During the course of my business career there was a point at which that I crossed the line between being a small retail chain and a “heavy hitter” in the sporting goods and tackle business. That small change catapulted our sales and profits into an entirely different sphere.
Like most all sporting goods/tackle chains, we bought 100% of our goods from U.S. vendors, many of which simply direct imported their products mostly from Europe and Asia. Because I was also a tackle jobber, I knew full well the margin spread between what the importer pays, the jobber pays, the retailer pays and ultimately what the consumer pays.
My early experience with importing product was through a function known as Port of Entry (POE) purchasing wherein I would place my order through my U.S. vendor, who directly imported the product along with their own and brought the shipment in together. When a shipment arrived at the port of entry and after it had cleared customs, my vendor shipped my portion directly to me from the POE. Thus, I got the direct import price at 5%-8% over cost. It was a good deal.
First-hand import experiences overseas
As my company grew a bit more, I decided to learn more about the pros and cons of direct importing. I contacted an import agent I had met earlier at a U.S. trade show. He lived in Germany and we scheduled a joint trip to Germany, Austria, France, Italy and Taiwan. Wow, what an education I got.
I lined up a group of about 20 other sporting goods/tackle retailers I knew and told them of my plans. Namely, I would source products throughout the world, bring back samples and quotes, take orders and thereafter place a combined order through my agent with the various vendors. The costs I quoted our group were FOB factory, plus import taxes (duty), plus freight, plus customs and clearing fees.
The combined orders where shipped together but marked by retailer. After clearing customers, the shipments went directly to each retailer. Over time, I imported fishing tackle, sporting goods, bikes, athletic and ski apparel, cross country and downhill ski equipment and a few other categories. I also attended trade shows in Germany, Taiwan and met with vendors in Japan, Korea, China, Italy and Taiwan. The quality was good and the prices were wonderful.
Learning the margin game
Here’s how the margin game is played: when meeting with a factory, I needed to estimate my usage, time frame and have a firm understanding of what it was that I needed. I often provided samples of what I was looking for. After negotiations, we firmed up prices.
The margin game: When direct importing merchandise, I could specify what name I wanted on the products, cosmetics, and, in many cases, the price we put on the gloves, sunglasses, skis, lure, etc. Most typically, the pre-priced ticket was cost price, plus import taxes and costs and then marked up 3 or 4 times the final cost. The ultimate retail price had to be realistic and reasonably competitive with similar products on the market.
The big money was made on apparel. We could bring it in at three times markup using a MSRP (manufacturer’s suggested retail price) price ticket. Leave it in the stores for about two or three weeks, and then start promoting it at 25% or 30% off. Later, we would “clear” it at 40% off and still make a very handsome margin.
This, more or less, is how the big boys play the game. Once I started direct importing, our sales, profits and reputation all when sky high. So, what’s the takeaway here. You can also direct import just as I did. Belonging to a buying group helps. And if not, simply pool together orders from other similar retailers interested in direct import advantages.
Does it take work? Sure, and also involves a learning curve. But in doing so, your sales profits, knowledge quotient and success level will grow large. Have at it, retailers!