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Why Retailers Choose to Directly Buy from China Factories?

2024-04-08
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The relationship between manufacturers, wholesalers, retailers, and consumers is evolving. Wholesalers were the major connection between manufacturers and end-users. Manufacturers selling products directly to consumers were a veto instead of a rule. It was the wholesalers, who served as brokers. They purchased bulk items from China manufacturers and resold them. This led to end-users purchasing the products at high rates. 

When you're looking to source products from China, you have two options: buy from a wholesaler or directly from a factory. They work differently. Paying a wholesaler means letting go of a part of your profit, but it is also a convenient way to source large quantities of different products quickly. Nowadays, more retailers choose to directly buy from China factories.

Why has China become the leading products exporter?

Today, Chinese products are most in-demand and have become omnipresent. You will never fail to see a couple of products manufactured in China. There are some good reasons that China is turned into a worldwide manufacturing hub. 

1. China factories offer a range of product quality

The reputation that the Chinese products are of inferior quality is wrong. Remember, Apple has its products manufactured in China. The infrastructure of China is eligible to produce high-quality products efficiently. 

Bulk buyers must pay extra to have a quality product manufactured but the product profits are consumed. If the cost is passed on to their consumers, then the rates go high. So, to save some money and keep rates low for end users, corners are cut while product manufacturing. The bulk buyer is in control of the product quality but even ensures to partner with an experienced Chinese manufacturer.

2. Mass production at reasonable rate is possible

Low wages & human resources - China has a huge population. The worker supply is greater than demand, so the wages are low. The locals are willing to work in multiple shifts at low wages. The massive labor pool helps in mass production, accommodates seasonal industrial needs, and caters to a sudden increase in the demand schedule. 

High-level productivity & skills – Chinese workers have high-level productivity & skills needed to work efficiently. It is crucial for handling product complexity and lead time. Experience in bulk production has offered the workers practice and experience to figure out how things can be completed more efficiently. It helps to ramp up manufacturing quantities and qualities. 

Superior infrastructure & manufacturing capacity – China has a well-developed train and road network that offers quick raw material delivery thus reducing the lead time. The energy grid dimension is vast, so there are vast numbers of high-tech factories. For export, the port network capacity is unmatched in the manufacturing sector. 

Material supply chain – The manufacturing process is supported by a comprehensive supply chain inside the production country. For textile production, they have natural resources, garment factories, and yarn production. For electronics, most of the components are sourced within China. 

Trusted suppliers – The local manufacturers have a strong relationship with suppliers around China as well as detailed knowledge about the ecosystem and networks. 

China is progressing towards growth, so outsourcing your procurement projects directly to the manufacturer in China is a good move. 

Why not working with wholesalers?

Wholesalers have contacts with different factories and there is no knowing who they're buying from. A wholesaler may initially offer you a low price with decent quality, keeping their margin low. Once you start placing more orders, they may switch to another factory that makes the product at a lower cost but only because it uses cheaper raw materials. Suddenly, you see the quality deteriorating while the wholesaler makes a profit.

Even if honest, wholesalers have no control over quality. They may not pay attention to the quality of products as their main job is to match your requirements and procure items. So, if the factory is to blame, you will have to inform the wholesaler about the quality issue and hope that you get better products the next time.

Opting for China direct sourcing is the safer option as you're able to maintain oversight over quality better. You can talk directly with the sales representative, engineer or factory manager. You can also negotiate directly with the factory to fix defects or replace defective products.

Good reasons to buy directly from product manufacturers in China

There are several reasons to buy merchandise directly from the manufacturers in China. Even if wholesalers offer better prices sometimes, direct trade takes higher priority in terms of reliability, control, and support.

1. Flexible quantities and price

Savings are possible on transport, warehouse, and wholesaler fees without the external supply chain. Infrastructure costs, transportation, and warehouse can be shared between both parties involved in a contract. The manufacturers can offer extra-large batches or even small quantities depending on your needs. 

In China, you will find trading companies and manufacturers. Work directly with manufacturers to lock better prices. If you order in bulk, then you get the products at much lower rates than expected. 

2. Consistent quality management

When you buy products from trading companies then there is a higher risk of less consistent product quality. There are some less ethical trading companies, who share misleading information via their websites or Alibaba or post fake videos and pictures on social media. They try to appear as manufacturers and display as if they are aware of what international consumers are looking for. 

Directly buying from China factories ensures high authenticity levels. The manufacturers are unable to hold the same control levels with or without intermediaries. When distributors are involved, there is a potential quality dilemma and even delays in shipping. The lead times are more reliable when businesses directly buy from China factories. It means receiving the appropriate merchandise in good condition within a preset timeframe. 

3. Direct and clear communication

If you buy merchandise directly from the producers, it means you have a reliable and accountable person at the source. It ensures proper attention and care is taken in manufacturing the merchandise.

Direct communication offers transparency and clarity. The manufacturer can work on your products without confusion leading to a few mistakes. The information is flown faster and accurately. Direct communication allows nurturing a long-term relationship. This is beneficial to both parties in agreement. 

As you bond, you can contact the manufacturers in China and negotiate better rates, new product ideas, and other payment terms. You can even learn about the manufacturing process. Because of direct communication and good relationship, you get direct access to the product designing staff and engineers. You get a chance to chip in your ideas for product development. If the products delivered are not according to specifications, you have a better chance to resolve the issue or get a refund. 

The directly buy from China factories approach is beneficial as it comprises high-level control from raw material to production phase to warehousing and shipping. However, you will need to make sure to partner with a reliable manufacturer in China for direct purchase.

Factors behind long-term success 

A reliable direct sourcing strategy helps sustain long-term success for your Amazon business. Elements of a strong strategy include:

1. Choosing the right factory

Building capabilities in manufacturing a certain type of product takes time. So, as much as possible, try to partner with a factory with proven abilities and credibility in making your product.

A careful evaluation is necessary to partner with the right manufacturer. The background checks include company name, registration status, registration number, registered address, legal representative, certifications (ISO 9001 etc) and trademark. Also, it’s important to conduct reputational and legal checks.

Screening a Chinese supplier is difficult and time-consuming for western importers. You can hire a sourcing company for supplier verification checks and end-to-end sourcing services.

2. Keeping a tight focus on quality

Working with manufacturers that meet ISO standards is imperative to ensure quality. Supplier screening and factory audits are done routinely. Conducting in-process quality inspections and actively communicating feedback on product quality are also important to satisfy your customers.

Relying entirely on the factory's quality control system is not recommended. The problem may not be with their processes or procedures, but with their understanding of your product requirements and quality standards. Quality that passed off as acceptable in China may be rejected in your market. So, keeping a tab on product quality is a key function.

You can pay a quality inspection agency to conduct the checks. They will compare the finished product against your specifications. Quality inspectors are knowledgeable and experienced in evaluating the quality of the products they specialize in. Sourcing agents also offer a quality inspection service, performing in-process checks and getting mistakes fixed proactively.

When a batch has more defective products than what you're ready to accept, you'll need to raise the matter with your supplier immediately. Solving the problem will entail answering questions such as whether the factory understood your requirements, quality inspection fell short of expectations, or the factory ignored your instructions. Making these deductions can be frustrating, with the language barrier adding further difficulties to your conversations with the manufacturer. A sourcing agent can be helpful during such situations, serving as a go-between and making things clear to the manufacturer in the language they know best. Their ideas and advice can be especially helpful for new importers that lack experience negotiating with suppliers.

3. Calculating costs correctly

When done right, China direct sourcing saves money. A good handle on the factors that affect the final price of products help you make informed decisions. With the right manufacturing partner, building long-term relations comes naturally. This can make you eligible for volume discounts and other money-saving incentives.

Sellers need to identify all the factors that add significantly to the overall cost of the product. The full cost of China direct sourcing includes these elements:

- Cost of raw materials and components
- Production cost
- Quality control cost
- Freight costs
- Warehousing costs
- Duties and taxes
- Management costs.

Tips to choose trustworthy product manufacturer in China for direct purchase.

- Make sure to do your research before committing in money and time. Make a list of factories with a well-established repute for reliability and quality. 

- Check their previous companies and talk with them to know about their experience in working with the potential manufacturer in China. 

- Check the manufacturer billing address because the account and the company name must be the same.

- Visit the facilities of the potential manufacturers you listed after thorough research. 

- Never hesitate to ask for licenses and registrations, ISO certification, and insurance proof. 

- If the facility appears too clean, well-equipped, and well-organized ask if the manufacturing process is performed in this place or elsewhere.

- Ask about employee certification and training. If the manufacturer boasts ISO compliance, then insist to see the original documentation and see if employees really understand and follow the standards.

- Raw materials quality varies extensively in China, so find out the material source. Be diligent to confirm the raw material standard.

- Is the equipment used for quality inspection property calibrated? Ensure that proper records are maintained about testing procedures and their results.

- Ask about the main contact you can reach out for project discussions. 

Conclusion

Due diligence is essential to find a trustworthy manufacturer in China for direct purchase because assumptions are horrible at times. By following the correct sourcing strategy and paying attention to all details, more and more Amazon store owners benefit from directly buying from China factories.

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