As I wrote recently, many companies that import from China have been forced to revise their approach over the last couple of years.

Those importers that turn a good profit have developed an “unfair advantage” that is not easily copied by competitors… Or by Chinese exporters and their relays overseas.

An unfair advantage is particularly useful in reducing the sensitivity to these two risks:

• Price raises, combined with tough markets in Europe and North America.
• New competitors using counterfeiting and imitation to acquire (steal?) market share.

I see 5 ways an importer can develop such an advantage.

1. In-depth knowledge of a market

Some people naturally see new trends and find ways to capitalize on them. They have the right products at the right time, and they have already moved to something new by the time competition catches up.

The downside of this advantage is that a series of hits can suddenly turn into a series of dogs, and the company suddenly gets out of cash.

Another way of knowing a market in depth is to know key decision makers in retail organizations (or other large customers). As long as the product offer and the pricing are in line with competition, this is a clear advantage.

2. Excellent supplier base

Some purchasers have invested time and efforts to to develop a few manufacturers, and to keep the relationships healthy. They are better than their competition at at least one of the following three competitive attributes: quality, cost, time of delivery.

As I wrote in 5 building blocks for developing good Chinese suppliers, a supplier development program follows logical steps:

This is a very powerful source of competitive advantage.

The risk is that a factory grows up very fast and starts to have other objectives in mind. Or that your competition finds your suppliers.

3. Very efficient order management process

Some buyers structure their supply chain in a unique way. For example, by cutting most middlemen out of the chain, and allowing individual customers to order (in group) a full container. I described this strategy last year:

Basically, they would fill a container with one type of product from one factory — but only after they had sold the whole order to domestic customers. So one container contains many separate orders from individuals (or small retailers).

Imagine buying products coming from China, with a minimum quantity of 1 piece, and at a slight markup (since the importer didn’t have to keep some inventory or pay for warehousing).

4. Lots of R&D muscle

If you can put patents and/or trademarks on your new products, this is a big plus. By the way, you should ensure your intellectual property is also protected in China, even if you don’t intend to sell there. If in doubt, talk to a lawyer.

If you can, use your R&D advantage to build a brand. The benefit of a strong brand is higher demand and less price sensitivity. What’s not to like?

5. A strong design sensibility

Original designs might be just what you need. Don’t get me wrong, this is not advice for big companies like Apple only. For example, one of my clients is a 2-person operation that buys LED candles from China, with decorations based on refined and ever-changing fabrics.

They are the only ones doing this on their market niche, and it allows them to sell at a strong premium. This is the right weapon for them.

Do you have other tips to build a lasting competitive advantage?