Monday, 11 february 2019 | Redacción CEU
They can be separated by thousands of kilometers, but countries have never been so close to one another. The world is getting smaller, although in strictly geographical terms is not. Despite the fact that some states are betting on the promotion of protectionist policies again, the truth is that in the current context, borders have been considerably blurred. Accessing both products and services from foreign countries is simpler as well as necessary. On the other hand, it may seem that importing is an activity which is only destined for large companies and multinational corporations, but individuals, SMEs and micro-companies can also import and achieve good results. What are the most important keys when undertaking a successful import business? What preliminary recommendations must be considered before importing?
By definition, importation means the purchase of goods and services that come from foreign countries. In other words, it is an activity that let companies to access products that are cheaper, do not exist in their country of origin or have a higher quality than the usual ones. Hence, importing becomes a great business opportunity. However, when entrepreneurs make the decision to import, they should be aware that they are not going to face a simple purchase abroad. A decision like this requires dedication, research, planning and effort. How to start a business like this? What advice should they listen to before venturing to import?
Some new entrepreneurs may identify a niche in the domestic market, study and analyze the best countries to find the product they need, choose good suppliers abroad, manage to handle transport and logistics in the right way, while, on the other hand forget something as important as what the taxes and tariffs that will be applied to these products are, which may lead to their business being unprofitable. The good news is that these inexperienced entrepreneurs will be aware of the mistake at the time they take their first order (it will be good news only if they haven't agreed on more deliveries with the foreign provider). The bad one is that they may lose a considerable amount of money, and that, in many cases, might be sufficient stimulus for them to invest neither time nor money in this type of projects again.
Before venturing to import, it is advisable to study the taxes and tariffs on the target products. As a rule, the customs costs are the following: VAT on imports (in Spain, 21% generally, except for special products or areas under a differentiated tax treatment), EU's tariffs and special taxes, anti-dumping measures, taxes on special products and other customs charges. The final price of the product can be really different from the one which was paid to the supplier.
Some people say that Hobbes was the first person to express, at least in writing, the relationship between information (in particular, he talks about privileged knowledge) and power. Whoever the first author of the well-known saying "information is power" may be, he/she was neither wrong nor has their theory has lost meaning over the years. In order to start an import business, it is necessary to have relevant information and understand the context well.
On the one hand, it is essential to count on a deep knowledge about the domestic market: conducting some research into what is the right price for the product, understanding and justifying what will be its use (whether for commercial or other purposes) and calculating what the profit margin of each operation will be. On the other hand, entrepreneurs will also have to gather information about the foreign market which is necessary. It should answer questions like: Does my country have significant agreements with the supplier country? Does this market have the infrastructure which is required to carry out an operation like this? Is there any legislative obstacle preventing the project from being implemented? Do I meet the relevant requirements to start this new business relationship?
Once researched the foreign and internal market and clarified the doubts about the specific requirements of the product and the management of customs procedures, it is time to look for suppliers. There are different alternatives such as the use of B2B portals (the most popular being Alibaba) and the attendance at international trade shows (ideal for businesses with large volumes) or commercial missions. In this search, it is advisable to consider aspects like: European suppliers are those that have lower tariffs and shorter delivery times, while, in some cases, the products from non-EU countries may be more competitive and interesting for the domestic markets.
Then, entrepreneurs will select the suppliers that they consider most convenient and will request a proforma invoice. The price should not be a key element that determines the choice. It is true that it is a significant factor, but other issues must also be considered, such as the quality of the product, its useful life, delivery times, certain aspects of financing, the supply of replacement parts or what type of after-sales services the supplier company offers. After analyzing these variables, the balance can be tilted to the other side.
Another important element to consider is whether the suppliers are able to satisfy the demand of the target products or not. If they cannot supply them with certain continuity, in the right deadlines and the necessary volumes, the import business will be in danger. Nor can entrepreneurs ignore the issue of the cultural differences. It is necessary to maintain a clear communication with foreign suppliers, and identify those situations that can be conflictive or create a misunderstanding so that they can avoid them or face them from the right approach.
These are just two initial recommendations when undertaking the adventure of importing. Of course, there is a large number of aspects to take into account when starting this kind of project. In the next articles of this international section, we will see other important factors in this process. For now, we mention that some of them are the following: the type of transport which is used, the appropriate selection of products, the strategic marketing plan, financial aspects, etc.
Both within our borders and on the other side of them, the scenario is constantly changing. This global context which is marked by uncertainty, speed in processes, the unstoppable technological development and complexity requires more and more qualified professionals. At The CEU IAM Business School we are aware of this situation, and, for this reason, we have designed trainings like our Executive Development Program (EPD) which is aimed at promoting the career of their students towards the business management.