How do you go about sourcing products from China? Sourcing products and working with Chinese factories is not an easy task. If it is done correctly it has the power to take your business to the next level, and done incorrectly it has the po
How do you go about sourcing products from China? Sourcing products and working with Chinese factories is not an easy task. If it is done correctly it has the power to take your business to the next level, and done incorrectly it has the power to kill it.
Regardless of the headaches you will face, sourcing can give you the edge you need in your respective business.
We have lived in the P.R.C. for nearly five years and work directly with people who have a decade of experience in trading and sourcing. No matter how long you have been here problems will always continue to come up. There are a lot of things you MUST consider when you are navigating these waters.
There is no “insider’s guide” or “10 steps to successful” sourcing, but we do have some tips and guidelines to make sure you can be as effective and efficient as possible without having to LIVE in China.
It is important to remember that everyone’s situation is different.
Lets start with the basics.
The truth about Alibaba…
The truth about Alibaba, and the other B2B websites is that they are full of agents and not real manufacturers.
It is extremely important that you understand that many people on these websites are usually not the actual manufacturers. They will be agents posing as manufacturers. It’s crucial that you deal directly with a manufacturer. While these websites are the only available starting point for most entrepreneurs it’s important to remember that they are JUST that, a starting point. They should never be considered the end all for sourcing.
Why is it important to deal directly with the factory?
These agents act as middlemen and will raise yours costs, which is probably not the reason you are looking at China in the first place. At least I hope not. Remember that just because someone says they are a manufacturer doesn’t make it so. These agents don’t have your best interests in mind.
This creates huge issues with quality control. Agents make their money by operating in between you and the factory. So the more you are willing to overpay (i.e.:the cheaper they can get it) the more money they will pocket. This is the complete opposite structure you want to be working with. If they have control of your products, you want them to have your interests in mind. With agents this is not the case.
Dealing directly with the factories also gives you more room to negotiate on prices. Verifying the party you are talking to should be the first thing discussed before you move forward.
This can be very tricky if you’re not physically planning on coming to China.
How do you determine if you should come to China?
The key is determining your goal. What are you trying to accomplish from sourcing?
For example are you trying design your own product from scratch? Does your product have exact specifications? Are you looking to lower your costs and raise your margins as much as possible? Are you simply trying to source cheap generic goods in high volumes?
These are the questions you need to be asking yourself.
Your goals will help you determine if it’s worth it for you to travel all the way to China and visit the factories yourself. For example if you are designing your OWN product with strict specifications coming to China is a MUST. If you are looking to find the lowest price possible for large orders (negotiate directly with a factory) then it’s also a priority to make the trip. If you are simply trying to source generic products that you will be marking up then making the trip it isn’t as necessary.This leads to another common question.
How do you go about finding the ACTUAL manufacturers?
The way China is set up, similar products are all made in certain places or have central hubs. For example electronics are made in Shenzhen, car parts in the north, textiles in Shanghai etc. This breaks down even further for specific products. For example you could probably find a city that makes belts and leather products.
You can use the B2B websites to locate the cities where the products your looking for are being made. Then the best way to move forward is for you or someone with your best interests in mind to visit the city. This will allow you to talk directly with the factory.
• Start a long term relationship with a face to face meeting.
If you are working with them to develop a custom product it is essential to start the relationship off right. The best way we have found to do this is by meeting them in person. This creates an a relationship of respect.
• Negotiating should be done with the help of a Chinese local who is on your side.
Truth be told, the second a manufacturer employee hears a foreign voice the price will instantly increase. Moreover, the bartering and negotiations from this moment on will be much more difficult to accomplish because you are a foreigner. Regardless of your Chinese fluency, unless a local is on the phone (Cantonese here in Guangzhou), they will be able to tell the difference and start to play the Chinese negotiation game.
• Where can you find a Chinese local to help you out?
The best way to obtain a reliable Chinese agent is through recommendations via your networking connections based in China. You need to be working with one that you can trust. If you need help with this we can probably put you in contact with someone.
• Quality Control will always be an issue
If a Chinese factory can save an extra penny per product, have no doubt in your mind they will try EVERYTHING they can to save a bit of cash, e.g. use lower quality parts, switch materials, outsource projects to cheaper factory, ect.
• If you are not going to be based here you need to have someone in China that is on your side.
Even if you personally visit initially. It isn’t expensive to have a Chinese employee on your staff. It really depends on how important it is too you. But like we said, problems will always come up whether it be with delays, QC or language barriers. The best way to cover your companies interests and relationships it to have someone in China that can handle the issues when they arise.
A full time Chinese employee will cost between 500-1,000 USD/month depending on various factors (English fluency, past experience, ect.) and job duties (Negotiating, Quality control, ect.).
The most effective, least risky way to find a reliable supplier or negotiate favorable terms is simple…have your interests represented here in China. A lot has changed in the sourcing game, except the fact you/a company representative need to be present at any new sourcing deal.
This post was a result of many questions we have received about sourcing in general. If you have more questions about sourcing that we didn’t cover then please leave a comment below.