How To Begin A Small Importation Business With Very Little Capital In South Africa:
The world is indeed becoming a smaller place. Who would have thought that ordinary people like you and I (who do not have a fat bank account) can now import goods directly from overseas suppliers?
Before I started researching the small scale business idea that I am about to share with you in this article, I thought international trade was reserved for the government and rich big importers who had strong connections with manufacturers and suppliers abroad.
Well, not any more.
This article reveals how small scale businessmen and entrepreneurs in Africa can become part of the import business with little capital investment. With the knowledge contained in this article, you too can import products at low wholesale prices and sell them for a much higher profit.
By the time you’re done reading this article, you’ll know everything you should to become an importer and international businessperson!
How the importation business works…
Before we get into the thick of this article, it’s important that we understand the basics of buying and selling.
How is money made in the ‘buy-and-sell’ business?
Simple; you buy something (wristwatches, for example) at a low price and sell them at a higher price to make a tidy profit.
To increase the size of profit you can make, there are basically two options you have. You can either find a way/place to buy wristwatches at a lower price or look for customers who will buy them at a higher price.
This is how everybody in the retail (buy-and-sell) business makes money (profit). Buy low, sell high. It’s simple math!
To make sure you understand the opportunity we’re about to share with you, we shall use a quick illustration:
Let’s assume you are the owner of a small business that sells foreign-made wristwatches. You have a small shop in which you display all your lovely wristwatches for customers to admire and possibly buy.
Because you can only afford to stock about one hundred wrist watches at a time, you have no option but to buy from big importers who, because of their large capital, can buy thousands of watches from foreign manufacturers at very low wholesale prices.
Although you would love to enjoy these low wholesale prices too (which will increase your profits), you don’t have the kind of capital the big importers have. Even if you could buy directly from the foreign product manufacturers, it would still be tough.
Most manufacturers and suppliers have a Minimum Order Quantity (MOQ) requirement. MOQ is the minimum quantity of products a supplier will sell to you in order to make a worthwhile profit. This is why they prefer to sell to the big importers who buy large volumes (container loads) of their products. Since you can only afford a few hundred watches, most of the big overseas suppliers won’t want do business with you.
As a result, you are stuck with the big importers. The profit you can make in your business is limited by whatever price they decide to fix on the imported goods.
The infographic below shows how the big importers act as ‘middlemen’ between you and the watch maker thereby reducing the profit potential of your business.
Thankfully, things have changed.
The internet has brought down the walls which used to restrict access to manufacturers located thousands of kilometers away. Improvements in transportation and logistics now make it possible for small businesses with little capital to import smaller amounts of stock at low shipping costs.
Finally, entrepreneurs and small businesses can enjoy the same low wholesale prices that the big importers have enjoyed for a very long time.
The illustration below shows how this new business opportunity cuts out the middleman and allows you to buy directly from foreign manufacturers at lower prices that allow you to make a larger profit.
Something you should know before we get started…
Many of the products and suppliers that shall be introduced to you in this article are made or based in China.
Although we shall also talk about products from the US and Europe, the tips in this article reveal more about buying products from Chinese manufacturers and suppliers. The most likely question on your mind right now would be: Why China? Good question.
I’ll tell you why.
As you may already know (or don’t know), most products in the world today are manufactured in Asia, particularly China. Toys, home appliances, accessories, computers, laptops, mobile phones and even Apple’s iPads are made in China.
Let’s try to verify this by doing a quick check of the products that are around you right now. You would be amazed that roughly 4 out of 5 things around you were manufactured in China.
I’d like to use myself as an example.
The laptop I am using to type these words is a HP Notebook made in China. The shirt I’m wearing, my earphones, my wrist watch and my iPad – all made in China. My mobile phone is probably the only thing that’s ‘Assembled in Brazil’. So the 4 out of 5 theory is true in my case!
Apart from food products, China is the Number One source of all the hot-selling and fast moving consumer products you know.
China is one of the cheapest manufacturers in the world because of its low labour and production costs. As a result, many of the big brands that you know (Apple, HP, Louis Vuitton etc) make their products through factories and contractors based in China.
To ensure the quality of their products are not compromised, US and European countries set very strict standards which the Chinese usually comply with.
Why am I telling you all this? It’s because many people in Africa have come to suspect Chinese products to be low quality.
While this may be true, I don’t think we should blame the Chinese. After all, China also produces many of the high quality products in America and Europe.
If our governments could enforce strict quality and safety standards for products coming into Africa, the Chinese would comply as they do for their clients in the USA and Europe.
However, you don’t have to worry about importing low quality products. In the later part of this article, I’ll share with you the secrets of finding high quality products and suppliers that meet US and European standards.
What do you need to get started?
To join the new and growing league of small business men and women who can now import products at low wholesale prices directly from overseas suppliers and manufacturers, you would need just the following:
- A computer or mobile phone with access to the internet;
- A valid email address
- A valid and traceable home or office address in your country where the items you order will be shipped to.
- A little money in your bank account. (We’ll talk about this a little later in this article)
Yes, you’re right, that’s all you need!
This means that you can shop for, order and import all the products you want to sell from the comfort of your bed, breakfast table or while you are sitting on a bus (via your mobile phone).
Please note that a P.O Box or PMB (Private Mail Bag) does not qualify as a valid and traceable address.
Let’s get started!
You should be excited to start your new and promising small-scale import business. But before you get on your computer or mobile phone to start shopping and ordering products, let’s walk you through eight of the most frequently asked questions.
By the time you’re doing reading these, you would know the best and most-trusted places to buy from, how to confirm the quality of products, the payment process and several more.
Let’s dig in!
#1 – Where should you buy from?
The following websites are our top recommendations as online marketplaces that sell products at low wholesale prices:
Aliexpress.com has become the leading destination for small scale importers looking to buy goods at wholesale prices from China.
Aliexpress is one of the subsidiaries of the Alibaba Group which dominates internet-based commerce in China.
In fact, in 2012, Alibaba’s portals handled sales of up to 1.1 trillion Yuan ($170 billion), more than its competitors (eBay and Amazon.com combined). The Alibaba Group is estimated to be worth between $55 billion to more than $120 billion.
The Alibaba Group launched Aliexpress in 2010 as an online retail service made up of mostly small sellers offering products to online buyers. It has more than 20 major product categories and sells to registered users and buyers in more than 220 countries around the world. You can visit its homepage at www.aliexpress.com
DHgate.com is a business-to-business (B2B) e-Commerce website connecting China-based small and medium enterprises with buyers overseas.
The website is a fast trading marketplace where users can order Chinese-manufactured products directly through the site. The company has been in business since 2004 and is backed by investors KPCB, JAFCO and Warburg Pincus.
It offers customer support through online chat, e-mail messages and phone support. The website is primarily in English but is also offered in other popular languages spoken in Africa such as French and Spanish. DHgate offers a wide range of products and you can visit its home page at www.dhgate.com
iPmart.com (started in 2001) is a huge wholesale market that ships products from China, USA and Malaysia. Unlike Aliexpress.com and DHgate.com which have a wide range of products, iPmart.com is focused on electronic gadgets like mobile phones, game consoles and their spare parts and accessories. If you’re interested in technology products, iPmart.com is the place for you. You can visit its homepage at www.ipmart.com
To start shopping and placing your orders on any of these websites, you need to sign up to become a registered member. To sign up or register is usually very easy.
By clicking on the ‘Join Free’ or ‘Register’ link at the top left/right corner of the home page, you will be sent to a registration page to complete a short form. All that is usually required is a Name, valid Email address and Password. If you prefer, you could sign up or register using your Facebook account.
As soon as your registration is complete, you can start shopping and adding items to your cart. When you’re ready to order, you will be led to the Payment page. This leads us to the next important step…
#2 – How can you pay for products?
Payment was one of the reasons why it was nearly impossible for small businesses to import directly from overseas manufacturers and suppliers.
Banks had to issue a Letter of Credit or Bank Guarantee which often involved a long and complex process.
Today, through easy online payment systems, all the websites we mentioned above accept payment through a wide range of channels. You can do a simple bank transfer or pay with a credit/debit card. Yes, the same card you use at the ATMs can be used to make purchases on these websites.
Just make sure your bank account is sufficiently funded so you can make payments. Fast and easy! No banks or long processes involved!
Just in case you don’t know how to use your ATM, Credit or Debit card to make payments online, I have prepared a short tutorial video to help you with this challenge. Enjoy!
#3 – What if you get scammed?
Scams and fraud have been a big issue in internet-based transactions and e-Commerce for a long time.
What if you receive the products and they are fake or not exactly as the supplier described?
What if you pay for the products but they are never shipped and delivered to you?
How can you make sure that you get the EXACT products you paid for without getting scammed?
Good and important questions!
All the websites we have recommended to you in this article have some form of ‘buyer protection’ mechanism built into the payment process.
This mechanism, also known as ‘Escrow’, is the same role the banks have played in the import business and international trade for a long time. The way ‘escrow’ or buyer protection works is simple. Rather than pay the seller directly, Aliexpress, DHgate and iPmart withholds your payment until you receive the products you ordered and confirm that they are not fake/damaged.
The image below is an example of the escrow system operated by DHgate.com. It’s a simple five-step process that ensures that the buyer is never scammed and gets what he/she pays for.
Sites like Aliexpress.com and DHgate.com offer reimbursements and return your money if you are not satisfied with the products you receive. All of this is done to reduce the risk/fear that you’ll lose your money.
We cannot say that it’s a 100% risk-proof process. However, we can say that it’s often unlikely that what you fear the most (getting scammed) will happen.
#4 – How can I find high quality products and reliable sellers?
This is usually one of the biggest concerns most people have about buying products from China.
Unlike the strict quality and safety standards which protect buyers in the US and Europe, African small businesses are vulnerable to low quality products. So how can you be sure that you’re buying good quality products from a reliable seller?
This is where the beauty of customer feedback ratings come in.
A Feedback Rating is a measure of a seller’s reputation on AliExpress and DHgate. After every transaction is completed, buyers can leave a positive or negative feedback based on their experience with that seller. This rating adds up to affect the overall rating of that seller.
If the seller usually delivers as promised, he/she often gets more positive feedback from satisfied customers. On the flip side, if the seller’s service is crap, dissatisfied customers will be happy to give him/her a negative feedback which brings down the seller’s rating.
Some of these ratings are based on a scale of 0 to 100% or between 1 (low) and 5 (high) stars. So, when you find a product you’re interested in, we strongly recommend that you take a quick look at the seller’s feedback rating.
We advise that you only consider sellers who have an average positive feedback rating of 90% or 4 and higher.
However, this rule is not absolute. You should take the time to read the actual comments and feedback by previous buyers. From reading these, you will get some vital insights and pieces of information about the quality of the seller’s product, early or late deliveries and so on.
We also strongly advise that you take your time to read the product descriptions/details, seller guarantees and shipping conditions which are usually at the bottom of every product page. You need to confirm that the product you’re buying has the features you’re looking for. Remember, what you pay for is what you get.
#5 – How will the products be delivered to you?
Some products on Aliexpress.com and DHgate.com come with a ‘Free Shipping’ service to many countries around the world. Free shipping is often delivered through China Mail Air Post or Hong Kong Mail services.
While the free shipping option is very attractive, it often takes the longest time to get your goods delivered to you; usually between 15 to 60 days depending on the product and your location.
In addition to a longer delivery period, it may be impossible to track the location of your package all through the delivery process. If security and early delivery are not serious concerns for you, the money saved through free shipping can significantly increase the profit potential of the products you import when you sell them.
Other common options for delivery on Aliexpress.com, DHgate.com and iPmart are DHL, EMS and Fedex.
Although these are much more expensive options, they usually deliver your products to you in a shorter time and allow you to track them on their way to you. However, using these options is very likely to reduce the profit potential of the products you order unlike the free shipping option.
Tip: Whether you decide to use a free shipping option or a faster delivery service for your order, we advise that you include your mobile phone number in the shipping address you provide.
More often than not, you will receive a telephone call from local post office or local DHL/Fedex office to come pick up your items. Including a phone number may mean the difference between a delivered packaged and a lost one.
#6 – What are the most popular and hot-selling products?
The websites we revealed to you earlier have most of the popular and hot-selling products you can think of. Some of these products are clothing accessories (for both men and women), consumer electronics (like cameras and gadgets of all sorts) and mobile phones and accessories (headphones, chargers, batteries etc).
One of the most popular and fast moving products is hair extensions. Hair extensions of all types (especially real human hair from Brazil, Peru and India) are in hot demand by a growing number of young African women, many of who live in cities and are in the middle and working class.
Over 60 percent of Africa’s one billion people are less than 30 years old. A considerable proportion of this young population are very interested in fashion accessories and electronic gadgets. In addition, our continent is now the largest market for mobile phones in the world after Asia. As a result, Africa presents a very lucrative market for all sorts of mobile accessories.
There is really no hard and fast rule when it comes to finding the best products to import and sell in your local market. You need to look out for trends in your local market. You need to have an eye for the kind of products that are in high demand in your area/country.
Import a sample of a product first and find out how many of your friends may be interested. Look out for products that already exist in your market that you can import and sell for at cheaper prices. There’s a lot of potential in this business if you can find the right products for your customers at the right prices.
#7 – How will I find buyers for the products I import?
Very interesting question.
If you already have (or can find) a small shop for the products you import, that would be great. This is the oldest and traditional method around but it still works. Interested buyers will walk into your shop and possibly buy from you. You will likely have a significant advantage over any competitors around who sell the same products as you do.
Because you import directly from overseas suppliers, you can sell your products at much lower prices that they can’t even dream of. It’s your trade secret!
For those entrepreneurs who would love to start this business but do not have a physical store or shop (and cannot afford one), there is hope. The internet has changed the whole selling experience and made it much easier to sell stuff to both people you know and total strangers.
Using a popular social media network like Facebook, it is now possible for anyone to set up an online store/shop for free! All you have to do is upload pictures of the interesting items you just imported and invite your friends (and their friends) to come have a look. If they like the product and price, they’ll contact you to purchase it!
In another article, we revealed the full details and step-by-step process of creating a Facebook Page for your business and how you can use it to attract and win customers for your new business.
#8 – How much capital do I need to start?
As you will notice when you visit any of the websites we recommended, many of the products on sale are very cheap. Not all of them, but many of them sell at very low prices. In fact, the more units of a product you buy, the lower the price you pay; that’s the benefit of buying wholesale.
And don’t forget, the lower the price you pay, the higher the profits you can make.
You don’t need to break the bank or get into debt to start this business. As we always advise here on Smallstarter, start small!
Start with products that cost little but are in high demand in your area or country. Use this to test the viability of this business idea and grow your confidence.
For most of the products you import, you can make over 50 to 100% profit margins if you can find the right buyers to sell to. As you make some money in your new import business, you can start to try out other products that cost a little more.
Tip: Never let your excitement about this business get the better of you. Avoid the temptation to invest a lot of capital when you start out unless you already have ready buyers for your products.
Start small and then grow gradually. This strategy may take a little more time but it’s less risky and helps to build your experience and confidence.
Now you know how to start a small scale importation business in Africa. When will you start?
Like we mentioned earlier, the business opportunities for small businesses and entrepreneurs like you to import directly from overseas manufacturers and suppliers has not always existed. It has now become possible partly because big businesses around the world have come to recognize Africa a strong and emerging economic powerhouse.
If export-dependent countries like China must continue to grow, they will need to sell more of their products to markets like Africa that have a huge and growing consumption. Africa is now one of the fastest growing markets for consumer products and the Chinese are doing everything they can to deeply penetrate our market.
One of the ways they are doing this is by eliminating middlemen from the import process, making the payment process easier and faster, and reducing the risk of scams, fraud and low product quality.
During my research for this article, I decided to put my money where my mouth is.
The stainless steel pocket watch to the right is a sample product I found and paid for (about $6) on Aliexpress.com. I decided to use the free shipping option offered by the seller and the item will be delivered by China Mail Air Post.
The seller’s customer feedback rating was 96.6% and when I read through the 67 customer comments, many of them were quite positive. I received a tracking number and some follow up emails telling me that my order has been shipped.
Although I have been told that delivery will take between 15 and 60 days, I expect it may take longer due to the Christmas holidays. I shall surely update you as soon as I receive (or don’t receive) the package.