Importing From China, Have I Got My Numbers Correct, Does This Seem Worth Doing?

blobert

Hello,

I’m looking into the possibility of importing a container of sporting goods (don't want to be too specific) from China to sell here primarily through eBay, possibly through a dedicated website and direct to retailers also.

I just wanted to run through the numbers involved, and see if I’ve got them correct and if my margins etc look appealing.

Cost of Product: €100
Shipping/Insurance/DockFees/Delivery in Dublin: €11.50 (€2000/175 Units)
Delivered Cost into Ireland: €111.50
Duty Payable = Cost Into Ireland * Duty Rate%
TARIC is 14% in case of this Product (€15.61 per Unit)

With Taric Cost: €127.11
VAT Payable = (Cost Into Ireland + Duty Payable) * 21.5%
€127.11 + €27.33 VAT = €154.44

Imported Cost of Product with Duty and VAT Paid= €154.44

Now I’m a bit confused by VAT at this point. If I intend to sell this product on at a higher price do I pay VAT again when I sell it for the higher price? If so do I then get a refund of the lower amount of VAT I originally paid? I assume this is the case, please let me know if it isn't?

I intend to sell each of these for about €275, this is a conservative estimate of how much I can sell them for, I’d imagine €300+ might be possible.

So, working just on the idea of selling them on eBay (so as to keep things simple)

Selling at €275, VAT is €59.13, left with €215.87
Assuming I get the original VAT of €27.33 back
Gross Profit: €215.87 - €127.11 = €88
Cost of Sale = eBay and PayPal Fees, about 10% of sale price = €27.50
Net Profit= €60.50 per Unit Sold

Now firstly I am interested to know whether my calculations are accurate, I have erred on the side of caution with the shipping costs etc, it should be possible to reduce them a bit.

If I were to import and sell these items as a Sole Trader would this change the VAT situation? My intention would be to start with a single container or less of goods and dependant on how they would sell, expand as necessary.

Also, without giving away too much about the goods in question I am not sure whether it is a viable option.

I contacted a UK distributer of a similar product and was told he sells them at ”£129.00 ex VAT with an SRP of £239.00, which is a pretty good margin in this area.”

What I’m trying to work out is whether my product offers a better deal or margin for me than this one.

Now the product that I would be selling at €275 is significantly better than the one for £239, I wouldn’t actually consider selling the widely available one as I’d have no advantage over the major retailers that already sell it in the UK. Also, while the prices from the UK would not involve an import duty I’d still have to pay transport costs from the UK which would make it less appealing.


Anyway, sorry for the rather long post and if I haven’t been very clear. I’m very confident that the product that I am importing will sell well both here and in the UK. The only competitor on eBay sells for €240, my product is far superior to this and so I’d be confident of its ability to sell. I have a few sample units on the way that I will sell to test the waters to make sure of this. Just not sure if I have my numbers right and if it seems an appealing proposition in terms of margins etc.

Finally in terms of retailers, a similar product (slightly worse quality) sells for €400 in shops here, so at what price would they be willing to buy from me to sell at this price themselves?

Any advice would be much appreciated.

Thanks

RUDOLF289

Hello Blobert,

I think you are on the right track, but you will need to ask yourself some critical questions. You will also need to write a business plan and talk to an accountant. In relation to your post, I will try to answer the questions you have posed in order of sequence.

1) VAT paid on Imports (provided you are properly registered for VAT, either as a sole trader or limited company), is claimed back in your VAT return. If required I can show you a VAT return and the relevant boxes you need to fill in. In fact I can e-mail you the last VAT guide (2008) if you send me a PM

2) Duty seems high, perhaps you would like a 2nd opinion to verify same. Again send me a PM with more details.

3) I have no experience of E-Bay / Paypal and the costs they levy, but I reckon you have overestimated and that there is room for reductions here

4) One thing I have not seen in your calculation is the cost of storage. Unless you have a large garage (and therefore no direct cost) you probably would need to store (some of) these items. Another point is, who pays for the delivery, is the buyer (your client on E-Bay) responsible for the delivery cost ? What options are you looking at here. Do you add the cost of delivery to your sell price ?

5) You have not allowed for cost of Marine Transport Insurance. Suggest to allow 0.8% (or Euro 8 per 1000) of the value you declare for insurance purposes. My suggestion is to insure the goods for the invoice value from your supplier plus transport cost plus Duty and a reasonable margin, maximum 50%.

How do you intend to finance the goods ? If you buy a container load (175 units) you would need to lay out upfront Euro 17500 to your supplier (and be sure that the goods will be shipped in the condition that you expect them, a challenge in itself), you have to pay for the shipping (you have allowed for 2000.00 I reckon it would be less), 14% duty and 21.5% VAT. By my calculation that is 27K. The goods will be en-route around 35 days from the time they leave the factory to the time to reach you. It is only then that you begin to generate revenue. With a start up I reckon you may need to allow upto 3 months (4 months from the time it was shipped ex China) before you have sold all the units. How would that affect your cashflow projection ?

I think you may have to consider selling a part through E-Bay and a part through shops. However, the latter may affect your margin. I am not sure what the average margin is for the type of products you are talking about but most shops would be looking for 100% margin (in this case you would need to quote excluding VAT as the VAT is a deductible item for shops). You may need to do some market research in order to see if there is an opportunity to act as a wholesaler. I may be able to assit and use contacts that I can call on to talk to the buyers in Mahers, Lifestyle, Champion Sports, Heatons and a few more.

All in all, your figures look reasonable. Get some advice in relation to setting up as a sole trader v limited company and find an accountant that can assist in your cashflow projections.

Best of luck

Mickk

Hi Blobert,

to be honest your figures wouldn't really excite me. Do yuorself a favour and think of everything ex vat,

product costs you 127 landed ex vat, you sell for 225 ex vat. You are making less than 100 euro before the work, advertising, storage or ebay fees.

Would you be looking to do this fulltime or as a side to your job? You should have a look at the history of the ebay seller in the UK, see how many he sold in the Uk and divide it by 15 is what you could probably sell in Ireland (on ebay anyway)

Also a shop selling something for 330 ex vat they would usually want to pay 160-180 ex vat and often on credit, this would leave you with lots of money tied up for a long time and not a lot of profit and you have to account for whatever the risk of the products being defective ect.

niceirishfella

All this is fine and well - but what if the Chinesse send you a container of merchandisable SH1TE that you cannot sell on.
It's been known to happen.
What Quality control measures do you have OP?

blobert

Thanks very much for the replies guys, I really appreciate them, especially RUDOLF289, you seem to give out a lot of great advice so if I do go ahead with this or something similar I will definitely use your services. With regards to the numbers involved, I suspect the particular products in question do not have a great margin, gross margin for the product involved seems to be about 35%. I may have this wrong but with an import cost of 127 ex vat and a sale price of 225 ex Vat this means a margin of 43.56%. So it's above the average but as Mickk says, probably not great.

You probably won't want to post on here Mickk, but you might let me know what kind of margins you would look for? I’d imagine with a lot of your products, such as weights plates it’s very decent as it’s a very simple product that is probably very cheap to manufacture. It's a bit of a shame that this product has low margins as I have a fair bit of knowledge about the area and a lot of interest in it. That said while it would be preferable to sell something you have a knowledge interest in, I'm interested in making money so perhaps this is not the way to go. The accessories/parts that go along with this product have margins of up to 50% but unfortunately that market is already very well sown up in Ireland and the UK.

It is possible I could negotiate on the price. The manufacturer of the product is offering me a price of $139.50 per unit. This product retails for $249 on eBay in the US, perhaps the seller there is buying for less than $139.50? Regarding the quality of the goods, the product is the same as the one that has been selling for some time in the US, so assuming I can get the same quality as that I think it would be fine. I'd be planning on doing this as a part time venture to begin with. I'm very keen to move into self employment but am keen to dip my toes in the water before thinking of doing anything full time, I doubt this particular idea would have the potential to be a full time plan.

One final thing is I’ve got in touch with a major US online seller of the products, they sell better quality versions of the products in question for $299 that would be about €500 here. Seeing as it is too expensive for them to ship the product to Europe and still make money I’m interested to see if they would be willing to let me sell their products in Europe or better still open a European version of their existing business. I think there could be bigger money in that but will have to wait and see. The other alternative is that I have a lot of interests, so see if any of the other ones have higher profit margins:)

Thanks again for all the help
Any further advice would be much appreciated.

madmik

bear in mind that uk ebay sellers will probably have larger margins to work with as they can haggle a better price from the factory

you cant automatically assume youre going to get a 15th of their turnover because if its cheaper people will just order it from the uk

ebay would be much better for irish sellers if we didnt have asian ,uk and american sellers undercutting us on price

lanternman

blobert wrote: »

One final thing is I’ve got in touch with a major US online seller of the products, they sell better quality versions of the products in question for $299 that would be about €500 here.

Any further advice would be much appreciated.

How have you calculated your conversion of $ to €?

Mickk

blobert wrote: »

Thanks very much for the replies guys, I really appreciate them, especially RUDOLF289, you seem to give out a lot of great advice so if I do go ahead with this or something similar I will definitely use your services. With regards to the numbers involved, I suspect the particular products in question do not have a great margin, gross margin for the product involved seems to be about 35%. I may have this wrong but with an import cost of 127 ex vat and a sale price of 225 ex Vat this means a margin of 43.56%. So it's above the average but as Mickk says, probably not great.

You probably won't want to post on here Mickk, but you might let me know what kind of margins you would look for? I’d imagine with a lot of your products, such as weights plates it’s very decent as it’s a very simple product that is probably very cheap to manufacture. It's a bit of a shame that this product has low margins as I have a fair bit of knowledge about the area and a lot of interest in it. That said while it would be preferable to sell something you have a knowledge interest in, I'm interested in making money so perhaps this is not the way to go. The accessories/parts that go along with this product have margins of up to 50% but unfortunately that market is already very well sown up in Ireland and the UK.

It is possible I could negotiate on the price. The manufacturer of the product is offering me a price of $139.50 per unit. This product retails for $249 on eBay in the US, perhaps the seller there is buying for less than $139.50? Regarding the quality of the goods, the product is the same as the one that has been selling for some time in the US, so assuming I can get the same quality as that I think it would be fine. I'd be planning on doing this as a part time venture to begin with. I'm very keen to move into self employment but am keen to dip my toes in the water before thinking of doing anything full time, I doubt this particular idea would have the potential to be a full time plan.

One final thing is I’ve got in touch with a major US online seller of the products, they sell better quality versions of the products in question for $299 that would be about €500 here. Seeing as it is too expensive for them to ship the product to Europe and still make money I’m interested to see if they would be willing to let me sell their products in Europe or better still open a European version of their existing business. I think there could be bigger money in that but will have to wait and see. The other alternative is that I have a lot of interests, so see if any of the other ones have higher profit margins:)

Thanks again for all the help
Any further advice would be much appreciated.

I really don't give much weight to margins. It's more about profit times volume. I mean you can buy a painting for a hundred quid and sell it for a couple of grand but it might only happen once a decade or you can sell cars at a 10% margin and sell 10 a day and make serious money.

Your product sounds like a trampoline or goal posts ect. It will to an extent be a niche product, you are limited to families with young children and space to put it. You have to work out how much you need to be payed, how much the operation will cost to run and then see how many you think you will sell. That will tell you how much profit is needed from each one.

I think that sort of margin (35%-45%) would often be available from wholesalers in the country/UK, who would cut your own storage costs, amount of money tied up, liability and often even offer credit. I personally would aim for a 55-65% margin if I am laying out all the money and importing directly from the manufacturers.

A new bit of gym equipment I am working on at the moment has a margin of 87%!! Did you find your supplier on alibaba? If they have an address like suite 4, tenth floor, some building in Shanghai they are just an opportunist middle man who has probably added 35% to the manufacturers price.

Good Luck

DubTony

lanternman wrote: »

How have you calculated your conversion of $ to €?

I don't think thats a currency conversion. It's a price comparison.
The product that sells for €500 here sells for $299 in the States.

aidan.connolly

Hi Blobert,

One small correction on you Vat on Sales.
If your sales of 275 is includive of Vat then the correct amount without vat would be 226.34 ( 226.34 plus vat @ 21.5% 48.66 = 275 )
and not 275 - 59.13 ( 275 * 21.5% 59.13) = 215.87

regards

Aidan

blobert

Thanks a lot for the replies guys, esp Mickk for coming back to me.

My original plan is a non goer, turns out there is a high EU duty on importing this product from China so I'd have to look elsewhere for a supplier.

I spoke to the major retailer in the US, he was incredibly helpful but his comments suggest my plan may be a non goer also. He tells me he makes very little per product sold (only about $40 on a $300 retail price) but rather he sells these to people in the hope they will be happy with the product and come back to buy a more expensive product from him in the future. Thus unless I were to stock the more expensive products (and these go up to several thousand) his business model would not work, and I do not have the funds to set up a huge online business with €250,000+ in stock.

He's going to put me in touch with his suppliers so I can see what's possible but it's not looking too promising. While I have a good knowledge in the particular product, would like to sell it and think it would sell well I don't think it's going to make sense from a business point of view.

I've also got in touch with the eBay seller in the UK to see how much I could get the cheap product they sell for. They are selling it for £189 delivered in the UK so they must be able to source it for very cheap.

From what I can gather they have sold 17 of the product in the past 2 weeks, and to do that they've had 80+ listings (which would drive up the costs further). That's not a huge amount of sales and my delivery costs to the UK would make it hard to compete with the seller.