Phone resellers require a consistent inventory source that hits the right price point. It can be easy for some of the newer resellers in the industry to fall into the trap of simply signing on with whatever wholesale supplier promises the lowest price per unit. Some resellers are even willing to overlook the logistical and practical questions that are raised when a wholesale supplier is located abroad because they assume that paying less is always better (and means more profits for them once they resell the unit).
The risk is that the pursuit of what looks like foolproof profitability can ultimately cost more money in the long run.
Does where a mobile device originates from have an impact on profitability? While looking for low unit cost is certainly a good place to start, the reality is that a price that’s displayed doesn’t necessarily tell the whole story.
The unit price is just one piece of a larger puzzle in most international transactions. Transportation, added fees, issues stemming from hard-to-reach customer service, and time invested in addressing variations in specs all factor into the total landed cost. Let’s explore the different costs that make up the whole picture when sourcing devices abroad.
You could be looking at an automatic per-piece or per-pound tax percentage of item value whenever you import from a supplier abroad. The actual percentage that gets tacked on is determined by what is on the Harmonized Tariff Schedule (HTS) that is used by the World Trade Organization (WTO). Mobile phones imported from countries like North Korea and Cuba come with hefty tax add-ons that total as much as 35 percent. Admittedly, you probably won’t need to worry about those tax rates because devices are not imported to the United States from those two countries.
The good news on the tax front is that import taxes for electronic devices coming from the United States’ traditional trade partners are essentially nonexistent. While imports of wholesale phones are duty free, buyers are responsible for a Merchandise Processing fee, which is a US Customs charge imposed on most imports into the United States. The current fee is 0.3464% of the cargo value as declared on the commercial invoice, with a minimum of $25 and a maximum of $508.70 per entry. To get a landed cost estimate for your international shipment, you can use the Fedex Global Trade Manager tool.
While the above mentioned Merchant Processing Fee is relatively small, one of the big stories of the year is the looming threat of new tariffs on electronics imported from China. Those in the electronics industry should make no mistake that this would be a game-changing event for businesses that bring in products from China. Even giants like Apple would be greatly impacted if new tariffs go into effect. Smaller importers would likely find that purchasing devices from that part of the world simply would not be profitable. This is something to keep a close eye on when making sourcing decisions. Where you ultimately decide to source products from can determine just how tariff-proof and politics-proof your supply chain is on a long-term basis.
Increased Shipping Charges
Perceived cost savings that come from getting the lowest per-unit price can quickly be erased once shipping costs come into the equation. Moving cargo far distances costs more than having something shipped domestically. It’s important to break down the price per unit once you add on the breakdown of the per-unit shipping fee, based on the price of shipping divided by the number of units being shipped. While there are several more variable fees associated with moving products internationally, shipping is one that no company can get around.
Time is also money when it comes to arranging shipments. It will be necessary to make sure everything is smoothed over for customs purposes whenever you’re anticipating a shipment. Any hiccups with paperwork could cause your shipment to be held or delayed. In addition, the actual process of clearing customs does slow down the overall arrival time for goods. Details regarding the Importer Security Filing (ISF), the Automated Manifest System (AMS), bill of lading (BOL), commercial invoices detailing payment, and packing lists are all things that must be in order before a shipment can be cleared. From our experience, such issues are infrequent, but they could cause major headaches if they arise.
While the risk may be small, the probability of losing an entire shipment or goods getting lost or stolen in transit increases when you ship expensive cargo across borders. This means that you may want to have enough shipping insurance to cover any losses that might occur. While the decision to insure must be made based on your risk tolerance regardless of where you are sourcing from, the risk profile increases when sourcing internationally. For more information on how decide whether to insure, see our recent blog post, Why Resellers Need Shipping Insurance.
Problems with Returns
International returns can be complicated. Unfortunately, the country you are now “exporting” your return to may charge you a fee for returning merchandise. You may also have to deal with long shipping times and uncertainty about delivery while you anticipate your refund after shipping back products to a supplier.
Discrepancies in Phone Models
With so many phones in the market, you need to know what model works where. Different countries and service providers use different technologies and frequencies, so a phone that is offered in the United States may have different specifications when it is sold in Europe or Japan.
Manufacturers often build phones to perform optimally in the markets they will be sold in. The most common spec difference you will see is that manufacturers often tweak bands to work with the specific network characteristics in various countries. The reality is that phones offer the best performance when they are optimized in the market they are intended to be sold in. Before sourcing from a different geography, make sure to check in with your customers to confirm that they are ok with a slightly modified spec.
Customer service is a value-added factor that is the true deciding factor for many resellers when choosing device suppliers. It is of utmost importance to get a person on the phone to discuss an order or answer questions when you complete shipments. Some overseas suppliers simply do not provide a one-on-one customer experience. Language barriers, cultural customs, and differences in time zones can make it difficult to make that all-important connection with a supplier when shipping issues or product questions pop up.
The Important Questions
Each reseller needs to come up with a sourcing strategy based on the goals and needs at hand. Remember: the items you source will ultimately serve as a reflection of your business. The company you source from will ultimately shape customer perception. WeSellCellular offers quality, consistency, easy returns, fast turnaround times, and world-class customer service for resellers. We make it easy to complete orders online through our various self service options, and you always have the option of one-on-one help from an experienced rep. Browse our inventory.