5 Key Tips for Creative Product Sourcing in China

2021-08-18

81086332 2 copy.jpgIntroduction

You might have heard of American brands sourcing the ingredients of their products or the products themselves from China. You might have also shopped from websites like Ali Express and wondered about starting a business selling low-priced products in your country. But did you know how are those prices kept so low and how you can start your business by selling such low-priced products?

China has emerged as one of the best global sourcing destinations in Asia and around the world. Since China has many creative product sourcing companies, it may appear daunting to navigate and select the right supplier for your product inventory. However, it is no secret that China is known as the world's product manufacturer, and that title is earned rightfully. This is because the Chinese government had taken measures to ensure that foreign investors are importing and sourcing products from China suppliers. Such type measures would boost China's economy while also benefitting various companies and businesses.

By having a huge and diverse supplier base, from textile to electronic gadgets, you can find a supplier for almost anything. Moreover, due to having years of experience and a thorough knowledge of supply chain management, sourcing products from China has never been this easy.

Before you finalize your sourcing contract, here are five essential tips you need to know for creative product sourcing in China!

Tip 1: Conduct a Market Research of the Available Suppliers

Just like when you are shopping for a product, a preliminary unofficial kind of research is done. Similarly, for sourcing products from China suppliers, you need to do thorough market research. Now this research has to be done not just for the suppliers but also for the demand of the product you are sourcing in the region you want to sell.

Doing this two-way market research helps you narrow down the product if you are confused about which product to source. It also helps you understand your target market and its spending patterns to price your sourced product according to that to maximize your profit.

Selecting a Manufacturing Region Based on The Product Being Sourced

So once you are starting with the market research, you need to focus on the product's manufacturer and which region they are based in. Within China, many of the product manufacturers are concentrated in one specific region.

So you will typically begin with the internet because it is your primary default option to look for a supplier. We'd recommend you take the help of a sourcing company for this purpose that will provide you with the best list of manufacturers according to the region from where the product is being sourced.

Reaching out to Potential China Suppliers

Once you start shortlisting, you can make a list of the potential suppliers, and then you begin reaching out to potential China suppliers. You may start by telling them about the details of the product or ingredient that you want to source. Once you are done specifying your requirements, you should also be looking at the minimum order quantity that the supplier is willing to provide you with. This is also known in China as the MOQ.

A note of caution is that if you are looking to develop a prototype or want assistance developing a design for the type of product you want to source. Then you need to know that Chinese manufacturers are usually not enthusiastic about developing products because it takes up time and cost.

Know your International Shipping Terms  

International shipping terms are important aspects that people often skip on or do not give due importance to. Not knowing your international shipping terms can land you in hot waters or potentially prevent you from receiving your order.

Knowing international shipping terms includes being aware of whether you have import rights or not; for example, for the USA, knowing your SSN (Social Security Number) or your company's Internal Revenue Service Number would be sufficient to allow you to source products from China. Being aware of freight charges is also important because products are usually exported through sea freight, air freight, and air courier.

Tip 2: Find the Right Chinese Sourcing Agent

Contacting a Chinese factory or a manufacturer can be a tedious job, what with the difference in languages and the difficulty of translating Mandarin. Luckily, this process becomes far easier if you look for a sourcing agent. This is because a sourcing agent or a sourcing partner will help you maneuver around the language aspect and offer services related to creative product sourcing, manufacturing control, quality inspection, and even order monitoring.

Getting a sourcing agent is really important if you want to manage your time properly. This is because sourcing does take time. You would need to commit between 1 to 3 hours per day looking for each supplier.

Decide which Sourcing Agent, Agency, or Logistics Company You Want to Work with

Once you have spent some time looking at different sourcing agents, sourcing companies, or agencies.  You need to decide whether you want to go for a sourcing agent, agency, or logistics company. That can be decided based on how you are willing to invest to ensure that your order is successfully and safely delivered to you with zero faults. A sourcing agent specifically is a risk factor because most of the time, they are usually trying to earn a living and are only concerned about the commission they earn from the factory.

A sourcing agency and a logistics company will be loyal to you, and they will not only just deliver you the sourced product. They will also provide you services of monitoring it for quality inspection.

The Sourcing Agent's Location and Manufacturing Region should both Match

While you are looking for a sourcing agent, you should also ensure that their location matches the manufacturing region where your potential product supply will be produced. This ensures that you do not experience a scam or make a contract with a sourcing partner with no idea about the product.

Verify their Trading License

You need to tell your sourcing agent or partner to verify the trading license of the Chinese supplier that will be fulfilling your order quantity. This is important to know whether you would be dealing with an authorized supplier or not. There are many incidents of people scammed paying money for product sourcing to an unregistered company or factory.  

A registered factory or supplier will gladly share their business license with you. This is because all suppliers need to have a trading license with the Chinese government's AIC.

插图2 .jpgTip 3:  Ensure Quality Control for Product Sourcing from Online China Manufacturers

Quality control is the foundation of preventing your products from getting banned and establishing authenticity with your customer base. A quality control team is essential during product sourcing from online China manufacturers so that all quality-related issues are resolved before your order leaves from the Chinese factory.

Unfortunately, in China trusting the factory alone for quality control is a big risk. This is where your sourcing partner's duties come in. Their job would be to ensure that a quality inspection is carried out for every product sourced for your order.

Have Transparency in Communication with China Suppliers

This needs to be reiterated that having a transparent communication passageway is essential to having your product manufactured exactly how you envisioned it. Frequently, factories and suppliers can provide you with a similar type of product but with different features, resulting in a waste of time and money.

Communication involves letting the Chinese suppliers know the requirements for developing your product and the quantity of product you want. You also need to ensure there is clarity between both you and your supplier. We'd recommend not going for suppliers that operate on assumptions because that is risking the product quality you get.

Try to Visit China to Conduct Product Quality Inspection

We know this is hard and near to impossible. But if you do not want to opt for a sourcing partner. We'd recommend that you visit China yourself to have a look at the factor for quality inspection.  This ensures that your order is being manufactured in the exact way that you wanted it to be, with no faults and minimum defects.

Clarify your Requirement for the Quality and Cost of the Product

Discuss the cost of the products and the quality. In most cases, there is gonna be a competitive market of suppliers for the product you are sourcing. Hence, we'd recommend that you opt for bargaining the price for bulk orders.  

You can ensure product quality by requesting product samples or auditing the Chinese factory.

Only Pay Once Quality Approval is Given

This is one of the biggest openings where a scam is most likely to happen. Once your order has been delivered, do not make the payment until and unless you are absolutely certain that a quality approval is given. If you are still unsure about it, you would need to check the quality of the order yourself to avoid a mishap with a potential customer.

Tip 4: Draft a Thorough Sourcing Contract

Once you have selected your supplier or your soucing agent has finalized the Chinese factory, which will be fulfilling your order. It is time to draft a sourcing contract to seal the deal! We'd recommend going for a proper contract manufacturer with a sourcing contract that is no restriction to a purchase receipt.

Most product manufacturers will provide you with a receipt of a purchase order as the contract to save time, but that can land you in hot waters if the supplier you choose for your product decides to bail on you.

Types of Sourcing Contracts

There are many different types of sourcing contracts, some of which also cater to products with private labels. This is where a sourcing contract will come in handy to protect your intellectual property. Here are some types of contracts that you should know of:

  • NDA (Non-Disclosure Agreement) version of China is an NNN agreement that will protect your private labelled product by preventing the supplier from using your IP or from making it public.

  • PDA (Product Development Agreement) comes in handy if you are collaborating with a factory for developing your product

  • MA (Manufacturing Agreement) will explain the relationship you have with your supplier, preventing any wrong interpretation that may backfire on you.

Include Details of Pricing, Quality and Product Warranty

Within this contract, you should be covering the basics of the cost-price and quality inspection measures that you want the supplier to have carried out. In some cases, it should also come with a product warranty. By including these details, it will prevent you from any unregistered production activities and infringements.

Your contract should remove one of your major concerns: your supplier replicating your product and becoming your competitor by selling it at a lower price than what you would be charging your customers.

Register your Patents and Private Label

It is very important to prevent your supplier or any other manufacturer from taking credit for your product. That is why you should safeguard your order by applying for a patent and getting a private label for them. That way, you are safeguarding yourself from infringement of intellectual property, but your business or brand will also become synonymous with the product you are selling.

Be careful that laws that apply to your country may not necessarily work in China. You can take the example of the NDA, which is not applicable in China. Instead, you would need an NNN to replace it.

38143799.jpgTip 5: Prepare for  an Unexpected Price Increase from the China Suppliers 

Price fluctuation occurs in every market, and there is no way you can escape it or not think about it. It is inevitable. What you can do is prepare for an unexpected price increase, especially from Chinese suppliers.

We all have gotten used to the fact that Chinese suppliers will provide you with bulk orders at minimal cost but, what might hit us with a shock is the price rise which can take us completely off-guard. This is why you need careful measures to protect your profit margins from an unexpected price rise.

Know when Prices may Increase

Being aware of the general demand and supply in the market for which you are sourcing the product is quite helpful. This is because Chinese suppliers are known to increases prices for the next order that you place with them. They might even provide you with false reasons of the economic market's demand being too high or supply is too low to combat for why they are asking for a higher cost-price.

But if a genuine shortage of raw materials or labor costs has increased, then that is counted as a legitimate reason for a price increase.

Negotiate to Extend Current Prices

However, we understand that suddenly increasing prices may be difficult for you because it can severely cut down your profit margins. Hence, you can bargain or start negotiations with your supplier to extend these current prices for a particular time until you have recovered your investment money or made a break-even.

If you have a good sourcing contract and terms with your supplier, you can easily keep the current prices for a specific time.

Keep the Second Option of a Backup Supplier

Although, just relying solely on one supplier is not a good idea. Having a second supplier comes in handy during these situations when your former Chinese supplier is not willing to meet your terms and conditions.

The same process would be followed in looking for a secondary supplier for the first one. The only thing you need to be careful about is to maintain these sourcing contracts and supplier relationships.

Conclusion

Creative product sourcing can be a very daunting task, and it may make you give up on the idea of sourcing products from China suppliers. However, it becomes easier by having a sourcing partner do the brunt of the work for you, making you let go of your worries and only focus on other parts of your business.

This is where Maple Sourcing comes in as a one-stop solution for creative product sourcing from China. You can rest assured that we will cater to all of your needs regarding the order you place. We believe in making product sourcing as easy as shopping online; you can leave the rest to us! 

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