A Comochi’s production line.
A couple of weeks ago I had the opportunity to talk with Pinuccio Melis, who started to import from China in 1982, the year I was born.
Pinuccio is the founder of Comochi, a chemical factory based in Sardinia, Italy.
He’ll tell us why he started to import from China and will uncover some import/export mechanism (common to all the world) and a couple of behind-the-scene activities concerning the Canton Fair and the “war” among the importers to get the monopoly of the strategical products.
Importing from China during the 80′s
Pinuccio, thanks for accepting this interview. You have been one of the first Italian businessmen to import from China. What pushed you to start?
There were many reasons. Let’s say that the most important was the feeling to rebel against the big importers from mainland Italy (for who doesn’t know it, Sardinia is an island). I understood that the difference of price between buying from a middle man and a Chinese suppliers wasn’t the 10%. It was the 50 or even the 60%.
What kind of difficulties you had when you began to import from China?
It was quite easy. Think about that. The first time I went to Canton Fair I was alone and I didn’t speak English, let’s forget about Mandarin!
As soon as I arrived I found an interpreter who had worked eight years in Italy.
Everything else was already programmed. At that time all the European and American importers used to stay at big international hotels.
What kind of products you bought the first time?
Mostly polyethylene, the raw material for the detergent’s bottles. It was difficult because the Chinese didn’t have the plants that there were in Europe. You must pay attention with plastic. The one that’s ok for making buckets may not work for bottles!
Hence I stopped to import raw material. Anyway, nowadays Chinese suppliers want to invade the global market and don’t sell raw material anymore. We get it from Dubai.
But at Comochi we also did trade. A Sardinian factory can’t survive without doing trade as Sardinia only has one million and an half people.
Hence, beside the detergents we were producing, we were also selling toilet paper, pieces of cutlery, plates and floor rags.
Pinuccio with the famous Purex floor rag.
The epic of the floor rag
What were the key products in your industry?
As the Comochi mainly produces detergents, one of the most important products for us was the floor rag.
We used to buy them from a Mantova’s importer. His name was Romano Siletti. He was the only one able to import the Chinese’s cotton rags, which are still the most consumed in Italy. One day I told to myself:
“Pinuccio, you must find that rag!”
I tried for five or six years without any chance.
In front of the Canton Fair there was the China Hotel, which had a French restaurant at the top floor.
Once we went to eat over there and, while I was sitting at my table, I touched with my elbow a man that was sitting at another table.
I turn my head and… Siletti!
“What are you doing here?” he asked me.
“The same thing you are doing here!” I answered with a smile.
“But you won’t find the floor rag, ” he says.
“Eh, I’ll find them!”
It was the classical war for bypassing the middle man.
He used to tell to everybody that he had the exclusivity. But Chinese suppliers never grant exclusivity to anybody.
The problem was that the floor rag wasn’t in the household products stands. And Canton Fair is huge.
That year I was lucky. As usual, I went to a silk stand for buying some presents for the wives of my employees. Over there, while I was looking around, I saw a fabric that I knew very well.
“This is the Purex!” I said, almost yelling.
“Purex” was the name that the Italians gave to the Chinese cotton floor rag.
But I couldn’t buy it. They were only selling silk. I still don’t know how the Purex arrived till there.
Anyway, I was getting used to visit factories. At the fair you usually only find a middle man. If you visit the suppliers you can get a better price.
It wasn’t always easy, the working environment was terrible, almost frightening.
Anyway, the silk trader told me where was the factory: Ningbo, a town close to Hangzhou, the capital of Chinese silk.
In order to arrive to the factory we spent eight hours in a cab along a mule track. But it was worth it.
It was there that the Chinese were producing the cotton floor rag.
Which was the difference between the price offered by the Italian middle man and the one offered by the Chinese supplier?
The Chinese offered me the same product for half of the price.
I guess you bought a lot of rags…
Twelve 40 feet containers.
Just to avoid losing face. What kind of importer you are if you only order a container?
Moreover, I knew how to sell it in North Italy. Milano. Genova. Bologna.
The truth was that Siletti became a bit arrogant and the other importers wanted to end his monopoly. Hence I was able to sell the rags at his same price.
Negotiate with the Chinese suppliers
How do you close a deal at the Canton Fair?
We are used to go fast, we want everything now. The vendors at the fair looked at me and laughed. One day one of them told me:
“Pinuccio, stay calm. Wanna buy at a better price? Then stay calm. Calmer than a Chinese. Conversely, we win.”
Thus I learned to spend the first days of the fair looking for products and sign the contract only the last day.
In this way before to close the deal I have a clear idea of each products, its price and quality.
Practical advices for wannabe entrepreneurs
Could you describe the process of importing goods from China?
First at all you must sign the contract.
Then you need to do a bank transfer. The bank guarantees for you but the Chinese can get the money only after that the goods go through the customs.
At this point the factory starts to produce. The Chinese also handle the bureaucratic problems concerned with the exportation.
When the containers arrive to your country, they go through the customs. Sometimes you have to pay an import duty.
Have you ever had any problems?
Once I ordered a container of pincers that never arrived. The container ended up in Marseille. At that time the French port was dangerous and containers used to disappeared quite often.
After two or three months I received a check from China. It was as big as a newspaper page. It was the reimbursement from the insurance company.
Another time I got a container of unusable goods. But when I found out it was too late. So I lost the money.
What can you do to avoid a similar scenario?
I learned to contract a Chinese responsible that checks the quality of the goods before to seal the container.
In the case the goods are unsuitable he has the power to block the container because without his signature the bank doesn’t pay the supplier.
Lets take the case of an entrepreneur that is just starting out. Is it possible to import a small amount of goods, let’s say less than a container?
Yes, but it’s more tricky. Share a container with other importers implies to have several people responsible for the quality control and this may quickly become a mess.
I often hear that, because of the growth of the wages and the inflation, the Chinese export industry will be overcame by the industry of poorer countries such a Vietnam or Thailand. What’s your opinion?
I disagree. Beside the labor costs, China offers other advantages. The most important are surely the infrastructures that allow to produce and transport the goods in an efficient way and an assortment of products that nobody else can offer.
As an example, if India produces fifty kind of carpets, China produces one thousand of them.
And let’s not forget that, after all, they are still the cheapest suppliers.
Pinuccio, thank you for your time and good luck for your next trip to China!