Starting an importing business—8 tips for dealing with foreign suppliers
Importing foreign-made products offers a way to start a company with limited start-up investment or R&D. Imported products also have the advantage of being consumer-ready and having proven appeal in other markets, which reduces your risk.
Despite these benefits, a poor choice of suppliers, production delays or currency fluctuations can quickly make a good import idea turn bad. “A lot of companies run into trouble by jumping into importing too quickly, with inadequate preparation,” says Patrick Grenier, a business consultant at BDC who advises entrepreneurs on importing. “It’s common to see businesses sign on with the first supplier they meet and not do enough vetting.”
Grenier offers these eight tips for entrepreneurs thinking about starting an importing business.
1. Attend trade shows
Your first step is to find reliable suppliers. An excellent place to start is at various trade shows where foreign companies show off their wares.
For example, the Canton Fair, held twice a year in China, boasts over 60,000 company booths featuring a massive range of products over three weeks. “It’s very inspirational—a real eye-opener,” says Grenier. “You’ll come back with 1,000 ideas to start a business.”
2. Visit potential suppliers in person
Based on your initial contacts, make a short list of companies that seem like good potential suppliers or partners.
Research these companies in-depth by asking for samples, evaluating their team and getting a sense of what they’d be like to work with. Scratch off those that don’t meet your requirements, and then arrange on-site visits to meet the most promising ones.
“It’s important to visit a partner in person,” Grenier says. “They might have the best website in the world, but maybe it’s just a student in someone’s basement or a middleman with no factory of their own. If you don’t go in person, you’d never know.”
You can use a checklist to rate potential partners and help you make a final choice. Issues that are crucial to verify include:
- How the business does quality control
- How the business treats its workers, including whether they use child labour
- How they handle product quality issues that may arise after a shipment arrives
3. Diversify your supplier list
Try not to rely on a single supplier. Diversifying helps ensure continued supply in case of interruption with one of your partners. “Let them know they’re not your only supplier,” Grenier says. “Then you’re not a hostage of any one company.”
Diversifying your supply routes and shippers also helps control the risk of interruption.
4. Research Canadian taxes, fees and product requirements
Before signing an agreement with a supplier, be sure to check whether their products meet Canadian regulatory requirements. “You want to make sure that when it lands in Canada, you’re going to be able to sell it,” Grenier says. Also make sure product packaging meets Canadian labeling rules, and look into what taxes and duties you’ll have to pay on imported items.
5. Hedge your currency risk
Payment for imports is usually made in U.S. dollars or euros. Both currencies can fluctuate significantly against the Canadian dollar, with major impacts on your margins. You can hedge your risk with the help of a currency broker or your bank.
6. Verify goods before final payment
Suppliers often ask for partial payment upfront when an order is first made—30% is typical—then require the balance to be paid before products are shipped. Especially with a new supplier, it’s a good idea to make a trip to inspect goods in person before releasing final payment.
You can also negotiate with the supplier so they accept final payment when the shipment arrives in Canada. In this way, you won’t have to pay while the merchandise is in transit.
7. Regularly check in on suppliers
It’s important to contact suppliers regularly to see how production is going, especially with time-sensitive orders.
“Delays for overseas imports can be long, and there can be disruption in delivery schedules,” Grenier says. “You need to be very disciplined about following up on dates and asking a lot of questions when red flags come up. If you don’t follow up regularly, you may not learn about a delay early enough.”
In the event of a serious delay, a trip to visit the supplier can help speed things along. “They may take your needs more seriously if you show up and make your case in person,” Grenier says.
It’s also useful to make in-person visits each year to touch base with suppliers and check out any new products.
8. Watch holidays
Keep on top of important dates in your suppliers’ country. Some holidays may involve extended work breaks when production shuts down. Holiday dates may change from year to year. For example, the Chinese New Year break can last as long as a month for many suppliers.
“Your supplier may have a lot of orders before and after the holiday,” Grenier says. “If you don’t plan for the holiday well ahead of time, you could run out of inventory and your customers may turn to the competition.”