Impressed by the number of Latin American companies, whether public or private, large or small, that wish to import from China, we decided to tell you in this article the main reasons why investing at least 15,000 dollars will allow these companies to obtain higher profitability margins in their import operations.
The reasons are as follows. Pay attention!
China is a very large market
To give you an idea of how HUGE the Chinese market is, and the magnitude of its industrial production, we would like to start by telling you some facts that prove it. Imagine that China is the world’s largest exporter, surpassing the United States, Germany and Japan.
Take a second, look around… we are 100% sure that some product carries the label ¨MADE IN CHINA¨. Have you noticed the magnitude of this market? Some of the industries in China are the following:
- Machinery and equipment
- Textiles and apparel
- Metals
- Plastics and plastic products
- Footwear
- Oil
- Food processing
- Instruments and apparatus for optics, photography or cinematography
- Electronics
- Telecommunications
- Automobiles and other transportation equipment
- Ships and aircraft
- Agriculture and livestock
- Among others…
2. Low prices
Large manufacturers and suppliers of all kinds of goods in China handle large quantity orders. It is a reality that manufacturers require minimum purchase quantities, a term known as MOQ(Mininum Order Quantity). This helps them ensure that the orders they take are profitable for them.
Simply put, in order to sit down to talk numbers and negotiate lower prices with a serious manufacturer/supplier in China, you must present them with a substantial long-term business plan, with a substantial purchase promise, that justifies the manufacturer to start up the production process, which includes machinery, workers, raw materials, taxes, etc. …..
Otherwise, if your purchase order is for 1 box, the Chinese manufacturer will appreciate your entrepreneurial spirit, and will not pay attention to your requests. Unfortunately, that’s the way it is!
In summary, the higher the purchase quantities, the more likely it is that Chinese suppliers will agree to offer lower prices or better purchase conditions.
3. To establish your company as an important customer in the huge Chinese market.
Trade relations between China and Latin America are growing closer and closer every day. Every year, new economic agreements are signed between China and different countries. Chile, Costa Rica and Uruguay are the most recent examples.
Regardless of the Latin American country where you are, strengthening relations and maintaining close contact with China is a great advantage because it is a market that offers many opportunities for those who know how to take advantage of them.
The steps to be taken must be practical and creative.
4. Fixed costs of any import operation.
In an import operation there are certain costs, which do not vary according to the quantity or type of products to be imported. In other words, you will have concepts that remain fixed, regardless of whether the load is 2 cubic meters or 15 cubic meters.
What are some of them?
Regarding customs, we can mention expenses at destination and in bonded warehouses, for example:
- Documentation management
- Container custody
- Administrative positions
There are also very relevant costs, which do not vary much with quantities. These are, for example, certification fees, license processing or customs brokerage fees, among others.
Therefore, the greater the quantity of goods imported, the greater the return on each $1 invested.
5.Long-term business relationship with suppliers.
This is a very important point, since in the early stages of this relationship with the Chinese supplier, he will probably not agree to all your requirements, such as lowering the price or minimum purchase quantities. Building a trusting, strong and supportive relationship with suppliers will take time and patience is essential in this type of operation. However, maintaining good communication is the basis for doing so and if you are willing to invest time and money in the first few months, we are sure that you will be able to enjoy a long-term profitable relationship and access the incredible margins that the Chinese market offers.
We insist that importing from China to Latin America is a great opportunity for companies. If you follow our advice, the benefits will be much greater.
Contact us, if you wish to receive personalized advice.
