Importing From China, Have I Got My Numbers Correct, Does This Seem Worth Doing?

Hello,

I’m looking into the possibility of importing a container of sporting goods (don't want to be too specific) from China to sell here primarily through eBay, possibly through a dedicated website and direct to retailers also.

I just wanted to run through the numbers involved, and see if I’ve got them correct and if my margins etc look appealing.

Cost of Product: €100
Shipping/Insurance/DockFees/Delivery in Dublin: €11.50 (€2000/175 Units)
Delivered Cost into Ireland: €111.50
Duty Payable = Cost Into Ireland * Duty Rate%
TARIC is 14% in case of this Product (€15.61 per Unit)

With Taric Cost: €127.11
VAT Payable = (Cost Into Ireland + Duty Payable) * 21.5%
€127.11 + €27.33 VAT = €154.44

Imported Cost of Product with Duty and VAT Paid= €154.44

Now I’m a bit confused by VAT at this point. If I intend to sell this product on at a higher price do I pay VAT again when I sell it for the higher price? If so do I then get a refund of the lower amount of VAT I originally paid? I assume this is the case, please let me know if it isn't?

I intend to sell each of these for about €275, this is a conservative estimate of how much I can sell them for, I’d imagine €300+ might be possible.

So, working just on the idea of selling them on eBay (so as to keep things simple)

Selling at €275, VAT is €59.13, left with €215.87
Assuming I get the original VAT of €27.33 back
Gross Profit: €215.87 - €127.11 = €88
Cost of Sale = eBay and PayPal Fees, about 10% of sale price = €27.50
Net Profit= €60.50 per Unit Sold

Now firstly I am interested to know whether my calculations are accurate, I have erred on the side of caution with the shipping costs etc, it should be possible to reduce them a bit.

If I were to import and sell these items as a Sole Trader would this change the VAT situation? My intention would be to start with a single container or less of goods and dependant on how they would sell, expand as necessary.

Also, without giving away too much about the goods in question I am not sure whether it is a viable option.

I contacted a UK distributer of a similar product and was told he sells them at ”£129.00 ex VAT with an SRP of £239.00, which is a pretty good margin in this area.”

What I’m trying to work out is whether my product offers a better deal or margin for me than this one.

Now the product that I would be selling at €275 is significantly better than the one for £239, I wouldn’t actually consider selling the widely available one as I’d have no advantage over the major retailers that already sell it in the UK. Also, while the prices from the UK would not involve an import duty I’d still have to pay transport costs from the UK which would make it less appealing.


Anyway, sorry for the rather long post and if I haven’t been very clear. I’m very confident that the product that I am importing will sell well both here and in the UK. The only competitor on eBay sells for €240, my product is far superior to this and so I’d be confident of its ability to sell. I have a few sample units on the way that I will sell to test the waters to make sure of this. Just not sure if I have my numbers right and if it seems an appealing proposition in terms of margins etc.

Finally in terms of retailers, a similar product (slightly worse quality) sells for €400 in shops here, so at what price would they be willing to buy from me to sell at this price themselves?

Any advice would be much appreciated.

Thanks

Your calculations assume you can off-set VAT paid at point of entry against VAT collected on sales, and that your selling price will include VAT.

This will be correct if you are registered for VAT.

If you are not registered, you will still pay VAT at point of entry but you cannot charge VAT on sales.

Thanks for the reply.

That would make sense alright, so the lower VAT rate would be paid if I was unregistered for VAT and the higher one if I was?

Thanks again.

No - VAT registration has nothing to do with rates - see below, I hope its clearer.

mathepac said:

... If you are not [VAT] registered...
pay VAT [but] ...
cannot charge VAT ...

Click to expand...

nor can you reclaim VAT paid at point of entry.

Sorry I meant I would pay the lower amount of VAT of the 2 amounts above, not rate, ie the VAT on point of entry, €27.33.

Then if I sold the product for €275 I would not be charging VAT. Correct?

So I'm guessing if I were to import a small amount of product it would make more sense for me to set up as a sole trader to begin with?

Thanks

blobert said:

Sorry I meant I would pay the lower amount of VAT of the 2 amounts above, not rate, ie the VAT on point of entry, €27.33.

Click to expand...

Yes you pay that amount of VAT at point of entry and you cannot reclaim it if you are unregistered.

blobert said:

... Then if I sold the product for €275 I would not be charging VAT. Correct?...

Click to expand...

No incorrect, because originally you said "Selling at €275, VAT is €59.13, left with €215.87" so to sell excluding VAT your price is €215.87 (unless you want the additional €59.13 to go to profit...)

blobert said:

... So I'm guessing if I were to import a small amount of product it would make more sense for me to set up as a sole trader to begin with? ...

Click to expand...

How you choose to structure the business (sole trader, Ltd Company, partnership, etc.) is one discussion, but whether or not it is worth the hassle of VAT registration for a trial run is a separate issue.

If your selling price is 275 incl 21.5% VAT, then the selling VAT is 48.66 and the net sales price is 226.34.

Thanks for the advice, €275 is the total price I think I can sell for, obviously less VAT should hopefully = more profit.

I see I have my VAT calculations wrong there, what is the formula I would use to calculate how much VAT should be charged on a particular price? Obviously my system of multiplying by 21.5% is obviously inaccurate. At least it means less VAT though.

Thanks again.

Edit, I think I've found the formula, is it:

( 100 / ( 100 + [VAT Rate] ) * [Final Price] = [Pre-VAT Price]

(gross price / 100 + vat rate) = net price

It seems people have gone through you figures so I will post my thoughts on weather your plan is viable.

Whatever the product is what makes you think people will want it. I note that what you are selling is "better" than the product in the UK but something is only worth what someone is willing to pay.

Also, are the people in the UK selling online or do they have a shop? you may find that you are dealing with the same people and possibly people using ebay are looking for further discounts. Also, the shop may have an established reputation and also customer service.

I think you really need to test the market.

blobert - Great that you are exploring the possibility of starting a new venture. Keep it going! For what it is worth I have brought in a couple of containers from China over the past few years. The advice I would give is allocate appropriate time/resources to establishing a proof of concept prior to placing an order with your supplier/manufacturer.

Most people tend to view the whole process as sequential, STEP 1 Find Product STEP 2 Establish links with supplier/manufacturer STEP 3 Order Product STEP 4 Wait for product to arrive STEP 5 Sell Product. I am not suggesting that this is your approach but some people that I have assisted in the past have more often than not had this process in their heads.

I believe that you should really be looking at the 5 steps above in parallel. Allocating time/resources to the first 4 steps and then finding out that you cannot sell what you have bought is a waste of your time.

There is a huge difference between thinking what your product will sell for and actually trying to sell it and finding out what the market actually believes it is worth.....or even if the market wants it.

As an aside don't be afraid to haggle with your contacts in China. You would be surprised as to the response you might get. I have found most companies will entertain a discount as long as you convey that the first order is to facilitate a proof of concept and that if successful, larger orders will follow.

Also you do not have to ship a full container. Get your proof of concept established first. Most of the shipping companies will ship a partial container for you....and definitely shop around with your shipping company - I have noted big differences across companies.

It might be worth applying for a Binding Tariff for your product to tie down the Taric classification - this can be subjective depending on the item in question - just an idea. You can call Customs in Nenagh and they will give you a heads up on processing times.

Hope some of this helps.....and best of luck with your idea......