Fundamental Knowledges about Asian Wholesale Purchasing

2022-06-07

插图1.jpgWhen you think of the word 'wholesale', you think of a company buying products from a factory and reselling them to you. The price offered by the manufacturer is the 'factory price'. This is the price at which they sell the products made at their factory to a wholesaler, trading company or buyer. Wholesalers and trading companies add a margin to this price and sell you products at a higher price. This is the 'wholesale price' and obviously, it costs you more than if you were to buy the products directly from the factory.

Asian wholesale buying is quite easy to understand and necessary to know as well. Without making clear distinctions between a factory and wholesaler or trading company, and the advantages and disadvantages of sourcing from each, you could make costly mistakes.

Trading Company vs wholesales vs factory: Breaking the myth

When it comes to sourcing wholesale from China, the common advice is, 'avoid trading companies, directly contact factories'. This is justified when you consider a couple of points:

- Traders work with several factories, so you don't know where your products are being made

- Trading companies have no product quality inspection.

- Traders don't accept liability for defective items

These are no doubt important points to consider when buying products from China. How would you deal with quality issues if your trading company is uncooperative or doesn't reply to your messages? How do you ascertain that you will only be getting products from one factory, that which provided the impressive sample product? Working with a trading company leaves many uncomfortable questions hanging in the air.

This lack of clarity can outweigh advantages such as their ability to have conversations in English, source products from different categories, and the flexibility to buy smaller quantities of products.

Now, how about wholesalers? Are they preferable to trading companies? While a wholesaler and a trading company are essentially middlemen, they differ in a few ways. A trading company doesn't take ownership of goods while a wholesaler buys and imports products. Trading companies markup the factory price by 5% or a bit more. Wholesalers add 20-50% to their purchase price, making them more expensive than traders.

The term 'wholesaler' is more prevalent in the west. In China, the two main suppliers are factories and trading companies. Suppliers on Asian wholesale websites like Alibaba identify themselves as the manufacturer or trading company. If this isn't clearly indicated, then you'll need to ask them as well as do your own research.

Trading companies and wholesalers serve a purpose and are not inherently bad. It's just that they have no value-add and focus mainly on reselling products. A handful of them may offer pre-shipment inspection and attentive customer service. But more often than not, their primarily goal is to build relationships with factories, offer access to several categories of products, and boost their margins.

Neither wholesalers nor trading companies can provide assurances about quality or adequately satisfy your product customization and original design manufacturing needs. For control and customization, your best bet is to work directly with a factory. If you don't need to customize product and aim to capitalize on the growing demand in a few up-and-coming categories, then the services of a trading company or wholesaler might suffice.

Wholesale quantities and minimum order quantities

Minimum order quantities (MOQ) are a requirement to buy a certain minimum number of units from the manufacturer. Wholesalers and trading companies also set their own MOQs, and these can be less than what a factory expects you to buy.

MOQ differ by product type. A product that costs more to buy may have a smaller MOQ and vice-versa. MOQ requirements for electronics are typically 500-1000 pieces per order. Textile manufacturers normally have an MOQ of 100-300 pieces per colour, which can again differ based on standard and custom colours. Products that have a lower profit margin have a higher MOQ.

Manufacturers are not generally willing to negotiate MOQs, and more so for products that have a small profit margin. Asking for a reduction would be futile. You can negotiate on price though, and manufacturers will be willing to match the lower quotes from competitors to get your business. Asking for a price reduction and lower MOQ is unfair to the manufacturer and you're not likely to hear back from them.

If you want to buy product in small quantity and have more control over MOQs, there's a tactic you can try. You can send your own bids to suppliers. This works well if you want to order different types of products or place orders across various product categories that the manufacturer specialises in. The supplier will consider the total order volume to determine whether they can accept your MOQ bid.

You may also be able to negotiate MOQs for specific requirements within an order list. For example, if you're sourcing serving trays, you can ask for a lower MOQ per colour or size, which will allow you to offer a larger variety to your customers. The supplier will be willing to negotiate based on your total order volume.

How to choose Asian wholesale products to sell on Amazon

Efforts to identify the right manufacturer, trading company or wholesaler, and negotiations on MOQ and price can go to waste if you choose a product that doesn't sell. A timeless tip for Amazon buyers is to do product research. Market reports reveal the demand for a product while Amazon data shows demand and sales potential.

What about the product makes it a strong seller? Can customising and white-labelling it bump up its sales potential? What type of products in a category are strong performers? A detailed analysis can keep you going in the right direction.

Product research and competitor research go hand in hand. After all, as a part of your research, you'll be looking at seller pages. The information will give your ideas on pricing your product and making it better and therefore more attractive to your market. Read reviews and see ratings to identify improvements in product development. Your product can address those flaws and include those missing features that make it more competitive in the Amazon marketplace.

插图2.jpgWhere to find a supplier

Where do I find a Chinese wholesale distributor for my product? You can find one from the comfort of your chair on an Asian wholesale website or make the trip to a major trade show in China to meet suppliers in person. You could both - identify a few suppliers that fit your requirements and fly to China for further talks.

The most convenient and cost-effective method would be to conduct all the business online and hire a service to evaluate the supplier on your behalf. A business contact in China to verify the supplier's location and factory. A quality inspection agency to conduct a factory audit and after production is under way, check the quality of your product.

Or you could focus on your business and let a sourcing agent based in China do the heavy-lifting for you. Sourcing agents essentially serve as your procurement team, helping you find a manufacturer with the capabilities to make your product. They usually also offer factory audit and quality inspection. The Maple Sourcing team, in addition these services, offers product design assistance and order monitoring.

Sourcing agents usually serve small and mid-sized importers that have fewer resources to manage all aspects of procuring products from China. They're also a solution to the language barrier and cultural differences that tend to make communications and relationship-building between importers and their Chinese suppliers a bit overwhelming.

Asian wholesale websites

China manufacturers and trading companies offering every conceivable product are on B2B websites like Alibaba, DHgate, Global Sources and HKTDC. The trick is to find the right supplier. This is better understood by looking at the advantages and disadvantages of popular China wholesale websites.

Alibaba

Alibaba pioneered B2B wholesale ecommerce. The platform connects buyers and sellers, who can communicate and conduct business on it. Alibaba also does factory inspections and handles trade disputes. Alibaba can work very well for you if you're able to manage sourcing and relationship-building on your own, without any outside professional assistance.

What's good

- Large product and supplier base

- Buyer safety features like Trade Assurance (money-back guarantee for defective quality or late delivery), Gold suppliers (checked and verified by Alibaba's third-party inspectors) and supplier profile (buyer reviews, transaction levels, trade capacity, production capacity and so on)

- Quality inspection service

- Supports multiple payment modes

- Bulk request for quote (RFQ)

What's not so good

- Drawn-out ordering process (browse > contact suppliers > compare quotes > trade assurance order > payment)

- Outdated prices based on past raw material or production costs

- Decent user interface, but can be better

Global Sources

Global Sources is a Hong Kong-based B2B multichannel media company connecting buyers with verified suppliers in China and Asia through its website. It is also a trade show facilitator, helping importers register for upcoming trade fairs in China. Services it offers include sourcing, sourcing news, private sourcing events, sample preparation and bulk RFQs.

What's good

- Large supplier base

- Buyer safety (Verified Manufacturer badge, Online-to-Offline suppliers who are sellers with  comprehensive online profiles and active trade show participation, verified company and product certificates from independent verification agencies)

- Easily navigable website

What's not so good

- No support for payment and delivery

- More suitable for experienced rather than beginner importers

DHgate

DHGate is a leading Asian wholesale website serving small and medium-sized businesses. It has over 31 million registered buyers from more than 220 countries.

What's good

- Tiered pricing structure means the more you buy, the more you save

- Buyer safety (escrow payment, supplier certification from third-party inspectors, extended warranty on electronics products, Premium and Top Merchant tags based on sales volume and customer service quality, return and refund)

- Quick ordering process (similar to B2C)

- Large supplier base

- Great for beginners

What's not so good

- Search feature needs to be better

- Old sellers have more exposure than new businesses

Trade Shows

China hosts multiple expos a year that give buyers worldwide to tap into one of the world's largest markets. Anyone interested in Asian wholesale purchases should consider attending a trade show where they can meet manufacturers' representatives, review products and have face-to-face discussions. Factory audits, QC inspection bookings and business meetings can all occur in the course of the trip.

The biggest China trade shows for sourcing products and finding suppliers are

- Canton Fair

- East China Fair

- Yiwu Fair

- Hong Kong Electronics Fair

- China Electronics Fair

- Asia Outdoor Trade Show

- China Hi-Tech Fair

Some tips:

- Register online in advance to avoid paying more in registration fee when you register in-person at the fair

- Go through the fairgrounds map on the trade fair website for help in planning your days and managing your time

- Collect business cards, literature, brochures and anything else that can help you evaluate the supplier better

- Prepare a list of questions to ask suppliers

- Follow up later and do additional due diligence

插图3.jpgSourcing agents

The architect of a successful Asian wholesale strategy may very well be the knowledgeable sourcing agent you engage to manage end-to-end procurement. Normally, sourcing agents are the go-to intermediaries for custom and original design manufacturing for their industry specialization, strong on-the-ground contacts and English-speaking account managers and QC inspectors.

How to evaluate a China sourcing agent

- Do they have a local presence in China?

- Do they have experience sourcing from China?

- Does their experience cover the product you want to manufacture?

- What services do they offer (can they provide end-to-end procurement)?

- Can they meet your custom manufacturing needs?

Depending on how much importing experience you have and time you can devote to the procurement side of the business, you may have a smooth or trying experience. As the success of your Amazon business depends on acquiring supplies on time and of acceptable quality, you need to work with a reliable China manufacturer. Maple Sourcing can help you find the right supplier for your Asian wholesale requirements and build a strong foundation for your business.

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