If your company is engaged in an online business or you happen to be a smaller enterprise, then you can surely make your business more competitive by sourcing your products from China at factory price rates.
On the other hand, if you are already engaged in manufacturing your products then prefer to buy packaging, components, or raw materials from China, which you can get at a very competitive price from China to make your business more profitable.
Till now, only a few bigger companies could only afford to maintain a sales office that could manage the imports and all other sourcing activities abroad.
However, thanks to internet technology that is available these days, now even a smaller company can assess the information of various China online suppliers and they no longer need to visit China and spend a lot of money for making a trip.
No doubt, e-Commerce may have certain pros and cons since you may get very cheaper products but may often face a certain nasty surprise too. That is the reason you must have a product sourcing strategy in place if you want to succeed.
These days a better relationship between different manufacturers, retailers, wholesalers, and consumers is evolving. Usually, wholesalers were one of the major connections between manufacturers and end-users.
Manufacturers who were selling products directly to their consumers were always having an upper hand. A few wholesalers, who usually served as brokers, and they used to purchase bulk items from China and resell them. As a result, often end-users used to buy products at very high rates.
Now digitalization has enabled customers to buy products directly from manufacturers. The shift towards a customer-oriented approach has now eliminated any role of distributors.
Now, retailers from anywhere in the world can directly buy from China factories. Manufacturers are also very keen to adopt the business model of B2C as it can lower their costs, increases margins, and improves customer satisfaction.
As a result, this approach has finally led to the development of more buying options with several benefits to clients.
When the world was not so well connected as today, working with wholesalers had become a necessity. To connect with customers, manufacturers required a very complex infrastructure, which was difficult to manage and maintain.
Digitalization has enabled shifting towards a direct customer where the role of any intermediary distributor is no longer needed. Manufacturers prefer to adopt the B2C model to lower expenses, improve their margins and increase the user experience.
This purchasing strategy has given rise to broader expansion and more buying options with several benefits for the buyers, which returns in stronger business relations and more rooted brand loyalty.
Retail purchasing versus buying directly from manufacturers
These were 2 different categories where the first option implied buying products through certain retail outlets and/or from wholesalers.
The other option was direct buying means trading with manufacturers directly. Both solutions had certain pros and cons, which depended on many different conditions, including the type of products.
1. What is retail purchasing?
Here the retail items will pass through several mediators before it reaches the customer. This supply chain will depend upon the connections between wholesalers and distributors, where at each level there will be a certain mark-up that will add to the initial cost, which was lower.
However, a retail provider was in a position to offer his consumers the benefit of a broader selection of products based on parameters like quality, price, and style.
Also, retail shopping could offer a more personalized experience, so that customers can compare products and search for alternatives before making a decision.
2. What is direct buying?
When you directly buy from manufacturers then the whole supply chain gets bypassed, and the mark-ups get eliminated that increased the cost of products.
By eliminating intermediaries, a significant advantage could be achieved where cost gets decreased. However, a customer still needs to consider everything from transport, to handling in the warehouse, packaging, and marketing.
When to use wholesalers?
Although buying from manufacturers directly leads to many advantages, however, in certain cases, still it is more efficient to bring a wholesaler into the picture to take advantage of the present infrastructure.
If both manufacturers, as well as the buyers, lack sufficient infrastructure or expertise then the advantages of lower prices may not be fruitful.
Why today China became the leading manufacturer?
Today, you can find Chinese products almost everywhere on the market. There are a few good reasons that today China has become a worldwide manufacturing hub.
Offers a range of product quality
China once upon a time was known for its inferior product quality, which is no longer true now. Even a company like Apple which is so much a quality-conscious company has started manufacturing its products in China.
China has created a huge infrastructure to produce almost anything in their factory with very high efficiency.
Bulk purchasers must pay more to have a high-quality product made, but the product's revenues are lost. Rates increase if the cost is passed on to the consumer.
Therefore, cost-saving measures are taken throughout product manufacturing in order to maintain low prices for end consumers. Although the bulk purchaser controls product quality, he also makes sure to work with a reputable Chinese manufacturer.
China can today produce on a mass scale which is possible due to the following reasons:
1. Lower wages and human resources
China is a highly populated country, and there is an abundant supply of manpower, which is more than demand, hence the wages are low.
The local workers will be ready to work in multiple shifts by taking low wages.
2. High-level productivity and skills
Over the years China has spent a lot on education and training and as result, there is an availability of many skilled workers who have high-level productivity & skills to work efficiently.
3. Superior infrastructure and manufacturing capacity
China has a well-developed rail and road network that can enable smooth material delivery and thus reduce the lead time.
4. Material supply chain
The manufacturing process is further supported by a widespread supply chain available within the production country.
5. Trusted suppliers
The local manufacturers maintain a strong bond with suppliers around China and detailed knowledge about the networks and ecosystem.
China is now progressing towards growth, hence outsourcing your products directly from the manufacturer in China can be your best product sourcing strategy.
Take the help of a Sourcing Agent in China for direct buying
A China sourcing agent can be of great support to your business. However, you must try to find the best sourcing agent in China.
1. Define your products
While discussing with your sourcing agent, you must have a clear idea about your product. You must develop a proper technical specification before you discuss it so that the same can be discussed with the supplier while searching.
Choose a product that has got a high demand and you can easily sell them. Select your sourcing agent who has exposure to your product.
2. Set your budget
You can never compromise with the following two things while tying up with your Chinese sourcing agents:
Therefore, your best option will be to get with the help of your China sourcing agent, a product of impeccable quality that should be well within your budget. Don’t target cheap products to compromise on your quality, but at the same time ensure that you can have enough margin to make a profit.
3. Research and compare
Ask your sourcing agent to find several suppliers of your product so that you can compare their rates and their expertise.
By comparing you can know how much profit your suppliers are earning. It will also help you to buy the best quality products at a low price.
4. Negotiate payments
Your sourcing agent can also provide great support while negotiating the price of your product from the supplier. Make sure that your sourcing agent is trustworthy enough.
5. Make a contract
While tying up with any sourcing agent, you must note all your minor and major requirements so that you can make a well written contract.
You should specify your
Minimum order quantities
This will help you in the future to compute the price of your products.
In today’s scenario, your best product sourcing strategy will be to buy directly from a certain Chinese factory before your competitor ties up with any one of them and capture the market.
The Chinese economy is growing and as a result, the wages of Chinese workers may also rise. So, the more you delay, the more you are likely to miss the bus.