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With the rise of digital technology and better shipping routes, global trading has become one of the most profitable industries globally. In 2018, Africa alone imported $273,346 million worth of goods and its exports were valued at $281,847 million. As a result, many young entrepreneurs are drawn to this line of business, particularly in frontier markets.
Setting up an import business isn’t inordinately complicated, but it requires significant planning and resources, which may be unknown to many. Having worked with importers across the world, we have identified the five key factors any entrepreneur needs to consider before setting up their import business. Here’s our list:
1. Assessing the market size
The first thing you need to ask yourself is if there is a local market for the product you are looking to import. Will your product fill a gap or satisfy a need for consumers in your market? What is the competition like? How does your product compare to what is already available in the market?
Run focus groups and speak to local consumers to understand whether or not they are willing to purchase your product. If there is little to no demand for your product, you will end up with a warehouse full of obsolete inventory and not even be able to recover your initial investment.
2. Finding the right import supplier
Once you have assessed the demand for your product, you need to consider the best way to source it. Browse through websites such as Alibaba and Global Sources to look for a supplier who is reliable and produces high-quality products.
If possible, shortlist your top 5 suppliers and visit their facilities- do they have the right type of equipment? Will their production line be able to handle your demand? Do they work with other international businesses and what processes do they have in place to export goods? It is essential to thoroughly understand the ins and outs of their business to accurately assess if they would be a right fit for you.
3. Pricing your products
As you are finalising your supplier, you also need to keep in mind your product pricing. This is the most important and the most difficult part of setting up an import business. Many promising businesses have failed as a result of unfavourable pricing.
The most efficient way to do this is to first calculate the landing cost of your goods. This includes all taxes, import duties as well as transport and service charges you will have to incur before the product arrives at your warehouse. You also need to consider any fixed expenses such as rent, utilities and salaries and wages of any employees you may hire.
Based on this, you can then determine a markup on your product that is affordable for the consumer while being profitable for you. It is also important to consider the price range of your competitors and ensure that your products are significantly underpriced or overpriced in comparison.
If you are importing a range of products, sometimes it might be worthwhile to undervalue some of your products and have a higher markup on others to attract customers, especially in the early stages of your business. Depending on the feedback you receive from your customers, you can reassess and modify your pricing strategy accordingly.
4. Sourcing a reliable cross-border payments partner
So now everything is set up. You know what you want to sell, how much you want to sell it for and where you can buy it from. But how will you pay your supplier? International payments can be slow, tedious and often expensive for most businesses. You want to ensure that you receive your goods on time, without losing too much money on FX fees and hidden service charges that most banks charge.
Exploring alternative cross-border payment options like AZA Finance is your best bet. We have almost a decade of experience with simplifying FX and cross-border payments for importers just like yourself across Africa, Asia, Europe, and North America. Our web platform offers a seamless experience with the best rates and no hidden fees.
And the best part? Our payments are processed within 2 business days so you never have to worry about delayed shipments due to late payments.
Reach out to us for more information about how we can help you make fast and cost-effective payments for your import business.
5. Developing a winning go-to-market strategy
The supply-side logistics have now been taken care of so it’s time to start marketing your products. You can have the best products but if your target audience is unaware of your offerings, your business will fail. Do some research to understand where your target audience spends their time.
If you are targeting a younger audience, then digital marketing on platforms such as Instagram and TikTok may be the way to go for you. If you are targeting other businesses then you should consider industry events, trade expos, and conferences and online platforms such as LinkedIn. This will help you allocate your marketing budget accordingly on platforms that will be the most lucrative for your business.
Once you have determined your marketing platforms, work on your messaging. You need to ensure that your messaging directly addresses the market need that you identified in step one. Find an angle that resonates with your audience and use that as an anchor to position your product in the market.
Ensure that you are active on all the platforms that you have identified and respond quickly to provide an all-around superior customer experience.
That’s it! Setting up an import business needs meticulous planning and determination, but with in-depth research and the right partners, you can create a successful business that fulfils a pressing need in the market and is rewarding for you.