As an Amazon seller, sourcing products from China is not an easy job. Possessing an effective and strategic sourcing process is essential for the success of your business. There is a common set of techniques and tools that are used by all business models and the trick is figuring out which ones will perform best for your brand.
Which procurement activities should you consider outsourcing? While this assessment mainly applies to enterprises that have large purchasing requirements and work with multiple suppliers, small and medium Amazon sellers can also benefit from understanding which offshore resources can support their business and how.
Benefits of procurement outsourcing
Why outsource procurement activities? Amazon sellers' decision to outsource procurement is based on the set of benefits explained below.
1. Access to expertise
Although online supplier directories have made it easier than before to find Chinese suppliers and work with them directly, the actual process of finding a trusted supplier in a foreign land and managing your order as well as relationship with the supplier is not easy. It requires a great deal of time and effort, even burning you out and affecting your business.
Procurement outsourcing services bring a significant amount of expertise, in terms of culture, industry and category. They support and work like an extension of your business.
2. Solve geography problem
Amazon sellers often encounter this problem and find that they must overcome many challenges in their path to getting their product made to the quality they desire, at a price that increases their profit potential. Perhaps the biggest challenge lies in building a rapport with the supplier and ensuring a smooth path from order placing to receiving shipments. A sourcing agency in China is in a better position to monitor your order and keep you updated on its status.
3. Achieve custom manufacturing
Want custom manufacturing? Working with a manufacturer that has relevant industry experience ensures that they will understand your needs and make products to your satisfaction.
Say you're looking to manufacture toasters in China for cheap, but the product needs to have an accurate timer-based function and must be made from cool-reach stainless steel as it is geared towards families with young children. When you search for a manufacturer that specializes in small household appliances, you want to make sure they can make your toaster to your requirements.
To make the most of China's enormous manufacturing capability, you need a trusted China sourcing agency that has boots on the ground and understands your industry and category.
4. Operate efficiently
There's a lot to manage when you're an Amazon seller, such as inventory management, customer service and sales performance monitoring - you have to do on your own. That's on top of monitoring your order, ensuring its quality, and managing your supplier. Handling all of it can feel like constantly keeping your eyes on moving targets, without missing! If you struggle to juggle many things at once, operational efficiency and profits can take a hit.
Outsourcing procurement services allow you to focus on other areas of your business. A reliable China sourcing agency has a dedicated, trained processing team to manage various aspects of procurement, including:
- Accessing and selecting vendors
- Negotiating price and terms
- Tracking orders
- Inspecting goods during production and prior to delivery
- Arranging logistics.
While they keep a tab on your order and shipment delivery, you get more time to devote to other aspects of maintaining and improving business operations.
5. Save costs
When you start out on Amazon, you're no doubt looking to keep cost as low as possible. Yet, working alone can lead you to make costly mistakes that eat into profits. Historically, outsourcing to China has been a way for enterprises to reduce labor costs and overheads to a significant extent. Amazon sellers can improve profits by outsourcing their procurement function.
The costs of bringing on an employee can be substantial. You'll have to pay for a hiring search, wages, payroll taxes and healthcare and other benefits.
When you use a procurement outsourcing service, you get a team that acts as an extension of your business minus the costs of hiring labour. Even if your Amazon business grows to the point when you can afford to build a team, outsourcing procurement can end up being more cost-effective in the long run. There's another important way in which this route can save money: assuring competitive pricing through volume purchasing.
There's always a risk of leaving money on the table when you negotiate prices with a Chinese supplier who doesn't speak your language. Sure, you can do your research on the average quote for your item, what can convince the suppliers to give you a better deal, how to negotiate effectively and so on. But when it comes to communicating and convincing, the language barrier often tends to play spoilsport and gets in the way of negotiating as effectively as you might with a supplier in your own country.
On the other hand, a China sourcing agency can assist with negotiations and increase your chances of getting a better price from a manufacturer that specializes in your product. As the sourcing agent will only connect you to a factory capable of making your product, you can place bulk orders with peace of mind and get competitive pricing. You may also be able to get short lead times on requests and ship your product out quickly, delighting your customers. Switching suppliers is another cost-saving tactic that you can execute rapidly with the help of a sourcing agent. And you can do this at any point without letting inventory or sales suffer.
6. Satisfy your customers
What do Amazon customers want? They want a decent product at a price they can live with and receive the product on time. They want sellers to respond to their inquiries and to be informed of anything that might impact their order. To win points with your customers, you must take responsibility for delivering what you have promised them. Not meeting their expectations leads to the inevitable: bad reviews, no repeat purchases, and the worst of all but quite possible - criticism on social media.
How effectively you manage procurement is linked to your customer satisfaction rate. A basic mistake is to simply choose the wrong supplier that leaves you with sub-standard products to sell on Amazon. Another is a lack of efficient order monitoring, which causes your order to slip through the cracks and not go out to customers on time. Procurement outsourcing improves customer satisfaction in these ways:
Improving order execution: A dedicated account manager from the sourcing agency reaches out to the factory to inquire about status or personally visits the workshop to confirm whether work on your order has started. The account manager updates you on progress and you can use accurate data for managing inventory, estimating delivery times, or reaching out to customers, if needed.
Keeping quality in check: Sourcing companies typically offer quality inspection as a part of their overall service. They have a team of QC inspectors who perform routine in-process and post-production checks to determine if the factory has adhered to your specifications. Any issues with quality can be resolved soon after they're discovered. Most importantly, defective products don't go out to your customers. You're spared the hassle of refunds and awkward conversations with the supplier about what went wrong.
Increasing long-term stability of procurement: A stable procurement process helps increase sales revenue and decrease the costs. Early efforts in building a strong procurement function pays off when your Amazon business expands. Outsourcing procurement to the sourcing experts helps develop a robust procurement function from the start and build long-term relationships with the right suppliers. As your business scales, you can order more from your supplier, making you eligible for discounts, special terms and other advantages.
How can a China sourcing agency help?
An excellent China sourcing agency can be immensely helpful for Amazon businesses in a variety of ways.
1. Finding reliable suppliers: One of the biggest challenges for Amazon sellers is finding reliable suppliers. With so many suppliers available in China, it can be difficult to know which ones to trust. A sourcing agency in China can help by vetting suppliers and finding those that have a track record of delivering high-quality products on time.
2. Negotiating prices: An experienced China sourcing agency can negotiate prices on your behalf. They have experience in dealing with Chinese suppliers and know how to get the best deals. This can help you save money and increase your profit margins.
3. Quality control: A well-established sourcing agency has systems in place to ensure that the products you receive meet your quality standards. They can conduct factory audits in China, perform product inspections, implement quality control procedures, and make sure that all your products sourced from China are of the best quality.
4. Faster lead time: Working with a certain sourcing agency in China can also help you reduce lead time. They have established relationships with suppliers and can expedite the manufacturing and shipping process. This can help you get your products to market faster and stay ahead of the competition.
5. Lower shipping costs: Sourcing agents also have experience in shipping products from China to Amazon warehouses. They can help you find the most cost-effective shipping options, which can help you save money on shipping costs.
6. Customized solutions: A good agent will work closely with you to understand your business needs and find customized solutions that meet your specific requirements. They can also help you source products that are unique to your brand and help you stand out in a crowded marketplace.
7. Risk mitigation: Working with a good sourcing agency can also help you mitigate risks associated with sourcing products from China. They can help you navigate regulatory and compliance issues, protect your intellectual property, and ensure that your suppliers are following ethical business practices.
8. Scalability: Further, working with a purchasing agency in China can help you scale your business. As your business grows, the agency can help you find new suppliers, negotiate better deals, and implement more efficient supply chain processes.
9. Supply chain optimization: A sourcing agency in China can help you optimize your supply chain to reduce costs and improve efficiency. They can help you identify bottlenecks in your supply chain and implement solutions to streamline the process.
10. Payment and logistics support: Finally, a Chinese sourcing agency can provide support with payment and logistics. They can help you navigate the complex payment system in China and ensure that your payments are made securely. They can also provide support with logistics, including customs clearance and transportation.
Working with a China sourcing agency can provide numerous benefits to your Amazon business. From finding reliable suppliers to optimizing your supply chain and ensuring product quality, a reliable sourcing agency can help you navigate the complex world of Chinese manufacturing and grow your business.