How much money can you make in China?
“How much money can I make importing from China?” This is pretty much the definition of an opened ended question. Perhaps a 21st century tribute to How long is a piece of string? Never the less its what I’m asked on a daily basis as more and more people become infatuated with the idea of making money from the far east.
Unfortunately there is no set formula for this and often the actual price of a product does not simply come down to materials used and production costs.
Simple things like how many of the same goods a factory has to produce that month or how well you get on with the sales guy will have a big impact on the price, timing your order with that of another customer and spending time building rappour means you can make a big saving.
One thing is for sure though, if you want to compete with the top sellers on eBay and come in at a price that will eat into there sales your going to have to buy in quantity. There is a reason thoses guys can sell so cheap and its because they operate in big numbers both in sales and purchasing. I had a customer ask me for 10 Bluetooth iPad keyboards then ask me why a seller on ebay is selling them at £0.50p more than he can buy them from me. Its a simple answer, that seller bought a lot more than 10.
When I used to imort from Taiwan I could buy something for $50 USD and sell it for $250 USD. That was a great time about 7 years ago when not many people were doing it and there was an exciting little window of oppertunity for a few years.
Realistically speaking I was not making $200 USD pure profit at all, that’s simply the gross figure. You can often get excited when looking at the gross figure but you have to be careful as the margin is soon eaten into.
Looking at the items cost of sale gives us a true indication of how much can be made from China. To do this we better pick a couple of examples and break them down. I have to apologise, there are quite a lot of numbers in this article – not my idea of a fun either.
Since a lot of my customers look to eBay as a major sales platform lets pick a couple of items off eBay, source them here, calculate the shipping, work out the import tax, deduct the eBay and PayPal fees and come up with a rough net profit for each of them. Might be interesting for a few people out there to see the whole picture from research to sourcing to sale.
I’m a bit of a eBay geek and I spend a lot of my time helping clients research a niche product they can import to sell at a decent margin, for this example I will pick out 3 eBay sellers that I would say could be worth importing. One with a retail price below £5 GBP, one below £10 GBP and one below £50 GBP. Sure, there are better items out there that you can find but I dont want to make it too easy for you now do I.
At £6.95 this women’s hoody isn’t really an exciting or ground breaking niche but the fact that its sold some 4,326 units is something you should be listening to. In fact its currently selling something like 50 units a day which is an impressive gross income of £347 GBP per day. Make no mistake this item is very keenly priced, in a shop on the high street you would be able to charge twice as much but to move them in this volume online the price is key.
This seller is charging £2.99 for postage and inside the UK this item could be sent as a small packet on a 2-3 day service for £2.20 without a business account, you can post for a little less with a business account but we will leave that out for now. This takes our gross income to around £496.00 with eBay fees at around £42.00 per day. Time to look at the costs and see what money is left to be made.
This looks like a nice quality hoody and for that reason we are going to go for a good mid range item in order to maintain a similar quality. For the purpose of this exercise we will say that we are buying 2 months worth of stock and shipping to the UK by air. This means that the stock is available to sell as quickly as possible without a long wait for sea freight and that with 2 months worth of stock we are able to establish a reasonable purchase price. Air fright on an item like this may not seem like the best solution, sea is after all much cheaper, but on a season and fashion sensitive item you need to take time scale into consideration so its either buy a season in advance or send by air. For this hoody we will be buying 3000 units which is 60 days stock at 50 unit sales per day and sending them by air via Hong Kong using FedEx.
3000 units is a good order size for low cost clothing like this and allows us to deal direct with a factory and even be a little specific about the garments details. For us to replicate the kind of sales seen here we will need to specify UK sizes and quite a stylish tight fitting cut. The only other thing mildly different about this hoody is the chunky modern style hood draw string. After working on various samples with a local factory here a usable product is achieved within about 6 days. After some negotiations and discussions about a repeat order of the same size every 60 days the production cost is set at 2.35 per unit. 3000 units is going to be something like a quoted production time of 10 days but best always double that as things here never seem to go as planned.
20 Days later and were £7,050 GBP lighter and looking at 3000 great hoodys, individually packed and ready for shipping to the UK. With each hoody being quite thick and heavy we are looking at a lot of cartons here and road haulage to Hong Kong airport where they will be transferred to FedEx for air freight to the UK. The price for this will be around £3,800 GBP. Yes, that’s a lot of money but your paying for the privilege of seeing your items land into the UK in a round 7 days. Sea freight will be well under half of this cost so bear that in mind.
With the product costs and shipping costs in hand we now know were looking at an overall unit cost of around £3.62 GBP, Still some room left to compete at £6.95 right? Well we are not quite done yet.
With packing and documentation completed the goods are loaded up and sent via road to Hong Kong. From here they are transferred from a local haulage firm to FedEx where they are flown to the sorting depot in Paris. From there the items are re-routed before finding themselves in the UK. Once in the UK the import duty and VAT is due at around £3700 GBP. So we now have the goods landed at a total capital outlay of £14,550 meaning our total product cost is now £4.85. This gives us a margin of around 30% if selling at the lowest price available on eBay.
30% is not an amazing margin, but you have to take into account that this is the lowest price on the internet and your selling them at a good steady volume. Sure you could sell them for more, at the end of the day they are worth more but were going for volume and fast turnaround here. Lets remember we can make a little on postage too as we got the hoodys pre packed in china so have no packaging costs to consider. This should add around £0.70 GBP to each units income. If we are able to achieve something like the gross daily income of £496.00 GBP seen above then we will see a unit gross profit of circa £2.80 GBP and a total gross profit of around £140 GBP per day every day for 60 days. After taking into account eBay and PayPal fees, depending on your current fee structure, this makes a net profit of around £7,308 GBP in 60 days for the 3000 units sold this way.
Now lets look at an under £5.00 GBP item. Items like this are good for a couple of things other than pure sales. Firstly they help create a lot of feedback for new accounts as volumes can be very high, secondly they help dilute any negative feedback’s you may receive as the will increase your overall positive % and thirdly they can help you get your account to top rated seller status. So here is a nice little item. A simple SD card reader.
With close some 8500 units sold this is a real flyer and a nice little item to look at. It is however very very cheap at £2.99 including free postage. Sent on the royal mail standard tariff as a large letter this will cost £0.69p. With around 20 units per day selling the £60.00 GBP per day isn’t going to get you rich but combine it with several similar items and its a nice steady income.
3 months stock is almost 2000 units so lets use that as our purchasing number. I buy a lot of SD cards so I know this adapter well and know at 2000 units the factory will be able to offer us this as around £0.85p per unit with a 5 day production time. These are very compact and light so sending them by air is no problem, again if combined with other goods sea would still be cheaper but for this instance lets use air freight as the method of shipping. On a 7 day service with FedEx the cost will be around £390 GBP for the full 2000 units. We are left with a unit cost of £1.24 GBP.
Obviously were going to have VAT and duty due on these which works out at roughly £530.00 GBP taking us to a total outlay of around £2620. This gets us a unit total cost landed in the UK of £1.31.
If we go ahead and sell at a similar rate to what we have seen above we are able to make a gross profit on each unit of something like £1.00 GBP. Across this shipment that’s a gross income of circa £5980 with eBay fees of £717 and domestic postage taking out £1380. Minus the costs of our actual product from China and we are left with a net profit of £1263.00 GBP from this order. Not spectacular but like i said take on 5 small simple items like this and your onto a nice little earner.
Next up lets take a look at an item under £50.00 GBP, a Bicycle work stand.
With some 2623 units sold at £34.75 and £5.00 shipping, this item sells an average of 8 units per day and has a total gross income of around £318 GBP per day.
With this item having a packaged weight of just under 8kg it will not be economically viable to send via air and will have to be sent by sea. With around 28 days shipping time to the UK I think it best to take on board 4 months worth of stock to make this worth while. This takes us to around 1000 units.
I work quite a bit in the bicycle sector so know a few places producing stands like this. With an already established relationship with a factory I know I can get 1000 of these for around £16.95 per unit. As mentioned this will have to go by sea and by using a shipment container combination with other goods a rate of around £1340 GBP for 1000 units is possible. This takes our unit cost to £18.29 with a 7 day production lead time.
VAT and duty wise we have around £2800 to think about so our total landed outlay for these is going to be something in the order of £21,000 GBP taking each units value to £21.09. This also means your going to have £21k tied up in stock for around 5 weeks before you can do anything with it – worth bearing in mind from a cash flow perspective.
Now landed in the UK we can look to sell a similar amount on eBay at a similar price which will make us somewhere in the region of a £13.00 return on each item or around £110.00 net profit per day. Shipping by courier within the UK is going to be pretty competitive at £5.00 GBP so there isn’t really any money to be made on the postage. So by working in a similar method to this the shipment will make a profit of £9,240 GBP after eBay fees.
There you have have 3 nice items that are there trading on eBay right now as we sit here. Not the best sellers but also not at all that bad. I have tried to keep this article completely factual and just provided you with the information so you can apply it to your own product research. All the figures are accurate in relation to the numbers we are talking about.
So, want to know how much money can you make importing from China? Well if you go with those 3 products above after paying your International Shipping, VAT, Import Duty Product Costs, Domestic Shipping, Paypal Fees and Ebay fees you can expect a nice net profit of around £6,360 GBP per month. Not bad.
As this is a pretty money orientated post here is a completely unrelated photo i took of two million pounds stacked up in gold bars that for some reason my bank likes to keep in the window.