If China is the factory of the world, the Guangdong province is its main assembly line. Counted as China’s mainstay as far as manufacturing, blue-collar employment and exports are concerned, the international business highlight at Guangdong is the Canton Fair (a.k.a. China Import & Export Fair), held in Guangzhou city twice a year. To give its readers a real time view of the autumn edition of the fair (that attracts over 0.2 million business visitors from over 190 countries and 26,000-plus exhibitors each year) and to understand how China’s xenophobic snobbery and obsession with Chinese brands is shaping up (beyond what Indian media reports), representatives from The Dollar Business boarded a flight to China’s numero uno GDP reporting province’s capital – Guangzhou. An on-the-ground exclusive report from China

 

That China considers having already achieved its ‘rightful place’ in the global economic order has become a singularly ubiquitous perception across the world. One reason for that evaluation of its own worth could be the careful choices that the country has made in the past four decades to growingly become the sparkling, attention-winning centrepoint of world commerce. The other could be a series of incredible manoeuvres made by Chinese economic jockeys that worked for a reason none other than plain chance. Choice versus chance – given you are on a flight to China, on a Boeing 777 with its horizontal stabilizers, rudder, vertical fins, ailerons, inboard flaps, the tail section, doors, wing panels, wire harnesses, wing-to-body fairing panels, and many other composite parts manufactured in China, you certainly hope that the nation’s supremacy in the contemporary world of capitalism is not all thanks to the latter!

Xenophobic snobbery

Until a decade back, products sold by multinationals around the world were classified either ‘Original’ or ‘Made in China’. From candies to baby products, from cellphones to heavy machinery, this nation (still) branded as being a foreign policy laggard made for the world to take. And the world took wholeheartedly. Despite China’s insecurities, the world sourced manufactured products for a reason that has today become common knowledge – low prices at acceptable quality. Of course, with a teaspoonful of salt each time. Over time however, the skepticism has faded. How the trust amongst buyers and consumers around the world was heightened is some story. When ‘aliens’ (that’s what the country’s immigration agency calls a non-Chinese; the term perhaps implying more of belonging to a foreign country and less of being an extraterrestrial) distrusted ‘Made in China’ products, the Chinese took upon themselves to make, use and in the long run...sell both perception and products to aliens. With the utility part of the equation being sorted, irresistible profits compelled importers around the world to overlook the quality classification that had for years plagued the character of the Chinese manufacturing industry. Result: Today, China is the world’s leading exporter of manufactured products, having exported ($2.21 trillion worth of goods) more than India’s total GDP (by value) to the world during the past year. As David Wang, a Guangdong-based Chinese foreign trade specialist tells The Dollar Business, “Given the huge consumer class, China ‘made and used’ for many years. In time, our low costs and quality won attention from foreign buyers. China today supplies finished products to the world in volumes that couldn’t be imagined a few years back. The export volumes will rise in future. We have already gathered a long experience in doing business with both a First World economy like US and an Asian nation like India.” Whatever be the real or cultured theory behind making Made in China a box-office phenomenon across ‘alien’ markets, what is most interesting is that the need for winning attention has today led to a literal case of xenophobic snobbery. It is difficult for an outsider to comprehend the reasons why China should and would only prefer (almost) everything that is locally manufactured. But it is there for every visitor to the country to see.

Aerial view of Hall 6.1 in Area A where samples of auto spare parts like steering wheels, axles, shockers, bumpers, etc., were on display

Matters that matter

A favourable time to visit China (i.e. if you are already an importer or plan to get knee or neck deep in this form of trade in future) is during months when the Canton Fair is held (it is hosted twice each year in Guangdong province’s Guangzhou city – China’s third largest city after Beijing and Shanghai). The Dollar Business team attended the first phase of the 116th edition of the fair this autumn (October 15-21, 2014). For first time business visitors to the fair or China, of the many, there are three most interesting aspects that are worth taking note of. First, the physical and emotional representation of the love for Made in China, in China (like we mentioned before, a typical case of xenophobic snobbery). Second, the very Canton Fair that is organised at such a scale that it is difficult to digest the fact that the event is a regular affair. Third, the unmissable speed at which China has progressed in terms of infrastructure – the wide city roads and skyline even in Guangzhou (which is considered China’s factory and a few years behind Shanghai and Beijing in terms of development) were unmissable. [And to say that orderliness and cleanliness are not just abstract terms meant for school education in Guangzhou wouldn’t be closer to the truth. You can easily compare the city’s clean, impressive infrastructure to that of Singapore’s.]

Extreme left: Lighting equipment – including industry lighting, decorative lighting, security lighting, etc. – being showcased at Hall 13.2 of Area B; Middle and Right: Visitors flocking the common hallway between Areas A, B and C

China loves Chinese

Allow us to present a typical scenario (based on anecdotal reference) detailing what your experience could be with Made in China brands immediately after the (more than partly) China-made-America-branded aircraft touches down at Guangzhou’s airport on an ordinary day. You would witness long queues outside the immigration counter with the travelling crowd kept in ‘silent’ order by black-taped line dividers manufactured by Uteiya Metal Trading Factory (and more than just a few Born-in-China police officers). The first counters you come across after clearing this check would be of those of brands that offer cellular SIM cards and travel services. With telephone cards you get to choose amongst the three – China Mobile, China Unicom and China Telecom. With taxi services you have fewer choices. Either rent a car offered by Baiyun Limosine Service or be prepared to have a few more hundred yuans shaved off by a Chinese cab driver who understands little or nothing besides Mandarin. The computers used at the airport are all of one brand – Lenovo. The large LED screens are from KONKA (on a lighter note, that name read like a spin-off of NOKIA to us!). Behaviourally, after a long flight, one finds it fairly more convenient to attend to nature’s call at the airport. There too, you’ll come to face with everything Chinese, including the cleaning personnel. [After using either a TA branded flusher, you will come across an AOSP branded automatic soap dispenser and a Karong automatic water tap. You can choose to dry your hands by placing it under a WEME branded machine.] In an observation that lasted about one man-hour at Guangzhou airport’s arrival zone, the only two non-Chinese brands that our team came across (being used at the airport) were Fujitsu (Japanese brand; digital signboards) and Beagle (an English breed of dog used by the Beagle Brigade to check passengers for illegally imported food products). From cars that zipped on the roads to hotels to food packs – China’s businesses and consumer class love everything Chinese. Even in a luxury mall at Haizhun Square in the city, you have Chinese designers with their high-end offerings and no American or European brand. China stitches what it wears and cooks what it eats. With pride. No wonder it got the world curious.

Hall 15.2 in Area C where Chinese tool-making companies were busy wooing foreign importers

The great hall(s) of China

From being a witness to a plethora of Chinese brands in action in the country, The Dollar Business walked into the first day of the 116th China Import and Export Fair (Canton Fair) co-hosted by the Ministry of Commerce of China and People’s Government of the Guangdong Province, and organised by China Foreign Trade Centre. The fair is the world’s largest biannual fair and the largest in China, spread over an area of 1,160,000 sq-m – almost covering 200 standard-sized soccer grounds. Divided into three areas (A, B & C) and housing 18 mega-sized halls, the total number of buyers that swarmed the fair crossed the 200,000 mark (from over 190 countries), with over 26,000 Chinese and international exhibitors showcasing their products at about 60,000 stalls (in the present edition). Forget the numbers, the event is a grand spectacle. The Dollar Business team spent five full days at the first phase of the current edition of the fair, covering all areas. Area A included exhibitors from categories like small, large and general machinery, automobile spare parts, industrial accessories, power machinery, consumer electronics, household electrical products, and construction & agricultural machinery. Area B included building and decorative materials, motorcycles, lighting equipment, electronic and electrical products, new energy resources, etc. And Area C included tools, bicycles, hardware and chemical products. L-R: Tool-kits on display at Hall 15.1 of Area C; A band saw blade grinding machine being shown by a sales representative at Hall 8.0 of Area A; Customers analysing a welding machinery at Stall no D 41, Hall 1.1 (Area A); and Industrial accessories at Hall 4.1Y (Area A)

At the fair, spoilt for choice buyers from around the world can be seen bargaining with Chinese suppliers. The sign language-aided exchange of words is quite a sight given that in almost all the stalls (by our first hand experience), sales representatives cannot blurt out more than half-a-sentence in English (and are regularly found looking for constant moral support from their colleagues with whom they play the eye-to-eye stare-in-surprise game). Despite Chinese stall representatives – and theirs would be the educated lot we presume, with a higher chance of being able to converse in English – sounding like confused Mandarin-trained babbling brooks, it is amazing to see them celebrating a deal now and then. This brings us to the first lesson that Canton Fair has to teach: You don’t need English to do business. You don’t even need a common language. Not if you are an exporter of Made in China product(s)! There are two approaches that a visitor can adopt to make the most of the fair. One, he comes with a narrow (read, focussed) approach and spends three to five days at a single or a couple of sub-zones. That to be able to meet each (industry-specific) supplier present at the fair, learn more of innovations, spare time to visit factories of Chinese suppliers (which the sellers are more than happy to arrange) and decide on what to settle for on the pricing front. Two, walk into the Canton Fair with an open mind and scout for opportunities, speak to as many sellers on both pricing and potential across as many product categories as possible, with a clear perspective on which products bear potential back home. Both strategies make for equally exciting experiences. While at the fair, the people you meet will come across as being (expectedly) friendlier than those you would meet while enquiring about the right subway route or directions on the streets. The fair is perhaps not the appropriate place for those looking for big volume-based bargains. Across most categories, even when the order size swells to a container-full, the sellers are willing to offer only an additional 1-2% discount (2.5-3% in extremely rare cases) over and above the minimum order price quoted. Justifying this non-flexible approach, Qian Jian, GM at Jiangsu Orient Light Industrial Products Co. Ltd. (a company that manufactures and exports consumer and industrial textile sewing machines) tells The Dollar Business, “We price our products at the lowest levels so that foreign buyers find sense in importing them. So even if the order size is very high, we do not offer bigger discounts.” During our short talk with Cyrus Chan, Head of International Business Center at Foshan City Nanhau Popula Fan Co. Ltd., he explained how, “Inflexible pricing and quoting one (lowest price) offer for each variety reduces confusion with overseas buyers, as our agents are not comfortable with speaking so many different languages!” Logical.  The Canton Fair is as serious an affair as it is exciting for importers who are looking to make the visit count. From an Indian perspective, minus the import duties and other freight and insurance related costs, the prices at which most products (like smartphones, PCs, home theatres, agricultural machinery, packaging solutions, solar products, inverters, diesel generators, saw blades, car accessories, mini projectors, interactive whiteboards, mist fans and other cooling solutions, lighting solutions, sewing machines, and many other industrial machinery and organic and inorganic chemicals) are put on offer at the fair turn out to be unexpected big money earning buys. One therefore needs to be careful not to allow excitement to overcome one’s senses. Often, high import duties and related costs render many-an-import-proposition unprofitable. [The Dollar Business analysed propositions based on importing many different products across various industries and found that profit margins actually fall close to or even below the zero mark in many products. Lesson: Everything sold in China cannot be sold in India at prices that guarantee big money. One reason could be the output from India’s fledgling manufacturing industry.] Most suppliers offer an FOB price from either Ningbo-Zoushan port or Shenzhen. The standard payment terms demanded by over 90% of sellers at the fair is 30-70 TT. [This means that 30% of the total price has to be paid in advance, while the remaining will have to be paid during shipment.] The risk with such an arrangement however is that the initial part payment made (30%) is done before the inspection is conducted prior to shipment, and in the case of goods not being allowed to be exported, the refund may become difficult to get. Of course, a couple of sellers were even willing to break down payment to the 30-40-30 format, where the last 30% chunk is to be paid on delivery and inspection at the destination port. Chinese suppliers will generally agree to have a foreign buyer’s logo inscribed or pasted on the product shipped at no extra cost (provided a certain minimum volume is ordered). While the most common warranty period for electrical and electronic products offered by Guangdong’s manufacturers is one year, care has to be taken to conclude on conditions under which spare parts will be made available. “Typically, most sellers in our industry offer 1-2% of spare parts by value, free of cost,” tells Raymond Chan, Overseas Market Manager at Guangzhou Ads Audio Science & Technology Co. Ltd., to The Dollar Business. The Canton Fair is a fine representation of the modern day Chinese manufacturing (business) society. Imagine the fair’s sprawling campus to be China. You have that densely populated choice of suppliers across all manufacturing businesses waiting to entertain you. That’s a happy situation, but one that calls for caution too. But, there is economics beyond Canton. And who but a buyer should know better. Common passage area between Halls 3.1 and 8.1 in Area A of the complex   

DOs & DON’Ts that will matter to Canton fair enthusiasts

Based on first hand experience and varied discussions with current and past visitors and traders at the fair, The Dollar Business presents a cursory list of DOs and DON’Ts for those interested in making a fruitful visit to the grand event in the near future:

1 Don’t walk in unprepared. This event has footfalls in many tens of thousands each day – and you wouldn’t want to be wasting half-a-day standing in one of those massive queues only to be told that your document isn’t complete! Pre-register for the event and ensure you stick to the document checklist.

2 Should you waste money on an interpreter? Had it been some mega fair being organised in another part of the world, we would have probably advised against this strategy. But seems, there are only a handful of those in China who can converse in English. An interpreter – if (s)he is not charging a huge fee should be a good idea for you to have a fair and transparent discussion with the sellers at Canton.  

“A detailed background check before deciding to conduct business with a Chinese manufacturer is critical”

3 Choose your location of stay wisely.

Lack of English speaking individuals in Guangzhou will make route mapping to the fair a tough job. Best, find a hotel that is within walking distance to the nearest subway or a bus station. Look up on hotels in the vicinity of Pazou, Modeisha, Chigang or Xingangdong subway stations. There are plenty to choose from.

4 Attire matters. The Chinese view those dressed in business formals as being more serious about doing business than others who would be dressed casually. This is particularly true at Canton where our observations led us to believe that those in formal suits are entertained better and more politely. [We were lucky.]

5 Spend time on your sellers. A detailed background check before deciding to conduct business with a Chinese manufacturer is critical. That includes everything from checking its registration, history, speaking to past and existing clients, etc.

6 Spend more time on your sellers. Before placing an order, a factory visit is a must. That should give you the absolute true picture of the competence, scale and indicative quality of the manufacturing process of the product being ordered. Better news, most sellers volunteer to organise such a trip.

7 Go by the Chinese culture. First, sarcasm isn’t well received in China. Two, it is important that you spend more time with your suppliers and perhaps even have a meal together. Create a professional, friendly bond if you can spare an extra week in Guangzhou after the fair. Let your supplier show you around the Pearl River Delta. In China, they love ‘aliens’ who praise their country and let them show them around the city.

8 The Minimum Order secret. If you are a first time buyer, experiment with a minimum order size. The supplier isn’t running away if your domestic market buyer places new / additional orders – and there’s more from where you got the first purchase. [It’s China. Remember?]

9 Don’t just haggle. A sole focus on getting the best price deal – especially in China will only land you amongst suppliers who make their products that are an unwanted compromise for you and your buyers back home.

10 Work with those playing for the long run. Lastly, always deal with a Chinese supplier who seems to be working for a future – that takes care of the supplier going missing and also ensures you continue getting the initial quality and price in the long term. Beyond just junk…

The Pearl River Delta on which the city of Guangzhou (and the province of Guangdong) sits has today become the world’s high-voltage manufacturing station. That zone alone has more number of factory workers than the whole of America. Forget complaints about America having lost over 3.5 million factory jobs to China in the past decade, for China, the gain has come at good speed, value and time. The Guangdong province accounts for about half of China’s annual exports from the two ports of Hong Kong and Shenzhen. During just the past year, manufactured products were shipped at the rate of one standard 20 feet-long metal container per second from this province. What these numbers imply for China and Guangdong region is that the manufacturing plants are important and that indirectly or directly as a result of what it produces from assembly lines, China has come to grab a central status in the world’s exchange of ‘made in somewhere’ business. But its success in manufacturing has also meant more public money to spare for developing the region’s infrastructure. Drive down Guangzhou and the lack of pot holes make you wonder why except for the sight of a young, populous city (and some rare instances of a red traffic light being run by those on foot), India doesn’t share more in common with the China you see. China today has wide roads, high rise society homes and wonderful marvels in the name of commercial towers. When you are witness to such progress, you often doubt the thought that crossed your mind in the past – about quality and the skepticism when it was a discussion about Chinese brands and Made in China products. China is more than cheap junk. The prices at which it makes and sells, keep its engine running for sure. It also makes life easier for industrial and domestic consumers and sellers alike in both the First and Third World geographies. Come to think of it – the fact that Moore’s Law isn’t still obsolete is much due to the abilities that are harboured in R&D labs around the world; a part of it of course, is also due to the incredible ability of China’s factories!

Disbelieve what Alibaba says E-commerce is good. But if you really want to start a business and get a real taste of what Canton and China have to offer, stop dishing out those catalogues and digging endlessly into those online bulk purchase sites. Step on to the turf. Make a real investment. Travel to China’s manufacturing haven. Pay a visit to Guangzhou and typically during months when the Canton Fair is on. You will remember the experience. Either because the sourcing ideas that hit you may be worth a fortune, or for the fact that the visit turned out to be a business trip meant for pure learning and understanding why Made in China isn’t afterall an antonym for ‘Original’.  

This article is a result of a visit to the Canton Fair in Guangzhou, Guangdong (China) by Steven Philip Warner (Editor-in-Chief) and Manish Kumar Pandey (Editor) of The Dollar Business magazine. Many products worth importing (based on conditions of a threshold demand in India and profit margins) were identified, of which a few were shortlisted (based on editorial judgement). These have been presented in the following pages of this cover story.

Chandeliers – All that glitters is definitely gold!

What started as an assemblage to secure candles in the medieval times has now become an art installation. Today, chandeliers are not just finding place in plush mansions, but also in middle-class living rooms. And with the Indian market already on its way to mature in terms of aesthetic sense, importing it from China certainly makes for a mathematically lucrative business proposition A chandelier on display at one of the stalls in Canton Fair 2014. Such sophisticated and brilliant crystal chandeliers can be imported from China at very competitive prices  

They were the staples of Hollywood classics – a centerpiece of every rich businessman’s plush mansion. A wealthy elite’s living room wasn’t complete without them. But that’s not where it all started. The history of chandeliers can be traced back to the early medieval times (5th Century AD) where they generally took the form of wooden cross with spikes where candles could be secured. The crosses were hoisted to a suitable height hooked on a chain or a rope. The practice continued until 15th Century when more complex and expansive forms of chandeliers (based on crown designs and manufactured using crystal and precious metals) started taking shape. Since then they have been synonymous for luxury and opulence and confined to the homes of wealthy elites. However, thanks to the influx of cheaper versions of the product from the world’s factory – China – there has been a paradigm shift in chandeliers’ market in the last decade. They are now visible in middle-class living rooms not just in India but across the globe. In fact, from brass chandeliers to cut-glass Chandeliers, from modern chandeliers to designer chandeliers, from low-height chandeliers to double-height chandeliers, one can only see the market in India expanding really fast for this decorative ceiling-mounted light fixture.While the domestic chandelier manufacturing market (which is estimated at $16 million) is growing at 12.5% year-on-year, India’s imports of chandeliers have been galloping at a much faster rate over the last three years – from $3.13 million in CY2011 to $4.36 million in CY2012 to $5.04 million in CY2013. What’s more interesting is the fact that, today, over 90% of the imported chandeliers selling in Indian market are sourced from China (Source: Ministry of Commerce, GoI). The reason is simple – Indian manufacturers cannot compete with their Chinese counterparts when it come to the cost of production.

“As compared to sourcing it from a domestic manufacturer, importing it from China is 40% cheaper,” claims Gao Min, spokesperson, IDEA (H.K.) Lighting Company Ltd., a Zhongshan (China) based manufacturer of crystal chandeliers. This means a chandelier sourced from China will cost much lesser than its Indian version even after taking into account the freight, insurance and applicable import duties. Result: The market share of domestic chandeliers is constantly falling. Further, Chinese chandeliers can also be custom-made to fit the requirements of an individual looking for unique designs and elements. Of course, the timeless classics are always there when it comes to the diversity in the Chinese offerings. With the Indian middle-class rising up the income ladder, the demand for the product is bound to increase. If the domestic industry can’t meet it, it’s the import that will have to fill the gap. Profits that look bright and beautiful and light up your eyes – chandeliers!

 

Mist Fans - No ‘mist’ery this. It’s a ‘cool’ lucrative import!

Evaporative air cooling has been a natural, age-old practice in India. And it’s now only gaining traction in the form of mist fans. In fact, its the new style statement when it comes to outdoor recreation. With more and more Indians preferring it over other cooling solutions during social gatherings, the future for the product looks anything but misty  A pressurised mist fan on display at one of the stalls in Canton Fair 2014. This mist fan has an effective area of 80 square meter and is an ideal for outdoor parties 

When enjoying a fabulous summer party in a beautiful outdoor setting, how much do we all crave for some cool breeze to blow into our faces! While air-conditioners are definitely not an option in open surroundings, air coolers are least effective. Wake up – the mist fan from Chinatown is here! Mist fan is the new style statement when it comes to outdoor recreation. From hotel lawns to marriage pandals, from open air restaurants to farmhouses, from terrace gardens to trade fairs, you can see it at work at many such places these days. For not only does it decrease the temperature by 4-12 degree celsius in the effective area, but also increases the relative humidity apart from reducing dust and purifying the air. High-end mist fans can have an effective area of more than 100 square meter. Further, mist fans can also be used to create fog as ambience for theme parties. Available in various sizes and specifications (in terms of power, volume, noise, effective area), mist fans can broadly be grouped into two major types – Centrifugal type and Pressure type. While the former uses centrifugal force to convert water into mist, the latter comes with high pressure pumps and nozzles that turn water into mist. Not to say the second type is costlier and bulkier than the Centrifugal type as it’s more powerful and effective when it comes to outdoor cooling. Further, these fans can also be customised as per an individual’s need. Although there are many companies in India that offer various misting and cooling solutions including mist fans, they stand nowhere near their Chinese peers when it comes to deliver powerful, yet trendy, mist fans at competitive price.

According to industry sources, the market for air cooling systems in India is currently estimated at Rs.25 billion and is growing at double-digit rates year-on-year. Hence, looking at the size of domestic market and rising demand for innovative air cooling solutions one can certainly say the segment has immense growth potential. While manufacturing mist fans indigenously could be an option, importing it from China (under the current scenario) definitely makes more sense. In fact, an importer can expect margins as high as 40-50% (on some high-end models) if he/ she is willing to take the pain of retailing the product. With demand expected to move only northwards, margins are bound to expand. Sounds lucrative, doesn’t it?    

 

Smartphones & headphones - It’s time to get smart ...and follow the herd

With the Indian market for smartphones and related accessories poised to grow at 40% CAGR over the next five years and with millions of price-sensitive Indians yet to buy their first smartphone, there cannot be a better time than now to import them from China. A Chinese manufacturer can provide you one for as low as Rs.3,000. [Already smell big margins?]  A high-end headphone on display at Shenzhen Dongzhili Electronics’ stall in Canton Fair 2014. Smartphone sale have pushed demand for accessories like headphones too 

So, what’s the very first thing you do when you wake up in the morning? Chances are high that you are one of those of our present present gen who reaches out for his/her smartphone. In today’s world, smartphones have become more of a necessity than a luxury. And that’s where the opportunity lies for you as an importer. China offers an array of smartphones and related accessories that can sell like hot cakes in India’s price-sensitive market. For instance, a smartphone with high-end specifications like 5” HD display, Octa Core 1.7 GHz processor, 1 GB RAM etc., can be available for as low as Rs.6,500 in the Chinese market.

Even if one takes into account the logistics cost and import duties, the product can easily fetch an importer a 16-20% margin in the Indian market. Similar is the case with headphones.

A high-end headphone with Bluetooth, USB2.0, MP3, 32 GB Micro SD Card and FM, sourced from China, can garner a profit of 20%-plus in India’s wholesale market. Certainly the market for smartphone and related accessories in India offers huge potential. According to UK-based consultancy Canalys, India is the fastest growing smartphone market globally (sales in India rose by 80% in Q2, 2014). Even DC India, a technology consultancy, projects the Indian smartphone and accessories market to grow at 40% CAGR in the next five years. No doubt, domestic giants like Micromax, Intex, Karbonn, etc., have been quick to capitalise on this opportunity. But do not worry; there’s still enough space for new players to step-in.

 

Decorative lights - Lighting up India with Made in China

Indian festivals don’t seem to be complete without Chinese decorative lights. Be it Diwali, Christmas, Eid or any other cultural jamboree, the market is always flooded with uncountable glowing pieces of lights from China. While its low prices make these light products attractive to price-sensitive Indian consumers, it’s high margins that persuades an Indian importer to take up the trade!  A multi-colour rope light on display at one of the stalls in Canton Fair 2014. Such lights can easily fetch an importer margins between 12-20%, depending on the quality  

Like every year – the trend has been there for more than a decade now – this Diwali too, the market was flooded with Chinese decorative lights. Red, blue, green, yellow and many such colourful Chinese lamps, rope lights, LEDs, were once again giving stiff competition to the traditional earthen lamps apart from sidelining their Indian peers. The reason was simple. Despite being more innovative and modish, Chinese products were priced way below their Indian counterparts. “Chinese manufacturers are experts when it comes to adapting to the local culture of other countries. In fact, you can see more Chinese products in the market this year than last year,” S. Reddy, a wholesale dealer of decorative lights at Koti Market in Hyderabad, tells The Dollar Business. To give you an idea of the low prices of Made in China light products, at the retail level, a Chinese chain of 60 rice bulb costs Rs.35, a 10 meter-long multi-coloured rope light costs Rs.550, a crystal-based rainbow thrower costs only Rs.250. “Low prices” we say? You wouldn’t agree, if you knew the mathematics behind the import strategy. To give an example, a decorative light piece in the wholesale market, may cost Rs.200 if it is manufactured in India, but the same product will cost Rs.60-70 if it has the ‘Made in China’ tag. Cost is certainly a factor for the buyer, but that doesn’t mean there are no lucrative margins involved in this business. The business proposition of importing decorative lights from mainland China and selling it in India makes more sense when one works out the margins these products can fetch. Even after taking into account the total duty of 21.2%, and other costs like freight & insurance, one can expect a healthy margin of 15-16% on import of decorative multi-colour rope lights from China. If one opts for multi-coloured ropelights with LEDs inside, the margins can go up to 20%. Then there are other products like decorative lamps, artificial diyas, Christmas stars, etc., that promise better returns if sourced from China – say 20 to 30% depending on the product sourced. This is the reason why most retailers of decorative lights in India either import them directly or buy it from other importers. When enquired about the qualitative difference between Indian and Chinese decorative lights, the dealer at Koti market (Hyderabad) said there is hardly any difference. “There used to be some concerns few years back, but today one can hardly differentiate between the two products when it comes to quality,” he told The Dollar Business. Importing decorative lights from China appears to be a lucrative business given India’s consumption patterns and ever rising demand for such products. According to Electric Lamp and Component Manufacturers’ Association of India (Elcoma), “The domestic lighting industry has been growing at the rate of around 12 to 14% per annum over the last 7 to 8 years, clocking an annual turnover of Rs.12,000 crore plus in 2013.” Estimates suggest that decorative lights contribute to about 7-8% of this market and is growing at double-digit pace. Trust the wave and jump into a trade that promises a prosperous year ahead! 

 

Portable solar power banks - All good things come in small packages

In a country that faces a daily power outage of 30,000 MWs and most of whose towns still yearn for 5-6 hours of uninterrupted power supply a day, this product can make big moolah for its importers. If this reason is not enough to justify its business sense, high profit margins associated with it, surely is. Portable solar power bank is what the world calls it...  A 4200 mAh solar charger and power bank on display at one of the stalls at Canton Fair 2014. This product is a heavy-duty battery for most of your mobility devices 

In today’s fast-paced world, one can afford anything but stay disconnected. Smartphones, tablets, notepads, et al keep you engaged with the world, even when you are travelling. And if you are a businessman, staying disengaged, even for a minute, could cost you big bucks. Well, that’s when a portable solar charger and power bank comes to your rescue, ensuring your devices don’t slide into deep slumber. Although there are established Indian players like Godrej that manufacture and sell the device, their offerings are relatively high-priced. On the contrary, at the wholesale price level, a solar power bank sourced from China is about 12-20% cheaper than those manufactured domestically (even after taking into account import duties and other logistics cost). In fact, it’s even 10-15% cheaper than an electricity-based portable power bank offered by most of the established brands. This makes a strong case for its import from China and indicates prosperous times for those importing it. The product also fits the bill when it comes to the needs of consumers based in India’s tier-2 and tier-3 towns where power outage is a big problem. As far as product specifications are concerned, ‘Made in China’ power banks come in all possible designs, are compact and easy to carry. They are available in various sizes to suit an individual’s requirements and are compatible with all USB enabled devices such as iPhone, smartphones with micro USB, gaming devices (PSP, NDS, NDSL), tablet computers etc. Power capacity too ranges between 1800 mAh and 12800 mAh (polymer lithium battery with over 500 plus recharge cycles), which provides the product a wider scope. While the recharging time is usually 5-6 hours, discharging time vary for different devices. A 4200 mAh power, for instance, would take approximately 140 minutes to discharge if used for charging a smartphone. Further, multiple ports mean one can simultaneously charge two or more devices.Interestingly, from logo creation to packaging, all needs are taken care of if an importer wants to source them on a big scale. Those wary of the Chinese quality should note that every piece needs to pass strict examination before being accepted. Some suppliers even provide a year’s warranty on their products and the payment terms in tandem with the global practice. At a time when the Indian government is gung-ho about solar energy and the market for mobile power sources is racing ahead in double digits, it makes all the more sense to import the product to reap full benefits. It’s time to exploit the power of the Sun, we reckon!                  

 

Circular saw blades - They also call it the wheel of fortune

Not many know about this product used on a mass scale in India’s booming real estate industry. But it’s one that has been yielding some great returns for those who have been dealing in it. The combination of a healthy margin and a short life-cycle is what makes imports of circular diamond saw blades from China a highly profitable business  Diamond circular saw blades are one of the most popular imports in this category from China. These are generally used for cutting granite and marble

This is one product whose import has been steadily rising for the past two years. In CY2012 India imported saw blades worth $84.12 million against saw blades worth $79.61 million and $67.31 million in CY2012 and CY2011 respectively. Interestingly, accounting for over 56% of India’s imports in CY2013, China continues to be the dominant player even in this category. While in CY2013 India imported saw blades worth $47.54 million (56.51%) from China, it imported saw blades worth $37.92 million (47.63%) and $26.25 million (38.99%) in CY2012 and CY2011 respectively. The main reason for this steep rise in imports of saw blades from China can be attributed to the Dragon’s low-cost manufacturing prowess. For instance, a 100 mm (diameter) diamond circular saw blade (this product is one of the most popular imports in this category from China and is used for cutting granite and marble) sourced from China can be bought for just Rs.90 from any wholesale market across India (despite import duties on the product totaling to 28.8%). As such the Made in China price is about 15-20% lower than that of India-manufactured saw blade of the same diameter. Since the life-cycle of the blade is short (a standard blade can cut through 80-100 metres of marble or granite), a 5% margin in this ‘rapid replacement supply’ business makes sense. Other popular products in this category include laser welded saw blade, sintered saw blade (used for cutting granite, marble, hard stone, clay stone, hard brick, concrete), which too can fetch an importer some really good money. Apart from cost, the factor that works in favour of Chinese manufacturers is that they know the Indian market better than others in the trade. “We have seen workers in India using water to cool the hot blade. This at times can lead to accidents. Hence, we design our blades to suit the Indian working conditions. Safety is our priority when it comes to India,” Yan Wei, Vice GM, Jiangsu Inter-China Group told The Dollar Business. There is no doubt that the real estate and infrastructure boom is there to stay in India, and as far as Indian manufacturing is concerned it’s not in the position to match the Chinese scale anytime soon. This obviously means great news for importers. At current prices, profit margins of about 4-5% are there for the taking for those importing top-quality saw blades from China. With demand expected to move only northwards, profitability is bound to expand. Sounds lucrative, doesn’t it?  

 

Silent Diesel generators - Harnessing the power of Power. High time!

Chronic power shortages and prolific growth in end-user industries have been driving the diesel genset market in India. And the situation is not going to change anytime soon. This not only makes importing gensets a lasting business proposition, but also a lucrative one. And what better place than China to source them – an export hub that offers gensets with margins as high as 30%!  A 5kVA air-cooled silent generator on display at Yarmax’s stall in Area C in Canton Fair 2014. The genset’s integrated cabinet ensures that it runs silently

Thanks to increasing instances of power cuts and supply shortages across India, the market for diesel generators has witnessed high growth over the last few years. According to a recent study titled “India Diesel Genset Market Outlook 2018” by RNCOS, “the Indian diesel generator market, which grew 9.5% y-o-y in 2013, is anticipated to grow at a CAGR of around 11% in value terms during 2014-2018.” In fact, rough estimates suggest that there is already a 17% gap between demand and supply of generators and it is widening by each day. This obviously means great news for importers. And what could be a better place than China to source them. In fact, 28% of the total generators imported into India are already coming from China (CY2013; ITC data). The reasons are simple – low cost and high margins! In India, diesel generators are widely used for power backup on account of high power outages, higher reliability, rapid response time, fuel availability and high load carrying capacity. Based on their power ratings, diesel generators can be grouped into four broad categories – Low (5 kVA – 75 kVA), Medium (75.1 kVA – 350 kVA), High (350.1 kVA – 750 kVA), and Very High (750.1 kVA – 3000 kVA). In India, low and medium power rating diesel generators account for majority of the market share. Further, its the silent type which have now started picking up speed. And for two reasons – one, they are technologically superior than the open type, and two, they offer better margins when imported from China. For instance, a 5kVA air-cooled silent diesel generator (from Changzhou-based Yarmax Power Co. Ltd.) can ensure a profit margin of 26% to an importer, after a high total import tariff of 26%, and high freight cost that is around 40% of the genset cost. Margins may go up further if someone goes for a bulk deal or higher variants. It’s this low-cost manufacturing prowess that has earned China a place beside the best in the business. “China is set to overtake US as the global genset market leader, increasing its share from 26% in 2013 to 33% by 2020,” says a report from UK-based research and consulting firm GlobalData. And those in the business, expect this to happen even sooner. Growth in end-user industries such as telecom, hospitality, healthcare, manufacturing, real estate etc. are bound to propel diesel genset demand in India. Factors like power outages and rising demand for energy too will work in favour of those in the business. “Frequent power outages coupled with growing demand for electricity are expected to drive the diesel genset market in India over the next five years,” says a recent report by TechSci Research. Further, emission norms in India are being continuously altered to keep pace with those in the European Union. This only makes the situation better for importers of silent diesel gensets. With minimum margins as high as 20% and chronic power shortages continuing to haunt the Indian businesses, the demand for generators is bound to scale up. Silent, powerful profits – give us a deaf ear if you want to.  

 

Caustic soda & Titanium Dioxide - Chemically balanced & profitably explosive

These days, titanium dioxide (TiO2) and caustic soda (NaOH) are being imported in greater quantities from China. While the price factor has much to do with the inflow, marked improvements in the qualities of Chinese-manufactured TiO2 and caustic soda, have made the ‘import’ case more compelling for these two darlings of the Indian manufacturing industry

Sodium hydroxide, also known as caustic soda, is one of the most popular alkalies and used across many industries like paper, soaps, detergents, cleaners and textiles

While one is the mother’s milk of the $5 billion Indian paint industry, the other is a key ingredient when it comes to the manufacturing of  paper and detergents. We are talking about titanium dioxide (TiO2) and sodium hydroxide (NaOH), and in that order. China has consistently remained at the top of the list of countries from which India imports TiO2 and Caustic Soda. In fact, India imported TiO2 and NaOH worth $12.23 million and $20.53 million respectively from China in CY2013.

Although the demand for both has grown manifold in the last decade, domestic production has failed to keep pace, resulting in increased dependence on imports. Add to this the fact that Indian demand for TiO2 and NaOH are expected to grow at a CAGR of 8% to 9% in the next five years and it becomes clear that the dependence on imports is only going to rise. While TiO2 is used (apart from being a key ingredient in paint) in the making of plastic, paper, ink, rubber, certain pharmaceuticals and cosmetics, caustic soda, is widely used in many industries like paper & pulp, textiles, soaps, detergents and cleaners. And these wide usages ensure jackpots for those in the business of their imports.

In fact, considering the going rate of Rs.184,000/MT for TiO2 (Rutile 908) and Rs.40,500/MT caustic soda (flakes, 99%) in the Indian retail market, margins of 7-9% are there for the taking for any prospective importer. Not to say, the quick turnaround time means higher profitability in the long run.

Any takers for these compounds?

 

Infrared interactive white board & Pico projector - Unleashing the power of innovation

Not many are aware of these products in the Indian market. And that’s what works to an importer’s advantage. With profit margins ranging from 20 to 40% they have the potential to become a game changer for any businessman. Once the demand for these products picks up, which is bound to happen, there is no chance that their importers won’t be laughing all the way to the bank

Rough estimates suggest that over 90% of schools in UK and US are using interactive white boards for teaching and the market for them is growing exponentially globally

We call them multibaggers. These two innovative and technologically advanced products – pico projector and interactive white board – have the potential to become a game changer for any importer. For, they have just arrived.

Pico projector is an emerging technology that is revolutionising the global projector market by making projectors small enough to fit into an individual’s pocket. These projectors come in the form of a small hand-held device, or in the form of a tiny light-engine added as an accessory to consumer electronics such as mobile phones, laptops, and PDAs.  “The total market for pico projector is expected to generate revenue of $10.09 billion by 2020, growing at an estimated CAGR of 41.01% from 2012-2020,” states a recent report by MarketsandMarkets.

 

Interactive whiteboard (an interactive display system that allows users to control screen activities using a pen, stylus, or finger) is another such high-potential product that is slowly gathering speed. According to a recent report by Research and Markets, “the global interactive whiteboard market, by revenue, will grow at a CAGR of 15.95% over the period 2014-2018.” Although the market for interactive board is still in a nascent stage in India, there is a huge potential for them, particularly in the corporate and education sector.

If sourced from China, both these products can easily fetch an importer profit margins ranging from 20% to 40%, and that too in the wholesale market. You would not like to miss the opportunity. Would you?

 

Padlock & door lock - Unlocking the door to prosperity

If you think they don’t have a booming market anymore, you are wrong. Thanks to a buoyant real estate sector, the demand for mechanical locks is on an upswing, and like never before. In fact, India is one of the top markets that will drive the global mechanical locks industry going forward.And if this is not reason enough for you to take that plunge, a stunning profit margin surely is

A 75 mm grey iron padlock on display at Fangyuan Locks’ stall in Canton Fair 2014. Import of padlocks from China has been continuously rising over the last few years

The lock industry is undergoing a transition. While locking solutions are becoming more secure and sophisticated by each day, a trend towards access control and interconnected locks is increasing the demand for innovative products. So, does it mean it’s the start of the end of the traditional mechanical lock segment?

Despite the rising influence of electronic access control and the adoption of more electric solutions, the mechanical lock industry is slated to clock modest growth. According to the US-based HS Technology “the world market for mechanical locking devices was valued at $2.2 billion in 2013 and is only growing further.” The technology solutions provider projects Asia – particularly China and India – to be the fastest growing region for mechanical locks with a compound annual growth rate of 5.4% from 2014 to 2017.

In fact, a closer look at the numbers and you get it all right. It’s actually China that dominates the segment with India too sourcing locks worth $43 million in CY2013 from the country. And the reason is simple. A 75 mm China made padlock, for instance, can fetch an importer a whopping 31.9% profit margin. Similar is the case with mechanical door locks with knobs that can offer margins in the range of 11-30%, depending on the variant and grade sourced.

There is no doubt that mechanical door locks will always make sense for a price-sensitive TG like in India. And if that is the case, sourcing them from China certainly makes for a lucrative business proposition. Isn’t it?