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My experience with international chatteling
Here are a few things I've learned while chatteling.
* I mainly deal in international chatteling. Buy in India or Asia. Sell to USA, UK, Canada, Australia and else where (Probably 85% of my sales come from those 4 countries).
* I spend 5-10 hours a week with 1 specific type of product. 70% of my time goes into packaging the goods for shipping. And filling out the customs forms. The rest of the time goes in customer support and answering questions to people via email. (I already have 2 sources to where to buy the product from now - so hardly any time goes into procuring the products. More about that later.)
* I make lower four figures net profit per month with this venture. Depends from month to month. Its just been a couple of months so I'm not yet sure of the variance in sales cycle due to the time of the year. But its a decent side project for the amount of time put in.
* (I won't be going into product details a lot - but the main criteria for selecting the product was: it had to be small enough to be shipped cheaply. But it still had to have a reasonable profit margin.)
* My sales price is 1.5x to 2x of the price at which I buy the product. I know folks like Ben Suarez and all recommend that your selling price should be 4x to 7x the cost price because advertising and paying to middlemen is expensive. But my product can't sustain those margins.
Because of this factor, I doubt if I can scale this side venture to a 7 figure project. I can only collect the low hanging fruit - sales that don't require a lot of advertising expense. Over time, I think I'll be able to increase my sale price to 3x the buying price. But thats about it. So at most, this will be a mid to high 4 figure per month project. Still awesome for the amount of time put in however.
* One advantage that I have that others don't: I have bank accounts in India as well as USA. I have companies incorporated in both countries too. Delaware incorporation is not that hard anymore thanks to the internet. (Although I had gone through a USA based lawyer. Costs more money but peace of mind.)
* How I got started: I was on a forum where some folks were complaining about a dealer who was late in shipping this product. (Keep an eye out for "problems.") I looked up if I could buy this product in India and at what price. Ebay, Alibaba, Google etc were my first place of research. But then followed up with a bit of calling.
I then made a post on the forum: if people were willing, I would ship the product at cost^ to them from India. But I would not offer any refunds or anything. Thats how I got my first few clients over the next few days. Thats how I learnt what shipping process is the best. And what packaging is sturdy.
^ In hindsight, offering to sell at cost publicly was a bad idea. I have to deal with so many people that ask me why can't I ship the products at cost to them anymore.
* The above bullet point is the most important lesson. Find buyers first. Don't procure the goods until you know for sure that you'll be able to sell it. You may not be able to do this with local chatteling, but in my case - I asked my clients to pay me before I went and bought the goods for them. I had absolutely zero risk when I began.
* Making more sales. 100% of my sales at this point come from 2 sources. 2 websites. I don't even have a website of my own for this product as of yet. I sell where a "hungry" crowd already hangs out. This way, no advertising expense. The venture takes as little time as possible. (I really don't want to make this a full time thing. 30 minutes a day on this is my goal.)
* Procuring the goods. It was research and calling and then haggling on price. I tested buying from 7 dealers. But I buy from only 2 of them as of now. I alternate between the 2 so that if something goes wrong with 1 of them, I don't have to close down. This is important: as Dan Kennedy says - one of anything will kill you. Always have backups.
* Storing the goods. Initially I went and bought the product only after I had received the payment from a client. Now however I keep a few orders worth of goods at hand. Keeps things smoother and doesn't slow down the shipping. Also gives me time to deal with a supplier situation without stopping sales coming in. You don't want to stick up a lot of money in inventory however. I think a weeks worth of products is a good idea - 7 days is more than enough to deal with supplier problems or finding a substitute supplier.
* What else. Escrow is good for international transactions. But it adds 10% to your cost.
* The downside to Escrow. Money remains stuck for 20 days or so (the time it takes for shipping). So you can't buy the goods with the money client pays. I had to "borrow" money from my other activities to not slow down my ability to buy and ship the products.
* Indian postal service is a pain. But its a pain that has to be dealt with because of no other better alternatives unfortunately.
* I constantly have to keep an eye on foreign exchange. This can suck big time. Forget about trying to time the forex market. Book your profits and worry about optimizing the business - not the forex trades.
Thats about it. Feel free to ask me questions - anything besides what product I sell.
* Keep an eye out for problems.
* Then do the research and find out if you can solve that problem cheaply.
* Then make an offer to folks facing the problem: you will solve their problem at cost. Let them fund your learning curve. Get rid of any risk while starting out.
* Look out for problems with solutions with high profit margin. The lower the profit margin, the harder it is to scale up. Rule of thumb is 4x to 7x is required to scale up with advertising for most products. (Unless you're selling high end products like boats and planes.)
* If the profit margins are not much, then look out for places where hungry crowds already hang out. So that you don't have to put in the effort and expense for people to find you. But be aware that this model has a ceiling.
* Have backups in place - more than 1 source from where you can procure the goods.
* You will make mistakes. The trick is to minimize risk while starting out. And having money in the bank later on to help you deal with the mistakes.
* Buy low. Sell high. Sell first.
Last edited by Ankesh : September 6, 2012 at 04:42 AM.
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