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Eliminating the middlemen in ecommerce

May 9, 2005

Internet retailing is getting more and more price competitive. Finding the lowest-cost manufacturer or wholesaler can make a big difference in the average ROI of an online business.

Jennifer Nichols has found the ultimate rock bottom source: China.

"If you understand how to sell on the Internet, the next best thing is understanding how to import from China," says Nichols, who is president of Kate Aspen, an Atlanta-based wedding favors wholesaler. "You cut out the middleman, and you're not as concerned with the price wars on the Internet."

Nichols saw considerable success with her retail wedding favors business, But when she decided to set up a wholesale business, she found few suppliers who understand the wedding favor market. This led her to explore buying direct from China.

Setting up a Chinese source is daunting, Nichols notes. "Every retailer out there is relying on a wholesaler, so there aren't many direct importers that sell on the Web."

But finding a Chinese wholesaler is worth the effort, she says it offers dramatically expanded profit margins.

Step one in finding a Chinese wholesaler is finding a Chinese broker. Nichols searched the Internet using the term "China broker out of Atlanta." She went through about five different brokers before she found a reputable one.

"There are good brokers and bad brokers," she notes. A good broker will prevent delivery delays, he'll be "somebody who knows the people to call."

Kate Aspen has found success as a drop shipping distributor using her Chinese connections.

Additionally, Chinese-American taxation issues are highly complex, and a good broker can oversee this, she says.

Then, with the help of that Chinese representative, an American merchant needs to contact several factories that will send samples, along with a price sheet.

The biggest challenge in buying from China is getting quality goods, she says. Not all factories turn out equivalent goods, and merchants can expect to pay more for a source that has higher quality control.

Nichol's business, Kate Aspen, currently ships 42 products, to about 250 wholesale customers.

"We drop ship with no minimum, so we're really trying to accommodate the Internet retailer," Nichols says. "When they have an order for 150 measuring spoons, we ship it out two days later."

She labels packages so they appear to have come from her retail buyers, so she can drop ship directly to their customers.

She has greater control of her own inventory, in terms of how each item is designed, because she buys directly from her Chinese source. She conceives of the items herself, then requests that design from the factory.

"I am thrilled that we got into the import business," she says.

Source: eCommerce Guide

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