There are many benefits of sourcing your products in China. However, it may take time to find the right suppliers, negotiate, and secure a good deal.
Most suppliers often face many issues when finding a supplier or after going into business with one, the product delivered did not match the specifications and was of poor quality.
It takes a lot of experience to understand the Chinese market and how to deal with suppliers which is why you need all the help you can get.
This article will outline some of the best practices, tips, and everything you need to know to help you source products in China effectively.
Sourcing is when you look for a supplier to help deliver you the best quality of goods or services for your business.
Similarly, Chinese sourcing is when you find quality goods and services with the help of local suppliers in China. Depending on the size of your business, importing goods from China may require many suppliers with different experiences for your industry.
For example, if you're a small business owner, you may require a few Chinese suppliers, whereas large enterprises may require a sourcing company in China.
China is one of the biggest countries that trade globally with supply chains that can serve businesses of all sizes. They can produce, maintain, and distribute products on a large scale.
For this reason, sourcing products in China would already be a good idea. But there's more.
Here are other reasons why you should consider sourcing in China:
If you're looking to source products from China, you might find it challenging. The process is often time-consuming and complex, but it doesn't have to be.
Let's take a look at a step-by-step guide to sourcing in China that can help you navigate the complexities and streamline the process.
If this is your first time sourcing in China, your first option might just be to do a quick google search.
There are many websites where you can get connected with suppliers such as Alibaba and Made in China.
However, it is not easy to distinguish between a reseller and a manufacturer online, so you need to choose carefully.
Websites like Alibaba mentioned earlier can help shortlist manufacturers during your search. These platforms have a feature where they rate different suppliers and manufacturers across China.
It would be best to keep in mind that these ratings might not be reliable as any supplier that pays for the Alibaba premium membership can get a gold supplier rating.
So, you need to take time with your search and conduct additional checks to ensure you have found the perfect supplier.
🕵️ Pro Tip: It is better to choose a manufacturer when you supply products with technical requirements as you can source directly from them.
If you are sourcing in China for the first time and are willing to spend some money, hiring a sourcing agent might be a convenient option for you, especially if you are looking to acquire products with technical specifications.
Again, this is a convenient option if you want to stay wherever you are and not travel to China to conduct factory and quality inspections.
Your sourcing agent will take care of all of that.
Other benefits include having an experienced agent who can speak the language and negotiate with suppliers on your behalf.
Companies such as Lazpanda have a strong reputation for sourcing products for businesses, saving them time and money, and making the entire process extremely smooth.
Lastly, when you use a sourcing agent, you are far less likely to get scammed or be a victim of fraud.
After making a list of suppliers based on their experience, you will need to verify this information.
Things to verify include whether the suppliers are a factory or just a middleman and whether they have had the previous technical expertise and the ability to produce what you are looking for.
You can verify this information by examining the suppliers' VAT invoices, audited accounts, or the factory's registration records.
You can call the supplier and ask for their registration number and business license number.
While this is not always the case, it is often a red flag if your supplier does not have a landline number and only operates using a mobile number.
Suppose your supplier fails to provide a business license or a company registration number.
In that case, you should avoid doing business with them.
All registration numbers can be verified by the local administrative government or the local Bureau of Industry Commerce.
Lastly, it would be best to ask for references from the supplier's previous clients to verify their history and reliability.
The biggest benefit of sourcing in China is that your cost is significantly reduced due to low manufacturing and labor costs.
When negotiating the price with your supplier, you should remember that all suppliers have a general minimum cost to manufacture the product.
Here is where you need to research the costs of the product and the market price to get a good idea of what a reasonable price is.
With this information, you can tell that when you are offered a price below the market price, the quality of the product may not be the best.
Going below the minimum market price or the product's cost price should be a red flag as the supplier is compensating for something missing that you might not have realized as yet.
To protect yourself from dealing with such consequences, you should avoid working with suppliers that offer you a price that is way too low.
Eliminating the middleman and buying directly from the supplier gives you more control of the entire manufacturing process.
Additionally, you also avoid paying extra fees or commissions to the agent or middleman.
If you have the time and experience to carry out your own search, effectively communicate with suppliers, and oversee the manufacturing process, this is something you should consider as it can significantly lower your costs.
Moreover, communicating and buying directly from suppliers avoids the risk of miscommunications and delays in sending money to China as you no longer have to rely on them.
The major challenge businesses face when sourcing in China is the lack of clear communication due to the language barrier and cultural differences.
Therefore, most of the issues in dealing with suppliers come from misunderstandings and miscommunication.
It may be worth hiring a translator as miscommunication can cause huge delays in delivery and production times, negatively impacting your business and its profit margins.
All technical details such as product specifications, technical requirements, and packaging guidelines should not be arranged orally and should be put in writing in both languages.
You should also make sure to discuss the progress of the work so all issues can be dealt with immediately and ensure that there is a good flow of communication.
Conducting regular quality inspections is crucial to ensuring that your product is made correctly and that its quality is not compromised.
Having a regular check on the manufacturing process ensures that things are not left to the last minute and that any issues that turn up are dealt with immediately as it's easier to fix problems during the manufacturing process than after the final product has been made.
Now that you know the steps you need to take when sourcing in China, it's important to understand some of the important factors, which will be beneficial to you in your journey.
Let's dive deeper into each tip.
After you have spent your time shortlisting and finding a supplier, you have to start negotiating. The goal is to create a situation where both parties benefit.
Before you negotiate, make sure you have all the data and information to present your case. This gives you strong reasons to refute your supplier's claim and that you're aware of the situation.
Other important tips you should consider are:
It is always a good idea to order samples before committing to one supplier and ordering in bulk. You don't want to make a huge commitment and waste money without testing the end product.
When you receive your first order of samples, you should:
If you are not satisfied, you can ask for a second round of samples with the necessary changes made or simply opt for another supplier.
Other factors to consider when ordering your first round of staples are the location of the factory, the payment methods available, and the time it takes to deliver.
Whether you are ordering online or physically going to China to meet your supplier, you should always build a professional relationship with them.
There are many benefits of having an ongoing relationship with your supplier as they may give you discounts and better deals.
Additionally, suppose you are looking for another supplier to manufacture a different product.
In that case, they can introduce you to some reliable ones using their network.
📱Recommendation: If you are sourcing online, make sure to use applications available in China, such as WeChat, QQ, and Momo to communicate with your supplier.
It is important to keep these tips in mind when sourcing in China, especially if it is your first time.
As a beginner, you do not want to be scammed or taken advantage of, as it can severely impact your business.
Taking your time throughout the process and not rushing things is the best option as you can carefully consider all factors and make an informed decision regarding who and where to get your supply.
China is a popular choice for sourcing low-cost inventory for resale. The lower manufacturing costs can help companies increase their own profit margins.
Many sectors choose to buy direct from China. The leading product categories are electrical machinery, toys, and sports equipment.
🔍 Did you know? In 2020, China was the largest supplier of imported goods to the US - accounting for 18.8% of all imports. This was worth a total of $434.7 billion.¹ Total imports for May 2022 were $44 billion, compared to around $39 billion in May 2019.²Whatever products you’re considering, there are several things to be aware of when buying from China - from initial supplier contact up to finalizing payment. This guide will help you navigate the process.
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When approached right, the Chinese market can offer high-quality products for great prices. Buying direct from the supplier can help build a stronger supplier relationship.
The process can seem complex and confusing when starting out. It doesn’t have to be this way, though. Companies have been successfully sourcing from China for decades. Taking the right actions can make the buying process easier and safer.
The first step is to find the right supplier. There are many ways to do this. Searching online and looking at supplier platforms can be the best place to start.
You can often find customer reviews online that can give you an idea of whether the supplier is good and trustworthy.
You may also turn to other companies for supplier recommendations, if they are happy to share these with you. If a company highly recommends a supplier, it is a good indicator that you will also likely be satisfied with their services.
It’s a good idea to start by finding two or three potential suppliers. You can then compare them against each other before making a final decision.
Once you have shortlisted suppliers, you should contact them. This can be by email initially, with subsequent video calls if you prefer. Due to the distances, suppliers are often used to handling the whole process remotely.
This initial contact with a potential supplier is important. Relationships and customer service can be vital. Remember that the best suppliers will become more than just a seller.
A good relationship will support changing business needs, and even expansion in product offering.
Before placing a firm order, it is sensible to request samples from potential suppliers. This allows you to test product fit and quality. It also lets you further evaluate the supplier and possible relationship.
Suppliers may offer to supply photographs and other details instead of samples. It is up to you, but in many cases, examining the real product is by far the best way to test quality.
Keep in mind the shipping time for receiving samples. Of course, this is a significant factor in future orders as well. You may have to pay for samples, or the supplier may offer them for free. Always confirm this before expecting any free samples.
After dealing with two or three potentials and evaluating the company and product quality, you need to select your preferred supplier.
When making an order, you need to be very clear about what you want. Be specific. This may sound obvious - but clearly specify all details including modifications, sizes, and quantities. You also want to ensure this is fully documented in case of problems later.
Be sure to also let the other suppliers know that you won’t be choosing them. It’s always nice to keep a good relationship incase you do need to fall back on your second choice.
Price is a major consideration when choosing a supplier and placing an order.
Keep in mind any minimum order quantities when placing an order. Suppliers may place limits to obtain certain prices. In general, the price per unit will decrease as you order more. Factoring this into ordering plans can be advantageous.
Make sure that the payment terms are clearly specified and documented. This includes price, quantities, delivery time, and payment timeframe. You may also have to make a partial payment (downpayment) before shipment.
Good documentation will be vital in the event of any problems or disputes later.
There are several options for shipping from China. This could be arranged by yourself, the supplier, or a third-party company.
Options vary depending on budget, types of goods, and desired shipping speed.
Shipping options include:
Customs duties could be due on any item imported from China (or any other country). The United States Customs and Border Protection (CBP) enforces customs rules in the US.
For goods valued under $800, there is no customs duty. Above that, the duty payable will depend on the type of goods.³
The US uses the internationally recognized Harmonised Tariff Schedule or HTS code to calculate the exact rate due.
US customs will calculate any duty due for arriving goods. It is common to get the supplier to send a shipping invoice before the delivery of goods. You can then pay charges before the goods arrive at customs, which can speed up the import process.
Finding the right supplier is essential. You want one that offers the best possible products; but also one where you are comfortable with the relationship.
Some of the best ways to find potential suppliers include:
There are many online marketplaces for the Chinese market - including Alibaba, DHGate and AliExpress.
Manufacturers will list details of themselves and their products. The platform then facilitates communication with potential suppliers. Alibaba can also offer a level of protection for orders through its Alibaba Trade Assurance program.
Trade shows have long been a leading way for companies to meet. Even with the rise of online marketplaces, trade shows still provide a useful face-to-face meeting opportunity.
Shows are held in China and overseas. The largest show is the Canton fair (also known as the China Import and Export Fair). This is held twice yearly in Guangzhou, China, and attracts over 24,000 suppliers.⁴
Recommendations remain important, just as they do in other areas of business. Talking to other companies about the experience is a good idea. Trade shows can also provide opportunities for this.
Buying products from China has its advantages, but it’s not for everyone. The following are some of the main considerations for sourcing from China:
ProsConsSuppliers often require payment in Chinese Yuan (CNY). Paying in local currency is the norm when you buy direct from China.
Even if you have the chance to negotiate payment in US Dollars, this may not be the best idea. It could harm the supplier relationship, and may incur delays or extra fees for either party.
A Wise Business account will help with making Chinese Yuan payments. You can hold, spend, and convert money in over 50 currencies, including Chinese Yuan. The Wise Business account gives you the flexibility to have account details for USD, Euro, GBP, and seven other major currencies.
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Chinese Yuan invoice payments can be made with ease. Your funds are converted at the real mid-market rate, for a low and transparent fee.
All sources checked August 23, 2022.
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