
The quantity will determine how many factories will want to do business with you. Specify too many units, and some factories won’t quote because it’s beyond their capacity. Specify too few units, and factories won’t quote because it’s not feasible for them to produce your item.
You want to attract at least six quotes for your product to help determine a fair market price to pay, as prices vary greatly in China.
You’ll need to forecast:
1. First order quantity
2. Monthly, quarterly and annual volume
Most suppliers are only interested in how many items you want on your first order because they only get paid one order at a time.
Suppliers know from experience that forecasts beyond the first order can lack accuracy, particularly for start-up businesses.
But for your own purposes, you need to forecast your monthly, quarterly and annual volume because you need to select a supplier that has the capacity to produce your volume, particularly if you have big plans!
Generally we recommend keeping your first order to the minimum the supplier will allow. This minimises your risk if the supplier and/or product doesn’t meet expectations.
A small order in International Trade may mean at least half a container. It’s important to keep in mind, however, that a full container is better value, as there may not be much price difference in the freight between a half and full container.
Containers are either 20 ft or 40 ft, and once again, a 40 ft container can be better value. However, on the first order, a 20 foot container would be less risk.
To calculate how many units will fit in a container, you’ll need to know the dimensions of your product, including packaging.
If you’re importing small, high value items, then air freight may be appropriate.
Check supplier websites to see if they advise Minimum Order Quantities (MOQ). Some factories advise their MOQ, and for others it will depend on factors like product value, product type, tooling requirements, product dimensions (how many fit in a container), frequency of purchase etc.
On your first order, you need to balance getting a reasonable size order to cover the fixed costs involved in importing, with being conservative to reduce the risks. While some people are tempted to exaggerate the quantity required in order to get a better price and/or deal from the supplier, and attract the supplier’s attention, we don’t recommend this strategy. You will form a much better relationship with the supplier if in your first order you provide a realistic estimation of what you actually want.
If, when you place your order, the quantity that you want has dropped from the original quantity, the Chinese supplier is more than likely going to lose interest in completing your order, and may become irritated.
The supplier may increase his price for your new, lower volume requirement.
Certain suppliers only want to run large quantities, and if you reduce the size of the order, they may find all sorts of excuses to delay your order, or even worse, not to produce your order.
This can certainly be a pitfall, and in this situation, I would recommend selecting another supplier.
