Don’t believe success in China is cheap and easy

A client told me recently about a mompreneur who has achieved a small measure of success with a product sold widely in the UK and Australia. This mompreneur reportedly got started by placing a $ 1000.00 order with a China supplier she met on alibaba and my client is hoping she can start out with an equally minimal investment. As my client’s product is design driven and involves a custom mould and printed fabric I told her right there that her costs would be considerable. Mould costs and fabric minimums alone will run several thousands of dollars. But then I explained to my client that as dramatic as it sounds the mompreneur she had read about probably did not get started in China with such a small investment. Here were my reasons:

1.) A $ 1000.00 order out of China would mean that the vendor made a very small profit, just a few hundred dollars, or they just broke even. Most vendors in China I know do not do small orders with small foreign home-based businesses just to break even. Some vendors will take small orders but usually only from established companies where the hope is that the second order will be much larger than the first.

2.) I looked on her website and see that the mompreneur’s product retails for about $ 20.00 meaning that she probably gets it out of China for $7.00- $10.00. So a $ 1000.00 order would translate to between 100-150 units. No vendor I know of would accept such a small order.

3.) The mompreneur’s product includes a full color retail display box. No printer I have ever done business with is going to make up just 150 boxes. Printers have minimums and no printer is going to print up a mere 150 small boxes which probably cost no more than $0.10 each. Do the math: 150 boxes at $ 0.10 each is $ 15.00. Is any printer going to accept that order?

4.) Most Chinese companies with English speaking employees have a fair amount of overseas business (that is the only reason they would have someone who speaks English on their staff). In fact a lot of Chinese companies still do not retain any English speakers. It is unlikely that a company that already does a lot of business with overseas buyers would be interested in such a small order.

This is all pure speculation on my part. Of course I don’t know for certain that the mompreneur did not get started with such a minimal investment (this fact was apparently included in a newspaper article about her company). Who knows, it is possible she found a very small 3rd tier factory on alibaba who was in dire straits and desperate for an order. Plenty of those in China these days. But my common sense and 26 years of China wisdom tells me that the $1000.00 story is more hyperbole or creative marketing than actual fact.

In short, don’t always believe the small business rags to riches stories that you hear. More often than not they are not true. It takes time to build a business and, especially if you are in consumer goods, it usually takes a fair amount of cash as well.

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