China has quickly risen to the top of the list of markets from where you can source goods. Additionally, just as with any widely adopted product sourcing trend, many business owners and organizations are making all kinds of purchases.
Consumer products made in China account for a large proportion in the world market. Many businesses have found success by global sourcing in China. You have great potential as a reseller or buyer because of this.
However, it could be a challenging task, especially for new importers. The import procedure can be quite difficult, perplexing, and expensive. Long transit times, increasing or fluctuating delivery cost, regulatory fees, and unforeseen delays can sometimes wipe out anticipated gains.
Even if you do not intend to travel there, you still need to get ready for the unique difficulties of getting goods from China.
The problem is that the road to effective procurement from China is paved with shady vendors, dashed hopes, and one-sided partnerships. Many people ponder whether it is even feasible to locate the verified suppliers without travelling to the mainland. They had heard numerous scary tales like:
- Long delivery delays
- Incorrect items
- Suppliers vanishing into thin air
- Poor quality shipments.
Although it is understandable to have second thoughts, keep in mind that there is not a single ideal technique to source goods from China. Your level of information about the seller's product specialty, negotiating prowess, interpersonal skills, and a host of other elements will all play a role in your successful global sourcing from China.
You should be informed of the benefits and drawbacks of sourcing goods from China without travelling there before learning how to successfully navigate the China sourcing process.
Pros:
1. Easy to compare suppliers
To find factories in China for your product, you can visit a few websites like Alibaba and Made-in-China to receive a list. Comparing vendors based on ratings, reviews, prices, shipping times, and other similar criteria is simple.
2. Cheaper sourcing
If you research suppliers online, you will profit from cost-effective product procurement. You will wind up saving money on travel costs, lodging, meals, and other costs related to visiting a factory in China. Your time and money could be used on working on something more important.
3. Early engagement
WeChat and other messaging apps have made it simple to get in touch with suppliers fast and conduct real-time chats with them. Before scheduling official meetings in China, merchants can start interacting with their suppliers.
4. Entitlement to samples
You would be well-positioned to request samples for your product if you are interested as you will not be traveling to the supplier's factory or warehouse.
Asking for samples from three to five of the vendors you are thinking about is a wise strategy.
When receiving samples, merchants can keep track of delivery timeframes, damage, import charges, and other factors to gain a general picture of how future shipments might turn out.
Cons:
1. Cannot build deep relationships
Online sourcing prevents you from having face-to-face interactions with vendors. Because of this, you might not be able to forge meaningful connections the way you could at lunch or dinner meetings, bar getaways, city tours, etc.
This can make it harder for you to bargain for a better price and terms.
2. Risk of scam
When purchasing products from China without travelling there, you run the risk of falling prey to a variety of frauds. For example, the vendors you select to partner with could not actually have a factory, but they might present themselves as reliable wholesalers.
To eliminate the risk, extensive due diligence will be required.
3. Higher minimum order quantity
Chinese manufacturers require minimum order quantity, so, they might not be interested in customers who order fewer than 100 pieces of pricey goods or fewer than 500 pieces of cheap goods.
As a result, you might have to cope with greater minimums, which can be too expensive for you.
4. Long waiting times
Most Chinese suppliers won't start producing your product until a real order is placed, they always ask for a deposit (30~50% of order value) to cover the cost of materials.
If you ask for samples, you will have to wait twice as long unless the vendor offers fast shipment.
Additionally, merchants may not offer solutions to cut waiting times since they do not treat online clients with the same respect as those who make visiting in person.
1. Have realistic expectations
We regularly receive emails requesting a new product with high-quality requirements and absurdly short lead times.
If you manage to strike a bargain with a Chinese supplier that seems too good to be true, it is almost certain that they are either trying to lure you in with a fraudulent quote or looking for ways to cut corners during the production process.
2. The first order may always take a little longer than expected
To acquire a realistic forecast of the production time for your first order, multiply your specified production time by 2. The first order always takes 2 to 3 times as long since the process needs to be set up first. For example, before manufacturing can start, you must decide on product and package designs, obtain a sample of the item, and approve the final version.
3. People often forget common costs
Remember to account for expenditures like:
- Sample purchases and shipping
- Amazon or other platform fees
- Customs inspection
- Returns.
If you overlook these expenses, you might be shocked to discover that, finally, you do not make any margins.
4. In China, repeat order is king
You must place large orders and place them more frequently if you want great quality with minimal production expenses. Chinese suppliers have extremely slim profit margins, so they don't have time to waste looking for new customers or changing their production methods.
They will be more likely to negotiate with you if you are a reliable and long-term buyer.
The following are a few important steps to follow if you are planning to global sourcing from China.
1. Identify your import rights
Whether you are a business or an individual, you must determine whether you have the authority to import products before making a purchase.
Many import laws only cover products brought in for commercial use or resale. Additionally, only the customs authority can decide what counts as personal use.
2. Identify the products you are importing
Trade businesses generate revenue by selling goods. You may lose your time and money by selecting the incorrect products. Making the right product selection for resale is the first step to being a successful importer.
3. Classify your products and calculate their landed cost
For each item you plan to import, find the 10-digit tariff categorization number. The tariff rate you must pay while importing is determined by these figures and the Certificate of Origin. Next, determine the landed cost.
Prior to placing your order, consider the Incoterms and determine the total landed cost.
4. Find the right Chinese supplier and place an order
Try to find the right supplier in China, place your order, and specify the shipment conditions that will be followed.
Request a detailed quote sheet for your potential purchases after choosing your supplier, making sure to include the harmonized system number, item description, and unit price.
Your proforma invoice must include your term of purchase, unit price, total value, the weight, and the packed dimensions.
5. Arrange your cargo transport
Shipping goods involves several expenses, such as:
- Packaging
- Container fees
- Broker fees
- Terminal handling.
Each of these elements needs to be considered to gain a clear view of shipping prices.
6. Track your cargo and get prepared for the arrival
Usually, the cargo from China must travel a very long distance and hence may require a longer time. Therefore, you need to regularly track your cargo based on the information sent by your supplier.
This will help you to remain well prepared when the items reach your country.
7. Obtain your shipment
Make plans for your freight forwarder to clear the items through customs when they arrive. You have the right to pick up your package if everything goes according to plan.
If you choose our door-to-door delivery service, all you must do is wait till your package arrives at the specified location.
1. Be clear about who you are working with
The suppliers that you work with can make or break your business. It takes a certain level of dedication and willingness to hunt down, qualify, and then negotiate with global suppliers. That is not a quick or easy process – and you will require patience. Then, once you home in on a few suppliers you think you might be able to work with, the next step is to test and qualify the quality of their goods. For all this, you require a successful sourcing strategy.
Conduct market research on various suppliers. When you conduct market research, you assess market conditions and the ability of suppliers to deliver a product under those conditions. When sourcing data for your market research, gather data from a variety of sources like:
- Industry trade journals
- Trade consultants
- Annual corporate financial reports
- Your network of industry professionals
- Trade associations and conferences.
Create a supplier evaluation scoreboard. Establish score criteria and then assign scores for each supplier based on their:
- Management capability
- Financial health
- Manufacturing capacity
- Technological capacity
- Social responsibility
- Risk management
- Quality control
- Regulatory compliance.
The above information will give you a clear understanding of how disciplined, organized, and reliable each supplier is compared with the others. That includes physically inspecting the factory, conducting social auditing, and meeting with the decision-maker and the factory managers.
If a supplier refuses to share information or withholds partial information from you, do not consider getting into business with them.
2. Establish acceptable quality standards right from the beginning
Quality is a critical aspect of the success of your business. You want to ensure that your suppliers provide you with nothing but the highest quality products. It all begins with establishing acceptable quality standards right from the beginning. That will:
- Ensure the safety and reliability of your products/services.
- Compliance with regulations.
- Meet environmental objectives.
- Control internal processes.
When quality standards are not set out right at the very beginning with unknown suppliers, there is a risk of low-quality products leaking into your business. Here are four steps to ensure you set acceptable quality standards right from the word “go:"
- Audit potential and existing suppliers. That will ensure they will provide you with high-quality products, support continuous improvement, and operate efficiently.
- Things to look out for include standards like the ISO series, social accountability, sustainability, and standards relevant to specific industries.
- Develop comprehensive and detailed product specifications. Product specifications must include acceptable quality levels, expectations for each supplier, defect details, and classifications. To be able to do all this, you must first have thorough knowledge about your product.
- Test products to determine standards are met and to troubleshoot. Use applicable industry-related standards to measure the product’s properties and evaluate its performance.
- Inspect throughout production, before shipment, and after delivery. Once production begins, you will have to ensure an end-to-end China quality inspection. That includes pre-production, during production, and pre-shipment inspection, shipment order monitoring, container loading inspection, and quantity counting conducted by a professional QC team.
3. Have a solid manufacturing contract
Ensure the manufacturing contract covers the end-to-end process and outlines all the terms you and the supplier will work on together. The manufacturing contract must include:
The design: All the required specifications. It can also include a prototype, mold, or pattern.
Intellectual property: If you want to protect your IP, include specific restrictions on the supplier’s license on top of the confidentiality clauses.
Quality control: It should include clauses that require the supplier to complete certain obligations related to the quality of the product. That could also include running regular tests and periodic quality control inspections.
Ownership and indemnity: This specifies at which point ownership passes from the supplier to your company. That helps avoid any confusion if there are damages to the products during shipping, etc.
Ordering, pricing, and payment: Have a detailed account of the procedure followed for placing an order and if there will be a minimum order to be met. Ensure the pricing terms of the raw materials and variable prices are outlined so that there is no confusion. Include details of when payments will be made. If there will be instances when payments will be withheld (for example, a delay in product delivery), mention that too.
4. Build relationships
The products supplied by your suppliers can improve your business and increase your efficiency and bottom line. So, how you deal with them must be a part of your global sourcing strategic plan. If you treat your suppliers right, you can be sure that they will respect and stick to the rules you lay down in terms of:
- Quality
- Timelines
- Competitiveness
- Innovation.
First impressions are crucial, so you must always start on a good note. Here’s what you can easily do to improve your relationship with your global suppliers:
1. Always pay your suppliers on time to earn their goodwill. Pay them punctually, and you can benefit from various types of perks they might offer you.
2. Keep in mind your supplier’s production methods and needs. Give your suppliers a reasonable lead time on your orders.
3. Personalize your relationship with each supplier. Visit their offices and invite them to your office.
4. Keep your suppliers abreast of what’s happening in your company. For example, keep them informed about new products, promotions, new people on the management team, etc. Suppliers might be able to use this information to find you potential customers.
5. Be aware of and mindful of cultural nuances.
6. Ensure proper communication to always ensure transparency from both sides.
The way of succeeding in business is to put what you are learning into practice. You can profit by global sourcing from China if you adhere to all these recommendations and conduct thorough research. Hiring a reliable China sourcing company can make your job much easier.
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