1. HOW TO IDENTIFY TRADING COMPANIES ON ALIBABA IN 13 STEPS
Follow the below steps to identify trading companies on Alibaba
1. If a company is displaying too many different product categories on their Alibaba/website, then most probably they are a trading company.
2. Check if their Business license copy which usually is in Chinese has mentioned them to be a trading company or not.
3. Check if their address is in an industrial area. A local Chinese company too can help you in finding this.
4. Is the company welcoming your request to visit their factory and are they open to inspections? If yes, that is a positive sign they are the actual manufacturer themselves.
5. Do they reply to your inquiries quickly? Sometimes a trading company takes longer to respond because they have to check the prices and details from the actual manufacturer.
6. Add their WeChat, and try to find clues in their WeChat moments (page) to see if they have pictures of their factory in it.
7. Check their city and address and try sourcing other suppliers nearby or ask their competitors if they are a trading company or factory.
8. Use a Sourcing company to do your due diligence.
9. Compare their pricing to other suppliers. Remember, manufacturers should supply for a 10% to 40% cheaper price than trading companies.
10. Ask for a live video call and request them to show you their manufacturing premises.
11. Try contacting the Sales, Sales Manager, and boss of the company and talk to all of them to find out more about their company.
12. Ask them if they have a 1688.com website. If yes, then there is a higher possibility that they are a manufacturer because the 1688.com website normally lists down only manufacturers. Trading companies also don't opt for it as the selling price is lower on this website.
13. Ask them several questions about your product in detail (manufacturing process, packaging, production time, pricing, Moqs) and see if they have a deeper knowledge of their products. Sometimes trading companies deal with so many products that they don't have deep knowledge about the products they are selling. A good Manufacturer, on the other hand, would try to educate you about your product thoroughly.
2. 6 BENEFITS OF WORKING WITH A MANUFACTURER INSTEAD OF A TRADING COMPANY
Let's see the benefits of working with a manufacturer below:
1. Better pricing (anywhere between 1 to 30% depending on the product and circumstances).
2. Consistency in product quality.
3. A lot of time that is required to communicate through a trading company is saved. Also, no mediator means fewer chances of misunderstandings happening which speeds up the product delivery process.
4. Fewer chances of your product idea being copied/stolen because the number of companies involved in your project lessens by 1.
5. It allows sellers to form a closer relationship with manufacturers. Eventually, you get to go on a visit which turns good in terms of better pricing, payment, new product ideas and you also get to learn about the actual manufacturing/supply chain process.
6. In the case of a supplier messing up the quality of a large order, you can always have a better chance to fix that problem or get a refund when dealing directly with a manufacturer.
No matter how good you feel about the manufacturers, it is always a good idea to do inspections and due diligence for all your suppliers.
3. FANCY NAMES FOR A TRADING COMPANY
Below are few of the Fancy/Creative names and phrases some China-based Trading companies use when they want to hide the fact that they are not the manufacturer of your product.
To win more business and retain their existing clients a lot of trading companies until today don't prefer to be recognized as a trader. They buy the product from an actual manufacturer and sell it for a profit. This is understandable and no one can blame them as everyone wants to grow their business. There are a lot of legitimate and good trading companies who provide their benefits and services. And hence, some Amazon sellers don’t mind working with these trading companies as long as all their price/quality/service requirements are all met.
If you as an Amazon seller suspect a company to be a trading company and ask them directly, they give the below creative names and phrases to portray themselves as a manufacturer.
A few of them could be true in some cases and thus it's a real challenge to find out the facts.
1. We are mostly a manufacturer but we trade some products.
2. We have a co-operate Factory.
3. We have a partner factory (our partnership factory).
4. We have an investment factory.
5. Ours is a Group company having both traders and Factories.
6. Family factory.
7. Friend factory.
8. Brother factory.
9. Sister factory.
10. Neighbor/Nearby factory.
11. We are mainly an assembling factory.
12. We opened a new factory.
13. Our Boss has many factories.
4. ADVANTAGES OF WORKING WITH A TRADING COMPANY
Usually, it's best to work with a manufacturer for any given product but sometimes it's very hard for you to source from the manufacturer. This is why you might have to go through a trading company that provides you the products based on all your requirements, quality standard, and target pricing.
So, it’s often a good idea to have an open mind and many times things can work out for both parties even when working with a trading company. Below are some of the benefits of working with a good & reliable trading company.
1. Many trading companies spend on recruiting a strong sales team who are often quite motivated, enthusiastic, and quick to respond to all your requests. Also, an export-focused trading company’s sale team has a good command of the English Language.
2. They can help in getting lower MOQs and even better pricing for your product because they buy in bulk or sometimes they have a strong past relationship with a manufacturer for that product. Many big trading companies also actually invest money in a factory but leave the daily operations to the manufacturer itself.
3. You can source other products from them if the first few go well in terms of packaging, bundling, sample consolidation, warehousing, inspections, and shipping. If you manage to find a reliable trading company you could also work with them on a long-term basis for all these services so that you don't have to go through different companies.
4. Your reliable trading company can vet other manufacturers whom you have sourced.
5. Some traders are quite strong financially and even have a service of giving 20 to 60 Days credit terms to Amazon sellers. However, you need to do business with these traders initially and they should find you enough trustworthy to pay them back on time.
6. Many trading companies give the sellers an option sending payments either by PayPal, Payoneer, or Trade Assurance.
5. AMAZON SELLERS, WHO DO NOT & WHO WOULD RATHER NOT WORK WITH SOURCING COMPANIES.
Having lived in Guangzhou, China for the last 7 years, I have come to observe many things and here I am discussing with you points based only on personal experiences and ideas. Like it has always been I intend to provide value, serve, educate and keep every reader informed about the current trends in this industry.
1. New Amazon Sellers want to learn everything about sourcing from China at once which includes -
a. Sending messages to suppliers through Alibaba/1688/Global sources
b. Getting samples sent to them
c. Finalizing terms and conditions
d. Getting goods inspected by a Quality control company(and sometimes getting no inspections done to save cost)
e. Letting the supplier arrange the shipping/documentation.
They feel they should understand the whole process right from day one so that they have complete knowledge about their business. They also might feel they would not know the real cost of the product if a sourcing company works as a mediator.
2. Amazon Sellers who are very niche in their products feel they don't need to work with a sourcing company.
For example, consider an Amazon Seller wants to focus only on LED Televisions as their only product. In China, there are about 5 to 10 big trusted factories that manufacture top quality LED televisions. The information about suppliers and prices is easily available for any buyer. So, Amazon sellers usually need to visit China twice or thrice a year, either by attending the Canton Fair or paying a visit to the factories to discuss their issues and future orders, etc. Later, they hire a good inspection company to do all the quality control work. Hence, Amazon Sellers feel to make more money, things are smoother and faster this way.
3. Also, many Amazon Sellers don’t want to work with a sourcing company because of not wanting to give out their product information and trade secrets. They feel they have a really good product idea or have invested a lot on their product research. Hence, they simply don't want a sourcing company to execute their plans. Also, many sellers feel trusting a Chinese supplier is already a huge risk and having another company in the middle is simply too much. Especially, it’s a little difficult for new Amazon Sellers to find a trustable sourcing company hence they take the direct route to the supplier.
4. Sellers' decision is usually based on past experiences, and hence factors such as the benefits of working with a sourcing company, ROI, risk are to be considered. However, it is not only about ROI because even when an Amazon Seller prefers to work with a sourcing company, but they also have to bypass them because of the competitive prices. They simply have no choice but to do business directly with the manufacturers.
5. Some Amazon Sellers feel that going through a sourcing company requires more work and is a potential time-waster. So, when they want to develop a new product, they feel it might slow down the process of launching a new product. They also feel they have free access to all the suppliers and their information through Alibaba, Global sources, etc. websites. So, by going through a sourcing company, they don't want to complicate and slow down the process.
6. Last but not least, many new Amazon Sellers don’t even know that a Sourcing company Exists! They think the whole ecosystem is based on them directly contacting the suppliers. They feel all the work of price negotiation, samples arrangement, issuing contracts, inspections, arranging to ship, etc. has to be done all by themselves and the supplier.
So, these are some of the reasons why Amazon sellers do not wish to work with sourcing companies or any middlemen in general.
6. IS IT NECESSARY TO WORK WITH A SOURCING COMPANY IN CHINA?
Why should we work with a sourcing company? Often throughout my working years in China, I have been asked this question by Clients/Buyers/Amazon sellers (New and Experienced ones both).
They ask questions like - Why work with a sourcing company? What are the Pros and Cons? Is it worth our time? How much are the fees/commission? And yes, as any good business service provider would do, I try to give them as much information as possible.
I would like to flesh out my thoughts on the topic based on my experience in dealing with different buyers/sellers from all around the world and from my experience of starting my sourcing company in China. First of all, let’s answer the below question.
What exactly is a Sourcing Company?
Any good sourcing company would provide the below Services.
a. Source the right product and a good reliable supplier for the client.
b. Negotiate the best possible prices and arrange samples to the client.
c. Make full detailed contracts with all the terms and conditions stated clearly both to the supplier and client. The contracts include payment terms, required Certifications, delivery date, packaging/labels, etc.
d. If necessary, visit the supplier before confirming the order to check their reliability, capabilities, an confirm whether they are a manufacturer or trading company.
e. Follow up with the suppliers during the production of the goods.
f. Inspector gets the goods inspected for quality control before the shipment.
g. Arrange the shipment of the Goods with the best shipping prices and speed either by air or sea. Also, provide all the documentation
to clients so that they can clear the goods from their local customs.
h. If there is more than one product and supplier, then coordinate with the factories to club the goods together for shipment.
i. Even after your clients receive the goods, provide after service to them and tend to their other needs and requirements.
So basically, these are some of the services and functions of any good sourcing company.
Now let us get to the more interesting part - Why is it not necessary to work with a sourcing company in China.
Now in business, it’s nearly become part of human nature to ask for having a Middle Man/Company/Broker/Agent/Sourcer/Trader. (We have many nicknames).With the gigantic leap in technology over the last 20 years, it is becoming true even more so.
Often the first thought comes to any buyer or company when deciding whether to do business with a sourcing company or not is about Money. They have to think about how much they have to compromise on their profits & margins. They sometimes feel that any sourcing company would not reveal the real factory prices and quote them prices after adding high margins. So, it is quite considerable of any buyer/Amazon Seller to remove a sourcing company out of the equation.
What value can a sourcing company provide to buyers or Amazon sellers?
A buyer could think - Why should he go through a sourcing company when he can easily source all the suppliers on the internet through websites like Alibaba, Global sources, made in china, Ali express, Dhgate, Hkdtc, 1688, Google search and others?
Unlike before Language is also not much of an issue anymore due to the emergence of Google translate, WeChat App Translation, and other various translation Apps. And these days with Escrow payment systems like Alibaba Trade assurance and PayPal it has become even easier and safer to do business through technology. A buyer could also attend exhibitions in China to meet potential suppliers directly. These days most Chinese suppliers are
putting up their booths in other country exhibitions also. So, it’s never been this easier to do business as we can do now.
Also, there are now many good verified third-party Quality Control Inspection Companies Located in China that provide full inspection services with reasonable prices.
Some buyers might also feel that working through a sourcing company might be time-consuming because everything has to be relayed through the sourcing company to the supplier and vice versa. So many buyers think this is wasting time and hence prefer to deal directly with suppliers.
Also, when there are modifications in a product, they feel it’s best to explain their exact needs and requirements directly to a supplier instead of going through a sourcing company.
Some buyers also would be apprehensive to share product ideas with a sourcing company who could leak or sell their product idea.
Most buyers and Amazon sellers also want to have full knowledge as to where their goods are going to be manufactured. So, they feel that there would not be that much transparency with a sourcing company and they can have some quality issues.
7. WHAT ARE SOME OF THE MOST INTERESTING AND EXCITING THINGS WE EXPERIENCE WHEN SOURCING FOR PRODUCTS?
1. Finding a supplier who has given you an awesome price, after you approved the quality of their sample and had their premises audited.
2. After searching for more than a week (or even more), you finally find a supplier who can meet your target price and all your products requirements.
3. Having a supplier reply to your messages at any time of the day.
4. Comparing pricing between suppliers and understanding the reasons for the price differences.
5. Finding out a supplier is a trading company.
6. Finding out a trading company is, in fact, a manufacturer.
7. Adding a suppliers WeChat/WhatsApp and them finding your profile picture and You genuinely "interesting" :).
8. Finding a supplier who is polite and patient enough to educate you about the product, how they manufacture it, and how you can do useful customization to your product.
9. The opportunity for you to visit the supplier’s country and meet them personally if your sourcing and sales are done right.
10. The eternal wait for samples.
8. ALTERNATIVE SOURCING WEBSITES OTHER THAN ALIBABA.COM
1. https://www.1688.com (it's in Chinese, so one needs to use Google Translate or a local company to help).
If nothing is working, then good old Google is always there!
(For example, if you need a consumer electronics product, you can type in "Speaker manufacturers in Shenzhen".
Shenzhen is a consumer electronics hub.)
9. ALIBABA.COM VS 1688.COM
Yes, 1688.com is a pretty useful website for sourcing products from China. It's in many ways the Chinese Version of Alibaba and is owned by Alibaba. Alibaba is focused on the international market and hence is branded to suit the international market which makes it popular. It's more expensive for a company to register and have a presence on the Alibaba Platform (at times nearly USD5000 for a year).
Hence sometimes the pricing on Alibaba can be on the higher side because manufactures and trading companies also have to invest more in hiring a Local English-speaking sales team and be a more export-focused business.
However, the Alibaba suppliers do have a presence on 1688.com. While focusing on the Chinese local market to find suppliers with lower pricing and lower MOQs they also want to do business with sourcing and trading companies who often use 1688.com.
Sometimes the same supplier on Alibaba selling a product for say $2 to the international market lists that same product for $1.5 or lower on the 1688.com website.
On 1688.com a lot of the smaller and even bigger manufactures based in China have some sort of presence and the cost of having a presence on 1688.com is very low and at times close to Zero. Yes, there are still quite a few trading companies doing business on 1688.com but compared to Alibaba there are fewer.
The whole 1688.com website is in Chinese, so a lot of sellers have to use tools like Google Translate to navigate through the website to get some more ideas on the Actual China market price. So, they try to add a suppliers WeChat App and communicate through it as it has an inbuilt translation software in it.
However, it takes some time, is tedious, and can be frustrating at times due to language issues, different time zones, etc. Also, there’s always a risk of things getting lost in translation and the chances of screwing up the whole project become high.
Many times the supplier on 1688.com happens to have an English speaking staff and some factory owners take help from a friend in translations/communications for certain projects so that they don't lose business!
Using a local sourcing company or trading company to help you source from 1688.com for better pricing, lower MOQs without compromising on the quality can also be a good idea.
However, you should never depend on these companies a lot but involve in the process from the beginning and keep things transparent as much as possible. This way you can be aware of the pricing, supplier contact information, shipping costs, production process, and will understand how things work in the supply chain.
10. REASONS WHY ALIBABA SUPPLIERS ARE OFTEN SLOWER TO RESPOND WHEN COMPARED TO THE SUPPLIERS ON 1688
Even though Alibaba and 1688 are under one company, they both operate with a significant difference. Most Alibaba suppliers are on the whole reasonably quick to respond to new client inquiries as compared to those on 1688 platform. I have mentioned below some of the reasons behind it.
1. Most of us are aware that the suppliers listed on the Alibaba.com platform are traders/middlemen. Hence often these Alibaba suppliers have to contact the factory or 1688 suppliers for updated quotes and details on a new inquiry.
2. The Alibaba.com website is totally in English and designed to cater to the needs of all foreign clients and inquires. Often a lot of Alibaba suppliers are bombarded with many new inquiries from all over the world simultaneously. On top of that, local sourcing and trading companies based in China also use Alibaba as an important tool to source their products. So many times these Alibaba suppliers need to filter clients and inquiries that are more serious to respond to them first. The clients which they feel are still new to import or our just checking the price, they will respond to them after a day or two or sometimes not at all.
3. Alibaba suppliers should respond as quickly as possible to get good ratings and reviews on their website but 1688 suppliers need to be quicker than that as they are more focused on the local China market and have to respond quickly to inquiries from local retail e-commerce companies like Taobao.com, Jd.com, and even individual buyers. To rank in the top search results they need good reviews and a positive rating for their website. So, an inquiry comes 1688 suppliers respond quickly and are not bothered to respond even after work hours and on weekends. This boost up
their company and website credibility with better ratings and reviews.
4. A few Alibaba suppliers also have a presence on 1688.com so they have the luxury of not responding as quickly on their Alibaba page because they feel they are already doing a good job on their 1688.com page and getting more than enough business for themselves through their 1688.com platform.
5. Many Alibaba suppliers don’t take responding on their platform seriously, because often a significant number of these suppliers are also attending exhibitions all over the world including the Canton Fair/Global sources Exhibitions. So, when they start getting enough business from these exhibitions, they become too busy and neglect to respond despite being willing to do so. The company's management decides to give more preference to clients from exhibitions because they are the ones that will confirm some orders with them and also they have to justify the investment they made by attending these exhibitions.
6. Sometimes a company’s online team for Alibaba is smaller than that of 1688 because 1688 suppliers acquire local and international clients through their 1688.com page. Hence a lot of suppliers on 1688.com invest more into sales teams whose can solely focus on client satisfaction on their platform.
11. SHIPMENT DELAY REASONS
The delivery date/shipment is delayed due to circumstances which many times are not in our control. We have mentioned a few of the reasons below
1. The supplier takes on too many orders at one time and your order is not of the highest priority.
2. Labor shortage.
3. The supplier is facing cash flow issues and is having to outsource a lot of the manufacturing process to other smaller suppliers.
4. The raw material prices shoot up. At times some suppliers wait for the raw material prices to go down to make an extra profit, which eventually delays the production.
5. You are dealing with a trader, where more parties are involved in the communications, which can slow down the whole process.
6. The Mold gets damaged or breaks.
7. Some suppliers in the interior parts of a city/province, at times, have no electricity for several days.
8. A Typhoon hits the city of your supplier.
9. Government Environmental officials inspecting your suppliers manufacturing premises, causing the supplier to temporarily stop production of all their orders.
10. The supplier’s salesperson is slow in communicating with you for all the details of the order, causing an overall delay in the delivery date.
11. The supplier’s raw material or packaging suppliers could face some of the problems mentioned above, which can naturally delay the overall process and delivery date.
12. UNEXPECTED SHIPPING COSTS!
Below are a few of the reasons some shipping companies have given us in the past to cause us unexpected costs. So it is important to make sure that you work with vetted and reliable shipping companies.
1. The shipping cost has increased (Extra Tariffs)because of the recent trade war.
2. During transportation or when the supplier miscalculates the dimensions/weight carton sizes increases and thus weight. Cost going up because the goods are charged based on volume weight rather than the actual weight.
3. Extra documents are sometimes needed to clear customs in China & country of Import.
4. HS Code of the product makes it a higher taxed product.
5. Sometimes the city/port goods being imported to has a higher duty fee.
6. The goods are potentially dangerous for the environment hence the extra cost is required to clear local customs.
7. If your warehouse is in a remote location in USA/China, it causes extra cost.
8. If your container is chosen randomly for inspection by customs (possibly on both sides), it causes extra cost.
9. If the receiving address doesn't receive the goods on time, there will be extra costs.
10. The trucking company only works with pallets so your floor loaded container was palletized.
11. If you fail to schedule an Amazon delivery for the order, your goods were offloaded in a third-party warehouse.
13. HOW DO BUYERS PROACTIVELY AVOID SHIPMENT DELAYS FROM CHINA
Most buyers have faced delayed delivery dates issue for their orders. The Manufacturers in the USA, Europe, or Asia have faced this issue at some point and are likely to face in the future. Many Chinese manufacturers still don’t have as high standards and a reputation as a German Manufacturer have for delivering the goods on time.
It is, therefore, quite natural that many buyers complain about this issue, however, some of them have accepted this and try to keep a 10 to 15-day buffer for late deliveries when dealing with their Chinese suppliers.
Also, when doing International business too many external factors have to be taken under consideration and many buyers realize that it’s not always 100% possible for a Manufacturer to deliver on time as they promised in the sales contract.
Meaning most buyers know, no matter how good the supplier is or how good their relationship is with that particular supplier, there’s still a possibility of the supplier delaying shipment for a week or two, or at times even longer. It would be quite naive for a buyer to always expect their Chinese supplier to follow the terms and conditions exactly as they mutually signed in the contract.
Even in 2018, many Chinese suppliers still don’t have as much respect for a contract as they should be having. For many, it’s still a simple piece of paper and just something to refer to when executing a buyer’s order.
Some Chinese suppliers, although not all, have the bad habit of not keeping their buyers updated during the production of the goods. These suppliers have perfected the art of giving the minimum amount of information to their buyers regarding the status of their orders (a collective culture thing). So often it’s the buyer who has to clarify each and everything with the supplier before, during, and after production of the goods.
Below are few of the things good and experienced buyers always proactively do to avoid late deliveries.
1. Many experienced buyers consider peak selling time of their products and at the same time understand how busy their Chinese supplier will be during this time. So just to be safe a lot of these buyers will start negotiating and finalizing an order with a supplier several days or even weeks before when they need to. Often these buyers don’t mind receiving the final produced goods to their warehouses weeks before they need them. They understand the need to always have some stock, continuous supply chain, and the importance to build or maintain their products brand momentum.
2. Seasoned buyers also know that even though they need all their shipments to be executed right on time, they make a conscious effort to not be manipulated in any way by their Chinese supplier. Meaning when some Chinese suppliers see a buyer is showing some urgency and desperation for quick production and shipment they sometimes jack up the products price or ask for a quicker and higher deposit amount.
The supplier promise to deliver the goods even before the target delivery date if the buyer agrees to their terms. However, experienced buyers know that agreeing to these terms and conditions is not going to dramatically speed up the production. Good buyers always look at their overall business and cash flow. They can’t be sending high deposit amounts (50 to 60%) to their different suppliers and expecting all of them to execute quick shipments. Hence, buyers simply negotiate more smartly by proposing suppliers for long term business.
Buyers genuinely try to build a better relationship with their supplier. If the product has a good long term potential and if the supplier is trustworthy, some buyers even offer to keep a fixed deposit amount with the supplier at all times. Because of this a Chinese supplier often sees the buyer as serious and potentially a big one for the future and hence genuinely makes efforts in never delaying shipments for these buyers. Even if they do, it would be a few days only.
3. Now after the negotiations and deposits, a good buyer needs to try getting their designs made and confirmed for the packaging of the product ASAP. Many buyers sometimes make the mistake by thinking once they have sent the deposit amount the production of their goods has begun. When in fact that’s often not the case. Yes, your supplier will use that initial deposit amount to start purchasing the raw materials for your order. But often many Chinese suppliers have a fixed company policy of not beginning the Mass production of the goods until they receive the final confirmed Packaging Design from the buyer.
4. A good buyer will always take out the time and make some effort to also follow up with their Chinese supplier during the mass production of the goods. Because a factory will at times have several orders to manufacture at the same time and sometimes some of them are so overwhelmed with the amount of work and pressure, they
unintentionally mess up the delivery times for your order. So it’s always a good idea to just put in a short email or message every week or so to the supplier's salesperson and ask them about the status of your order. You can even request them to send you the ongoing production pictures for your satisfaction.
5. It does help to keep your suppliers on their toes at all times.
6. It’s also important for you as a buyer to be aware of all the certifications (if any, for both import and export) that are required for your product before the shipment. So, in this way before placing an order and during the production of the goods you have got all your certificates in place before the delivery date. Many times, even when everything has gone well and the goods are ready, your order cannot be shipped out if some Certificate is missing and hence the goods are not allowed to be exported from China. So, by the time you apply for this certificate and receive it, another 10 to 14 days could be potentially wasted in this process.
7. Buyers also know that if they are getting a third-party inspection done for their goods, it’s important they notify their inspection company several days before the production of the goods is completed. Sometimes Inspection companies don’t have any Inspector available in that particular city where your product is being manufactured and by the time one is arranged or you find another inspection company many days could be wasted in this process.
8. Getting your price terms and conditions right. Many times, in a hurry to place orders buyers make the mistake of not clarifying everything with their supplier. For example, if a buyer places an order with a supplier on EXW price terms they then assume once the goods are ready they can ship them out immediately from the factory. But in EXW price terms as we know the goods first have to be sent by the factory to the buyer’s freight forwarder warehouse or at least picked up by the buyer’s forwarder for delivery to the nearest port/airport.
There are also other costs extra involved for a buyer as the goods have to be transported to the nearest port/airport. There are Customs duties to be paid, port handling charges, loading/unloading charges. So, at times when buyers are hit with all these extra costs, they start getting a little irritated and concerned with all these extra charges and waste a lot of time then renegotiating everything and ask for explanations for each cost from their supplier and their freight forwarder. So, a good buyer will always have all these extra costs clarified with their freight forwarding company or with the supplier beforehand.
9. It’s also important to pre-book vessels/flights a few days before the actual delivery date of your goods. Experienced buyers have come to know that even these shipping companies have their peak season times and sometimes due to a lack of space or less frequency of flight/vessel departures their shipments can still be delayed for more than a week if they don’t take care to reserve some space for shipping out their goods. Also, these buyers make sure of the exact number of days their consignment will take to arrive at their warehouse.
So they are careful through which shipping company/freight forwarder in China, they are shipping and it’s not necessarily always the best idea to look for the cheapest option because in doing so, in some cases weeks can pass before the buyer receives the goods in their warehouse.
10. Last but not least good buyers also understand their product requirements, pricing and market need well. So, when negotiating and making a contract with their supplier, not too much time is wasted on always chopping the terms and conditions of the order and requirements for the product. In this way, buyers save a lot of time in starting the execution of their order.
14. BENEFITS OF VISITING YOUR SUPPLIERS MANUFACTURING PREMISES
E-commerce for a lot of us has been totally life-changing and hopefully never taken for granted. But at times the human element goes missing and disappears in the e-commerce space. We sometimes get so immersed in our little E-com businesses and start thinking this is how business is done in the real world.
However, on the other side of that computer/laptop/phone is also a human being just like us hence making those human connections/relationships can and should never be underestimated.
Always a good idea not to judge a book by its cover
In the long run, authenticity does seem to always play itself out, be it in any business space or industry. Often what we see from the outside, will quite likely make us perceive that would be the same from the inside. But as they say, never judge a book by its cover.
A supplier with an amazing and well-made Alibaba Page & Website can highly influence our decision in wanting to do business with that particular supplier. An Alibaba page with great pictures, product descriptions, and gold status will at the very least wake up our curiosity buds and push us into looking what exactly that supplier has to offer.
Also, when we meet suppliers at their Exhibition booths and see all their products displayed there, it helps us see what quality level their products are at. But at times the samples displayed at these exhibitions by some suppliers are of a higher quality than those of their actual manufactured products.
The look and quality of the samples displayed at a booth are also significantly enhanced by all the lighting and decoration around the supplier’s booth. A few also continue to adopt the old school tactic of using an attractive salesperson or models (both local and foreign) in getting buyers attention to their booths. We can compare it somewhat to superhero movies, which look amazing on-screen and often take our
breath away. But the process in making those superhero movies is often not very glamorous and there are a lot of trials and errors involved to arrive at the finished product on screen.
So similarly, the process in making any product is often filled with its challenges and realities. It’s always a good idea to see what’s going on the other side of the fence to have a better understanding and a more wholesome perspective of things. No harm in learning how the product is made, what are the processes involved, and more importantly if the supplier is someone you could potentially do long term business with.
No doubt flying halfway across the world is not always going to be possible in terms of money, time , and energy. Though it costs initially, these things are worth it from long-term investment point of view.
Ideally, you making these trips to visit your suppliers is better but going forward you can always find some reliable companies & people who can help you with the process of auditing new suppliers, paying visits to your regular suppliers and maintaining one on one touch with suppliers. Having boots on the ground at all times will keep most suppliers on their toes when doing business with you.
Below are some of the more specific benefits of visiting your suppliers manufacturing premises :
1. To find out if the supplier is an actual manufacturer or trading Company
First things first, a visit to any supplier will let you know if you are dealing with an actual manufacturer or a trading company. Once that doubt is clear you can focus on the main tasks. In the Chinese business culture, it’s still very common for suppliers to say they are manufacturing the product even if they are not. Many of these suppliers who are essentially trading companies still believe (though maybe rightly so) that they will lose a lot of business if they openly show themselves as a trading company. Now, of course, there is nothing wrong in working with a trading company, especially if they have managed to meet your target prices, quality requirements and been professional throughout
the process. So through your visit, you will have established if the supplier is a manufacturer or trading company.
If they are a trading company, your first impression about this company would not be very good as you would naturally feel this company might not be very trustworthy to work in the future because they hide their real identity even before the first deal. However, it’s up to you if you wish to continue doing business with this company or not. Some of these trading companies are financially strong and can provide a quite competitive pricing without compromising on the quality and overall service.
2. Get an understanding of the manufacturing process of a product(s)
One of the first things you will likely notice during your visit to a supplier is whether or not your supplier is manufacturing the product you need and which process is being outsourced to other manufacturers. You need to see if the manufacturer has its mold making machines, injection mold machines, and printing machines.
Also, if a supplier has all these machines and infrastructure one can safely assume that this supplier is quite strong financially and this could help you get better payment terms from them in the future. Nearly for all products you need a mold and some sort of printing on them. This will help you know how much control can your primary Manufacturer have over the quality of the product.
You can see which process is being done in house and which process is outsourced to another supplier. Why is this important? Well, these are some of the factors which can highly influence the cost of the product, how much quality control a supplier has over that product, maintaining consistency in quality, delivery times, and after-sales service.
If your product requires significant customization then working with a supplier who has the capability & technology in their manufacturing premises is most ideal. The process of product development becomes easier and faster and fewer things getting intercommunicated because fewer manufacturers will be involved in the whole process. Though of
course, you would also need to have confidence in them and make sure your current supplier is capable of doing all this in their factory without compromising on the quality of the product and delivery times. A good manufacturer will know what are their strengths and which manufacturing processes to outsource.
The quality of the product can be significantly enhanced if some part of the production process is outsourced to a nearby manufacturer who is specializing in that manufacturing process. Also if you have found a manufacturer who can make the complete product in their factory, these suppliers can give you very good pricing as they are not involving other suppliers in the manufacturing process and the production time too can be shorter from these suppliers.
3. Relationship building exercise and making that Human Connection
Building Relationship and trust with your supplier (Called Guanxi in Chinese business culture) makes the whole process simply becomes more Human and real. You may not speak the language and the supplier’s sales team might not be fluent in speaking English but sharing a meal, drink or Chinese tea can make you feel more comfortable in doing business with that supplier.
Also, many suppliers themselves would feel the same way and could try supporting you in many ways in the future. As a buyer, it will also give you some confidence to know if the supplier you will be dealing with is someone you can feel comfortable, enjoy and trust to do potential big business for the future.
This is just one of the tools to make your business grow, but it’s always best to be alert and professional during this time. One should not let these things cloud your decision-making ability and practicality. Some suppliers even try to take advantage of these situations by over-promising and then later under-delivering, especially after drinking some Chinese Alcohol (Baijiu). These drinks have up to a 52% alcohol level and hence are not recommended for you to drink.
4. Opportunity to negotiate better pricing and payment terms
You can negotiate better prices and payment terms when you visit your suppliers personally. Most of the suppliers see this as a very positive intent and hence give you the best pricing and terms possible from their side.
Usually, the money and time you spent in visiting your supplier will be covered by the supplier giving you more favorable pricing for your product. There is, of course, no guarantee for this but if you go in with a positive attitude and intentions, then more often than not the other person will pick up those vibes and try supporting in return to the best of their capabilities.
For example, if you were dealing with your supplier on 30% + 70% payment terms, then potentially after your visit, you could get payment terms like 10% or 15% deposit and the balance after the inspection and before the shipment. Also, once you do business with a particular supplier for a few years, they even can support you by giving you some credit, where you give a deposit of 10% and pay the balance after 60 to 120 days after the shipment.
Now, these kinds of payment terms are naturally influenced by several factors, such as your reputation, order quantities, your financial strength, the supplier’s financial strength, and their company policies. However, on the whole, it can be a win-win situation for both parties in the long run.
5. Re-emphasize the importance of quality, improve quality and your projects will be given more importance
By understanding how your product is manufactured and how much work/ labor goes into making a product, it could help you as a buyer to sell your product more confidently, market it more properly and increase your sales. So, during your visit to your manufacturer, you can see how exactly your product is being made and how you could enhance the quality of a product by you giving some of your suggestions to the manufacturer.
Also, if you have been seeing some bad reviews of an existing product on Amazon and it’s a product you wish to sell yourself now, then during a visit to the manufacturer you can come up with a solution to those quality issues with the manufactures engineering team. Besides, with you being physically present there, the supplier will take you much more seriously and genuinely try to help by giving more of their time and resources on your project.
6. A great chance to be inspired and come up with new product ideas & solutions.
Often the salesperson you may be dealing with would be handling several other accounts hence they may not have the time and energy in offering you their other products over the internet hence a visit could potentially open new doors for your business. So, by visiting a supplier it allows you to see what other products your supplier is making and this, in turn, could help you come up with new product ideas for your product line or for even come up with a customized product idea.
Just being in the sample/showroom of the supplier can greatly inspire you to come up with ideas! It could also help you come up with some bundling product ideas for an existing product you are selling. Not only that but you can also understand if the manufacturer is specialized in the specific product category that you want expand into. Working with a manufacturer matching your future product goals/categories is always ideal.
It’s also best not to show too many emotions initially even if you feel that manufacturer could turn out to be good in the future. Yes, it is always better to keep your cards close to your chest. This will help you stay more level headed during your visit and also give you the clarity and presence of mind to observe other things.
When you are at a manufacturer's premises, do make the effort to also see if the supplier has all the valid certifications for your product, and if they are displaying a competitor’s products openly. If yes, then you can quite safely assume that they might do the same for your products in the future. All these things can guide you in your decision-making process
and know if this is a supplier you would want to do business in the long run or not.
7. Visit your supplier’s competitors and other nearby manufacturers and markets
Visiting your manufacturer allows you to visit other nearby suppliers so that you can compare the quality and pricing of your product. Normally in China, manufacturers of specific products can be situated in a specific city or province. So, these won't be very time consuming and expensive trips.
By visiting other nearby suppliers, you may get some other product ideas, an opportunity to understand why is there a price difference between suppliers and how different manufacturers work for the same product. Also, by doing this you keep all the manufacturers on their toes as they will see you are aware of their competitors and thus the current china market price of their products. You will likely have a deeper understanding of the whole situation. In the long run, this will help you talk more professionally to your suppliers by you having a deeper understanding of product manufacturing and the supply chain in general.
You will eventually learn to ask your suppliers better questions and filter out suppliers which don’t meet your requirements. In the future this could help you attract more professional and suitable suppliers to work with as suppliers too want to work with knowledgeable and experienced buyers. On top of this, you can visit local markets in China such as the Yiwu Market where you can get a lot of new product ideas and meet a lot of other manufacturers.
8. Physically experience the suppliers working culture and conditions.
You get to see how is the business module set up by your supplier. You will know -
If they are organized, clean,
How are the labors treated
Are working conditions safe
How is their company's culture and happiness levels
Many buyers have their values and internal compass and wish to work with people who share the same values and principles. Also, maybe your current product brand is leaning towards being Eco- friendly and hence you want your suppliers also to have ethical manufacturing processes and working conditions.
9. Gives you leverage on you insisting for faster production & delivery times.
Being present at your supplier's manufacturing premises also gives you an opportunity and some leverage to emphasize on the importance of not having too long or delayed delivery times for your orders. Some suppliers have to be reminded constantly about shipping your goods on time. Sometimes you need to explain them in laymen terms how crucial this aspect is if your business has to grow.
You need to let the supplier know that they too will be winning more business and potentially larger orders if they ship your goods on the agreed time. Normally an average delivery time for a supplier after they receive a deposit from you is 30 days, but once you meet your suppliers this could go down to 25 or even 20 days. This could give you a huge advantage over the competition and also you will not run out of stock.
Most suppliers will treat you as a serious buyer, when you spend your time, effort, and money on your visit. Therefore, more likely they will give more priority and emphasis to your current and future projects.
So basically, once you are at a suppliers manufacturing premises, you get a sense of the potential business you can do with that particular supplier. Often, it’s the undercurrent vibes you will get from everything surrounding you to help you know if you should do long-term big business with supplier.
It feels so much better and safer to have met the company whom you will be sending payments to in the several hundreds of thousands shortly. Initially, the whole trip could be a little overwhelming, especially when visiting several suppliers or markets. Of course, you don’t have to make decisions on the spot and it’s always best to enjoy & learn during the whole experience. Not to mention, you will make the long-term relationships during the trip. Once back home you can evaluate everything with your team so to make the best decisions for your business.
15. CREATIVE SOURCING FOR “HIDDEN” SUPPLIERS PART-1
All of us know the 4 to 5 platforms were most buyers do their sourcing from the internet. Be it Alibaba.com, 1688.com, Globalsources.com, Made-in-china.com, all of these sites are where more or less each buyer tries to source from. Below are some tips which one can use to creatively Source some suppliers from these platforms and at the same time also look outside these platforms for potential suppliers.
When you start searching on alibaba.com or any of the above-mentioned platforms, you often see several pages of results and start thinking there are hundreds of suppliers out there for the product you need.
It’s overwhelming and exciting at the same time. Though when you start going deeper into your search, you start realizing that the suppliers you found on top of Page 1 are now popping up on Pages 5, 6, and so on.
Yes, there are many products out which are listed by hundreds and even thousands of suppliers but not all of them are going to be on Alibaba/Globalsources, etc. Also, not all suppliers have an online presence on these particular platforms. Some suppliers are so big and have enough business that they prefer not to be bothered with more new inquiries hence don’t invest their money to advertise themselves on these platforms. Many suppliers also prefer to just attend exhibitions in China and abroad and get all of their business from there. On the other hand, many smaller suppliers cannot afford to advertise their company on these platforms. Some do for a year or two and if they don’t see results, they pull out. Whatever the reasons, every buyer’s goal is to find the right suppliers as quickly as possible. Sometimes it becomes necessary to think a little out of the box.
Hope some of these below tips and tools can be useful for your businesses.
When searching on Alibaba or other platforms try to select the option of “Suppliers” (the option is right beside the search box) when putting in a search for your product. Often you can get a few new suppliers to show up on the subsequent page results.
It’s not always necessary to cast your net far and wide during your product and supplier searches. Going deep can be very useful. A lot of smaller exhibitions are held in China all year round for each industry and niche products. Many times suppliers show the exhibitions they have attended on their Alibaba/Globalsources page. So, if you are looking for products in the Pet Industry, you can try finding on the website about the exhibition which the supplier attended, or you can ask these Alibaba/global source suppliers which exhibitions they have attended in the past. So, in this way you can search for suppliers outside these platforms where everyone else is already paying attention.
When you find a supplier for your product (let’s say Bluetooth speakers) who you verified is a manufacturer, you had them send you samples which you approved of but their price is too high and not workable. As a buyer, you don’t need to always think that was a waste of your time and money. You can check these suppliers address and see their Industrial area. Often suppliers in China are in one single industrial area of 20 to 200 kilometers. If you find out that the above supplier is in Shenzhen City, Longhua District, then you can put in a search in Alibaba by typing in Longhua + Bluetooth speakers. You are now giving yourself more options & speeding things up by doing these kinds of searches. Also, this gives you more of a chance to do business with an actual manufacturer.
16. CREATIVE SOURCING FOR “HIDDEN” SUPPLIERS PART-2
Anyway, let’s explore some of the other tools and tricks a buyer can use to find suppliers who in many ways don’t want to be found very easily. Please do note it doesn’t always mean we have found a good supplier if they have been hard to find. Even if you manage to find a supplier who is not on the regular search platforms, it should not make you think this is a supplier other buyers have not contacted before and that you have hit a jackpot. At the same time, even if you don’t do business with this hidden supplier, you could at least potentially have another backup option or a reliable source to compare the quality and price.
1. After searching Alibaba, Global Sources, Made in China, 1688, you find out that the product you need is price sensitive and suppliers are unwilling to meet your price & MOQ. What can a buyer do in this situation?
Everyone is familiar with the Yiwu Commodity market in China. A good website that one can use is en.yiwugo.com. It has a good database of all the shops which are in the Yiwu market. Even though there are many traders mixed with manufacturers in this market one could still find very good deals if you are persistent with your search. Suppliers here are pretty flexible with pricing and offer good quality. At the end of the day what we all need is the right quality, pricing, and service (a full package) when dealing with suppliers, manufacturer or even a trader.
2. Sometimes the most obvious things/opportunities are right in front of us but become invisible because we are so focused on our goal and way we carry out things. In my last post, I gave an example of the Bluetooth speakers. You find out that the for Bluetooth speakers you need there are many suppliers located in Shenzhen City, Longhua district. You Can simply put in a Google search by typing in Bluetooth speakers + Longhua District. And
you never know, a supplier could pop out which turns out to be very useful for your business.
3. Another easy and at times an effective way to find a product/supplier is by simply asking for recommendations. You don’t want to give out too much information about your product and you need to be asking the right trustworthy people who won’t misuse that information. For example, if you have a reliable freight forwarder or inspection company whom you have already worked with, you could ask them to suggest you some suppliers or give you some other clues on how best to find the product/supplier you need. Even asking one of your old suppliers could be worth a shot, especially, when you are looking for a product in a similar product range. A lot of the salespeople who work in these factories have friends or relatives working in other factories too.
Hope these tools can prove to be useful!
17. BOOTS ON THE GROUND (INSPECTIONS)
Inspections are ALWAYS a good idea, be it a new or old supplier.
Below are some of the reasons some suppliers could give you to avoid Inspections (Red Flag!).
1. We don’t trust third party Inspection companies and feel they are not professional and aren't equipped with the proper knowledge and tools to do the inspection.
2. We don’t want to waste our time and money in hosting (Lunch/hotel) the inspectors from the inspection company.
3. Our Factory is too far out in the countryside for the Inspection company to travel conveniently.
4. It will unnecessarily delay the shipment.
5. We had sent you samples before the order confirmation and can also send you the Mass goods sample for your approval and that should be enough for you to get the goods shipped out.
6. We can send you Videos and pictures of the Mass/Ready goods.
7. We would need to repack all the goods if the inspection company comes and inspects a large % of the goods. Unpacking and Repacking these goods could potentially damage the goods.
8. We don’t trust third-party companies because some inspectors expect to be "Bribed" for them to be able to pass the inspection and write up a positive inspection report.
9. We are not comfortable and familiar in dealing with third party inspection companies and have our own internal inspection and quality control team.
10. We don’t trust Inspection companies but we trust and welcome our clients to come to visit our factory for the inspection (expecting the client to fly halfway across the world).
18. SUPPLIER FILTERING
Even after living in China for more than 6 years I still often find myself struggling to come up with a good system to filter out the right suppliers.
As each case is different and there are no fixed solutions or templates to this, but if you keep in mind fundamentals, then you will not go wrong.
So instead of making it all sound like rocket science, let’s try to simplify the whole process by asking ourselves the below questions. They will help you are finalizing a supplier with whom you are going to work. These questions can apply for Suppliers on Alibaba and other websites or those who you meet at exhibitions.
1. Do you find professional and detailed layout on the supplier's Alibaba Page? Do they have their entire factory's Introduction, product pictures, product description? Are they specialized in any product category? if yes, then that’s often a good sign because traders normally deal with hundreds of products.
2. Does the supplier have a Website? Even if they don't have one, they could not be called bad or unreliable suppliers. You need to research more about them. You can directly ask them why they don’t have a website. Some smaller suppliers don't want to spend the extra time and money on building a website because their Alibaba page gives them enough business.
3. Sometimes due to language and cultural differences, most Chinese suppliers simply don't have much of a strong presence on social media platforms like Facebook/LinkedIn/Twitter.
4. Look for the supplier's contact and address information. Is their address part of an industrial zone where other factories are located? If yes, then at least you will get an idea that this supplier has a factory and is NOT a trader. Again, this is not applicable all the time as a few
good suppliers on Alibaba show their corporate office address which is in the main city.
5. Does the email address used by the supplier to communicate with you have their factory’s domain name or is it Hotmail/Gmail/QQ mail ID? Most big and repudiated factories normally use their factory’s email domain name address.
6. You can ask the supplier if they have had any experience in selling to Amazon Sellers. If you need your goods for the USA, you can even ask them if they have shipped to any brands in the USA and whether they have all the certifications for this market.
7. Ask them about their shipping process for Amazon FBA. From their answers, you will get a general idea about their experience level for this.
8. What are the supplier's payment terms? Normally 30% Deposit & 70% balance before the shipping should be ok as it is the industry norm. If the supplier insists for 40% to 50% deposit then understand their reasons. In some cases, suppliers ask 100% payment before production, its best to run away from them.
9. You can contact other suppliers who are near the supplier you want to do business with. You can ask the other suppliers about their pricing and then bring up your supplier’s name in the conversation. This could also help you get an idea about the reputation of the supplier you wish to do business with.
10. How is the email correspondence with the supplier? Are they proficient in writing clear emails and easily understood replies? Are they polite and patient with your questions? Their English speaking and writing skills should be up to a decent level if they are doing business with European or South American Countries or other English speaking countries.
11. How many years’ experience do they have in manufacturing the product and how long have they been an Alibaba Supplier? Again, a 1-year old experienced supplier doesn't need to be bad for you as some of these new suppliers sometimes are very good in terms of their pricing and quality and want to come up in the market.
12. Does the supplier accept and agree on payment by PayPal & Trade Assurance? For new suppliers always work with an Escrow payment system and avoid direct bank transfers.
13. Is the supplier welcoming your requests for future factory visits or product inspections? If they try to dodge or ignore these questions, then you need to stay on Red Alert always when dealing with them.
So above are some of the first few basic things we can check when finding the right supplier. Hope this helps!
When doing your Sourcing for Suppliers & Products via the internet, be it through Google, Alibaba, Global Sources, Made in China, Exhibition websites, or even 1688.com (translated). It’s always a good idea to use several different kinds of keywords to get you the best and fastest results.
Below are a few keywords you can input when searching for a product like “PLASTIC SPOONS”.
You can interchange and play around with the keywords, as it just gives you a higher chance to contact all the potentially right suppliers for your product.
1. Plastic Spoons (Obviously)
2. Plastic Cutlery.
3. White Plastic Spoons/Cutlery (assuming you need white).
4. 1g White Plastic Spoons/Cutlery (1 gram is the weight of the spoon you need or you can put in more details such as size/dimensions/specs of your product
5. Disposable Plastic Spoons.
6. Plastic spoons + Amazon: At times you can find suppliers who specialize in making goods for Amazon sellers. Though of course, there always are pros and cons of working with a supplier who is already supplying to your competition.
7. Plastic spoons + USA/Europe: Sometimes it’s a good idea to work with suppliers who are familiar with your market and understands the quality requirements, certifications, shipping process already.
8. Plastic Spoons + City Name/Province: putting in a city or province name is at times very helpful in filtering out the kind of suppliers you need. Normally, the Guangdong Province is known for making higher quality products than Zhejiang Province. However, if you are looking for lower prices, then Zhejiang Province is a better bet. Yes, the Guangdong province supplier prices often are higher than Zhejiang but it is always better if you source a better-quality product. Also, a lot of cities specialize in making a particular product or product category. So just focusing on that city can speed up your sourcing process.
9. Plastic Spoons + $1: $ means the price range you need your product for.
10. Cheap Plastic Spoons: if nothing seems to work, you can try this as well.
19. WHY SOME CHINESE SUPPLIERS MIGHT NOT BE SHOWING INTEREST IN DOING BUSINESS WITH YOU
In the Chinese culture saving face plays a big role in everyday life and business.
So, it’s quite common for suppliers to not tell the true reasons for their disinterest in doing business with you, be it out of respect for you or their conservatism.
This post is simply to help you understand why you may have faced this situation at times or will likely face.
1. They feel you are still too new, inexperienced, or are too small fish in the Amazon world.
2. Even if you’re an experienced and full-time seller, at times your products initial quantity requirements will be too low to match the suppliers MOQ.
3. The supplier is already selling on Amazon the specific product/model you need.
4. The supplier is already supplying to several other Amazon sellers in your market and doesn’t want to oversupply the product and create too much competition, which could potentially spoil their relations with their existing Amazon clients.
5. They are very busy already and are not in a position to take on any new orders.
6. They are unable to match your product quality requirements/specs but do not want to admit it.
7. They might feel your initial target price is ridiculously low and that you might try to take advantage of other parts of the order also.
In a way when facing these kinds of suppliers, it could be a good thing for you in the long term because you cannot force anyone to do business with you and its often best to work with a happy, motivated, and interested supplier.
20. A SUITABLE SUPPLIER
Below are a few of the first positive signs you can take into account before jumping into business with a supplier.
Normally you can do a quick recap of the below points after you have approved the supplier's sample and made sure that you are dealing with an actual manufacturer and not a trading company.
Of course, no supplier is perfect and there are always going to be challenging in the sourcing process but it's always nice to have a handy internal map to use before you are off to the races.
1. Has the supplier been quick, professional, respectful, and motivated while talking and negotiating with you right from day one.
2. Have they been transparent in terms of sending over their business license copy, welcoming for factory visits & inspections, working through an Escrow payment system (trade assurance/PayPal)?
3. The supplier has not kept changing the products price, payment terms, details/specs, the delivery date of the product you need.
4. Has the supplier been trying to educate you about your product, packaging, quality control, the certificates required and what other potential challenges you could face when importing?
5. Last but not least you can match all the Data with your Gut (Instinct) feeling and the vibes you have gotten to make the best possible decision for your business.
21. UNSUITABLE SUPPLIERS
Below are some of the warning signs which you should take very seriously when dealing with a new Chinese supplier for yourself. These can be implemented upon both manufacturers and traders.
1. When they ask you to send payments by bank transfer/TT Only.
2. When they insist for a 100% deposit before confirming an order with you.
3. When they refuse to send you their business license copy.
4. When they try to discourage you not visit their factory or office by coming up with all kinds of creative excuses.
5. When they seem insecure and not confident upon your requests to have an inspection done of all goods during your initial negotiations with them.
6. When they don't or can't provide you with valid certifications which you might need for a particular product or market.
7. When they say that you don't need to see the samples before an order confirmation because time is limited, their production lines are already quite full and hence they don’t want to delay the delivery time for your order.
8. When they change the price more than twice/thrice or are trying to confuse you with FOB, EXW, DDP, DDU price terms.
9. When they start coming up with new magical costs for your product after receiving your deposit.
10. When you have a hard time communicating with them due to a language barrier, slow response, or them not understanding their product and business very well.
Of course, many of these kinds of suppliers can still be potentially very good and safe to work with eventually. Some of them will have killer quality products, but the risks for you as a buyer will always be higher and the leverage will often be on the side of your supplier. Also, at the end of the day, the intent is what matters no matter who you are dealing with.
22. SUPPLIER VERIFICATION CHECKLIST
Below are some of the questions I ask my sourcing team after a client has approved our quote and wishes to order a sample from a supplier. So, the result of these questions will simply help us know if the supplier is legitimate and someone whom we could do business in the long run. This helps everyone save significant time and money before actually confirming and sending a deposit to a supplier.
1. Can we visit their factory before placing an order?
2. Are they welcoming us or giving excuses so that you don't visit them?
3. Did you check their business license and company on the customs website (tianycha)? Are they a manufacturer or trader?
4. Can they accept payment in USD by Alibaba Trade assurance? (if they have it)
5. Can they accept any other Escrow payment system? Are they asking for 70% to 100% upfront payments? (Industry norm is 30%)
6. What is their normal delivery or lead time for order quantities of 1000 to 5000 units? (Industry norm is 30 to 40 days maximum)
7. If the product needs certificates, does this supplier have the valid certificates? Have they been guiding and being transparent about the certification requirements?
8. Did we recheck with the client if they need any certificate from China for this product?
9. Are they welcoming and accepting a final inspection of the goods before the shipment?
10. What is your personal feeling about this supplier after talking to them for several days/weeks about this project?
23. PRICE NEGOTIATION WITH YOUR SUPPLIER
You don’t want to go in with a counteroffer so low that would make the supplier think either you are not serious, unprofessional or a total newbie.
You must know the average price first of your product, in the country you are sourcing from. That will give you an idea of how much realistically you can negotiate without making your supplier lose interest in your inquiry.
To put it simply, say you have a lemonade stand where you are selling each glass for $3.00 (your sales are reasonably good at this price) and if someone comes up to you and says they will pay you $0.30 for one glass, you would most likely feel this person is not even worth your time. Hence, negotiating with them will not help and you would most likely not budge from your $3.00 price.
Price is very important of course but it's best to not focus on that as in China many suppliers will give you what you pay for. Meaning you could end up with a very low-quality product based on your low negotiated price. I have been a victim of this where I initially felt quite proud of myself of managing to negotiate a very low price but later suffered when the final
goods produced were of poor quality. Though at the very same time you do want to get the best possible price for your product and ideally which is lower than your competitors
Before you start negotiating the price with your supplier, it's best if you can get multiple quotes from at least half a dozen suppliers and understand the average price and why is one suppliers’ price higher/lower than others. This will give you an overall better understanding of your product and how would it be possible for the price to come down without compromising on the quality of the product.
Below are a few of the things you can say to your supplier during the price Negotiation period:
1. You can tell the supplier that you are not working on high margins at all and wish to enter/break into the market with competitive pricing to establish your brand name without compromising on the quality of the product.
2. You can tell them you wish to establish a long-term business relationship with the supplier and are confident of giving them repeat orders which could be very high in volume and also the frequency of the repeat orders will be high shortly.
3. Say if your product is being made in Zhejiang Province of China, you can tell your supplier that other suppliers in this province are giving you a lower price but you are willing to support them and want to start business with them only because you feel confident about their overall capability, attitude, responses, product's sample and packaging.
4. Add the salespersons Wechat /Whatsapp or Skype to build up some rapport or even try making a Wechat group involving you, the salesperson, and a manager when negotiating. Involving some senior management or even the boss can be very helpful at times. Though do note a lot of suppliers won’t always be open to this as they too have a protocol and might say everything will be done through the
sales rep. Nevertheless, you can build up some friendly relations with a supplier through these applications. Many Chinese suppliers love using emojis to express things, so use some of that when speaking to them. But don’t make it as if you are trying to get something out of it or be fake. The more natural it is and the more you enjoy it, the more positive the results will be. You can also do a quick voice/video call with your supplier if their English is good enough and more importantly the negotiation and overall process becomes more human which can never be underestimated.
5. If you are selling in multiple countries then no harm in asking your supplier if they can support you with good pricing and quality. You could thus sell their product in many different countries too. So naturally, this means more potential business for the supplier in the future.
6. If you are a full-time seller/importer or if you plan to book large quantities for this product, then a visit to the supplier personally could help both in terms of getting you the best pricing and quality. Often, nothing beats face to face meetings. In most of the cases, this won’t be possible, if you have a reliable & trusted company in China you can ask them to do a quick visit to the supplier and get you better pricing and at the same time build a relationship with the supplier. A lot of suppliers naturally will feel more comfortable when dealing with someone local and speaking the same language. But as we all know thousands of sellers and importers are managing very well without this service too. It depends on the company and individuals.
7. Also, try not to make your supplier feel that you are just trying to get the lowest pricing possible. Make efforts to genuinely explain to them that you wish to establish your brand/product in the fiercely competitive market and wish to enter the market with the best pricing possible, which could enable you to spend more of your time and effort in selling/marketing the product and providing good customer service.
8. Normally in China for all the products which are exported by manufactures, they receive a Tax Rebate from the local government. This is based on total order value though the % varies from product to product. The range is between 10% to as high as 20%! That means you can tell your supplier that on top of the margins which they are already making on the product, they will be also getting tax rebates if an order is confirmed with them. This is another tool and way to show your supplier you are aware of how things work on the supply chain side of things.
9. You can tell your suppliers you have to give credit to the distributors you sell to and can only get your money after several weeks once you manage to sell out the goods. You can tell eCommerce/Amazon sellers that they will receive your profits from Amazon only several weeks after making sales.
10. Many times, there are some unnecessary features/functions or material on a product which is not relevant to your requirements, brand, and marketing strategy. So by being able to identify those things on your product and bringing the cost down without really devaluing the over quality and value of the product also can be quite a useful strategy to implement.
You don’t want to go in too hard and aggressive. The above negotiation tools/tactics can be used one by one if necessary, depending on the situation. As each case is different and so many things have to be considered such as the actual order quantity, suppliers’ interest in doing business with you, your products average price in the country sourced and how realistic for it is to go lower than that average price. All suppliers need business but often choose to not show too much eagerness and often keep their cards close to their chest. If you go in intending to respect the other company with a Win-Win mindset where both of you make money, then with a long-term strategy things should work out well for you.
24. CHECKLIST BEFORE SENDING A DEPOSIT TO A SUPPLIER
If all the below points have a check beside them, then you can feel pretty confident and be in a good position to pull the trigger when sending out that initial payment.
1. The supplier has a well-made Alibaba page with professionally taken pictures, detailed product descriptions along with a decent website.
2. The supplier has been professional, quick and self-motivated in communicating with you and answering all your questions patiently since day one.
3. Did not overcharge for initial samples and did not take too many days in getting them made even if you had the samples customized. Even agreed to refund you the sample fee if that was possible. Also, they made a good first impression by sending you a high-quality product sample and even giving you some customization ideas for your product and more better packaging options without any high price.
4. Welcoming you to visit their factory for auditing/inspections at any given time.
5. Did not give you a super high price when quoting you the products price for the first time or a price which was way over when compared to other suppliers.
6. Did not ask you too much about your order quantity, pushed you too increase your order quantity, or complained to you about your order quantities.
7. Did not ask you to remit them the payment without you having the protection of an Escrow payment system. Example a supplier asking you to send them all payments by T/T or Western Union.
8. Suppliers sent you their business license copy willingly when asked to so do, where you can sometimes find out if a supplier is a manufacturer or trading company (though not always applicable as many manufacturers register their export licensed company on their business license).
9. You checked a supplier’s legitimacy on the customs website in China and Baidu
10. The supplier having all the updated and legitimate certifications for your product.
11. The process will take about half an hour after they help you fill in the form and it costs you around 100 RMB (USD15)
25. HOW TO GET BETTER PAYMENT TERMS FROM YOUR SUPPLIER
Yes flying to China to renegotiate your payment terms is one of the best options you have in trying to get you a better deal (pricing, improved payment terms, new product ideas).
Though obviously, this is not the most effective use of your money and time. Also, not a practical long-term solution for you, if you will always have to be taking long flights to get better payment terms from new suppliers you might wish to work with in the future. Below are a few things you could try leveraging and re-negotiating better payment terms for yourself! However, always being genuine & authentic while using the below tools helps in the long run.
1. A lot of suppliers in China often can get very good payment terms from their own raw material/packaging suppliers. Especially when you are dealing with a bigger supplier who is financially strong already and has a good reputation in general. These suppliers have built up their own personal brand in the local China market. So, a lot of raw material suppliers/packaging/mold suppliers will give supplier payment terms like
a. 20% Deposit and 80% after the goods are made
b. 10% Deposit and 90% after the goods are made
c. Some don't even ask for a deposit and 100% payment after the goods are made
d. Some who want to win the business will not ask for any deposit and on top of that give some Credit terms to your supplier (30 to 60 Days or even longer). The bigger and more reputed your supplier is, you can at least mentally go in with the attitude that the supplier you are dealing with is in some position to give you better payment terms because they are not paying upfront to their raw material/packaging suppliers. Of course, this depends on case to case and I don’t want you to be
assuming too many things and telling this directly to your supplier. You can try reasoning/negotiating with them while keeping all this in mind and throwing small hints to them about this.
2. You are most probably using WeChat App as one of your primary ways in communicating with your suppliers. What many importers/sellers from all over the world do is use WeChat to show their Human side as much as possible and be transparent wherever possible.
As we know International Business is a lot of going back and forth through the power of technology and in China posting your Wechat moments has been quite a trend for the last few years. It's basically how we post our pictures/videos (personal/business) on our Facebook/Instagram. So, a lot of foreign buyers make an effort to add their supplier's Salesperson/Manager/Boss on Wechat. They then try posting pictures/videos on their Wechat Moments of their Amazon/e-com meetups, China Visit, USA Warehouse, and even some personal side. In this way their suppliers can see more of the human side of the buyers and also this gives buyers more validation and authenticity. It could eventually help you build more trust with your supplier in the long run.
Facebook is blocked in China and even the locals who use Facebook through VPN always say they find it hard to understand how it works and doesn’t like using it much. So, in China, a lot of time and energy is spent on things like WeChat Moments (their version of FB/Instagram and their Social Media in a way).
3. If you are already working with a local Chinese trading company or sourcing company whom you trust and have a strong relationship with, then involving them for negotiating better payment terms can also be a very useful and effective way. It's how many of us are still more comfortable working and talking with someone who shares the
same culture and language. So, when dealing with your Chinese suppliers and involving someone who speaks to them in their local language can often help you not even get better payment terms but even better pricing, quality, faster deliveries.
You can always be in control of things by giving out clear guidelines and requirements and communicating to the supplier what exactly you need and How.
4. What some of the bigger importers/sellers try implementing with their regular suppliers whom they have met previously and have built up that trust and relationship already? They keep a fixed deposit of say $5k to $20k with the supplier at all times. That means this amount of the buyer will always be credited in the supplier's account and used against all their future orders which could be in the hundreds of thousands of US Dollars. Just by doing this, many suppliers see this as a positive intent by the buyer and hence try to support them where ever possible.
Again, doing your full due diligence about the supplier and how big you would eventually go with the supplier heavily influences this decision.
5. Sometimes a factory closes down in China when the owner decides to mess around with the local tax authorities. In China, all manufacturers get tax rebates for whatever products they ship out from their factories. This could range from 5% to 15% depending on their product category. Meaning if factory ships out USD10, 000 worth of goods and are eligible for a 10% Tax rebate from the local government then they would get an extra USD 1000 from the local government on top of the profit which they make from the customer.
So sometimes the owner of a factory tries to manipulate the system by showing on the factories invoices a higher amount of exported goods. For example, if in a year a factory has shipped out USD100,000 worth of goods they will show they have shipped out USD200,000 so
that they could be eligible to get more tax rebates. Many of these factories are eventually exposed and forced to completely shut down by the local authorities.
6. Chinese suppliers unlike compared to the past are now giving many Ecom/Amazon Sellers, importers much better payment terms. Last I heard was of a supplier even giving 120 days Credit terms to their Buyers! Though again this is someone they know for several years already, know them on a personal level and even visited each other’s homes. So, if you happen to know any other suppliers who are doing this already, done business in the past, and if this supplier is in the same city or nearby your current supplier then maybe asking them to put in a good word about you, could also be something worth exploring.
Again, there are so many variables involved and everyone’s personality is different. Some suppliers can be flexible with their payment terms because they are financially able to and want to expand their business, some no matter what only want to stick to the 30% + 70% "Safe" formula, some are not in a position to give any credit terms, and there are others due to their past experiences simply don’t dare in taking any more risks. You may not agree with a few of the points made above and may also have your ideas on how to do things. But just wished to share some of my thoughts and ideas. How do you go about getting better payment terms from your supplier?
26. OPENING A BANK ACCOUNT IN CHINA
Next time if you happen to visit China for your factory visits or the Canton Fair you can try opening a Chinese Bank account and then link it up with your Wechat.
Below is the information I got from the Bank of China (Best choice for now) in the last Canton Fair to open an account in their branch.
Linking it up to your Wechat can help you make small and quick payments in RMB to your Suppliers, Courier companies, Shipping companies, Inspection companies.
1.) Passport Holders of the following Countries: USA/UK/Canada/France/Germany/Japan:
These countries can use their Hotel Address as Proof of Residence.
Residents from other than the above countries will need to show proof of residence from their own Country)
2.) M Visa Valid for 6 months or 1 year
3.) Hotel Address
4.) Local Chinese Mobile Phone Number
After they help you fill in the form, the process will take about half an hour in total and costs you 100 RMB (USD15)
When confirming a contract with a supplier for any big project which is high is order value (say over usd20,000 or above), it's always a good idea to convince the supplier to stamp the contract with their company's official stamp. Though of course, this is just one of the many ways you should utilize when trying to protect your unique product ideas, Mold Project, high-value projects.
In China, a company's stamp does carry some weight and authority and many suppliers do show some loyalty and respect towards a contract which has their company stamp on it with their signature & fingerprints. However, not all suppliers will always be willing to follow this process. So, by asking suppliers to do this process, you might be able to tell what are their intentions and how serious are they in working with you on a long term basis. The below picture is an example of the types of Stamps used here in China (Stamps are also called Chops in China).
Investing in a mold can be a little challenging at times, especially when it's your first time. Investing in a mold does give you a good chance to differentiate your product from the competition and be a trailblazer in the market. Depending on your product, a mold can cost anywhere from as low as $200 to more than $200,000. No matter how much investment is required, below are few of the fundamental things you can use as a guide when sourcing and dealing with a supplier for the mold you need to be made.
1. If possible, do try to work with a supplier who has had previous experience in making/opening molds for your product specifically. Even if you manage to find a supplier who only specializes in making molds, sometimes these suppliers who are not very knowledgeable about your product and hence can’t be flexible in dealing with your requirements and might even make an inferior mold and product you need.
2. Most suppliers will ask for 100% upfront payment before starting to work on your mold project but it's best to try to work on a 40 to 50% deposit and balance upon your approval of the molds product sample. Especially if your mold is costing several thousands of dollars, it's always a good idea to negotiate hard with the supplier and not give them the full leverage. This allows you to push the supplier to re-make or make changes in a mold if you are not satisfied with the mold or the product made through the mold.
3. If your mold costs between $3000 to $10,000, there's a strong chance for you to seriously negotiate with your supplier for them to share half of the cost of the Mold. Especially, if your initial quantities are large and you can give assurances to the supplier that you will continue ordering large quantities in the future also. If a supplier feels you are serious and has confidence in you, many times they agree to share half of the cost of a mold.
4. Make sure to clarify with your supplier after how many pieces made through your mold will your Mold investment be returned to you. Each product and project have their minimum quantity levels which have to be hit. For example, if you manage to give a supplier a 200,000 pieces order in 1 year from a mold you invested in, then either the supplier returns you full mold investment or gives you better pricing for each piece in your future orders
5. Ask your supplier how long it will take to make the mold after your deposit. Depending on the complexity of your product, your suppliers’ capabilities and how busy they are, making a mold could take anywhere from 10 to 45 days.
6. Also, make sure with your supplier in written and a face to face meeting (if possible) that the supplier will not be using your mold to make products for other clients and markets. As you have invested your money into a mold, you as a seller have the right to tell a supplier this and you are the actual owner of the mold.
However, at times things don't always go as planned and some suppliers get greedy and have the wrong intent and go on to use your mold for their benefit. But doing your research and homework thoroughly on a supplier does give you a better chance in keeping your mold and product idea safe in the long run.
7. When Investing in your mold, it also gives you a good chance to negotiate hard with your supplier for the lowest pricing possible for your product. Especially if the mold investment is significant from your side. Also, you can request a supplier to give you faster delivery times (if you need), as your mold will (should) be used to make products for your orders only.
8. No matter how small or big your initial investment for your mold, always make sure you have a written agreement/contract with your supplier for every detail regarding both your mold and the product.
29. PRODUCT PACKAGING
If looking for some high-quality packaging for your product, then try working with a box factory in the Guangdong area as their box quality & overall finishing is often better than other provinces. Their price might be $0.1 to $.25 higher at times but can often be worth it and you can always negotiate hard if the quantity is large!
Yes, there will also be the potential expense of transporting the box packaging to your product supplier but a lot of sellers who are wishing to stand out from the crowd try to over-deliver on their brand, do often make the effort and spend a little extra on some high-quality packaging.
Also, if you are bundling products or your product consists of several small accessories, then the extra cost on a nice packaging box can pay off in the long term.
The impact of a high-quality packaging box is indeed brought down significantly because the product is delivered to the client in a generic brown box. Compare that to a retail store whose sales are significantly impacted by the quality and look of their packaging box.
But still, if you manage to find a good packaging box supplier with competitive pricing, then it could potentially help you differentiate yourself from your competition and get you some extra good reviews.
30. THE CANTON FAIR SERIES
Let's talk about how buyers can identify and differentiate the actual manufacturers from a trading company at the Canton Fair in Guangzhou.
Though there’s nothing wrong in working with good trading companies (they are actually out there!) most buyers feel that after spending so much money, time and energy to arrive at an Exhibition, so they should be working with a supplier who is actually the true source and manufacturer of their target product(s).
As a buyer, one can expect that by working with a Manufacturer one is going to get the best possible prices, a better-quality product, a better chance to build up their brand/private label for the long term, and with better after-sales service.
At the Canton Fair, one can safely assume that 20% to even up to 40 % of the suppliers there could potentially be a trader for the products you are looking for. At times you can find your target products at more than 20 or more booths sometimes. Even if you have a very specific product and just found 2 suppliers, you will still need to decide which one is the right fit for you and which one could be a trader. Even for an experienced buyer, this scenario can be quite tiresome and time-consuming.
At the Canton fair, some trading companies are transparent (and proud!) of being a trading company. However, in most cases, Chinese traders at the Canton Fair still seem to love and relish playing this Hide and Seek Game by advertising and portraying themselves as the actual manufacturer of a product.
Even if you do find a supplier who is giving me all you need in terms of pricing, quality, services, etc. and later you come to know that they are in fact a trading company, you will naturally feel how much can you actually trust this kind of company in the future if you are to do more business.
So, in a way as a buyer, you need to put on your Detective Sherlock Holmes Hat and go about investigating and filtering out the actual manufacturer of your product with whom you would feel more comfortable working within the long term. Below are some tactics you as a buyer can use to try spotting and identifying who are the traders at the Canton Fair.
Of course, like all strategies and tactics everything will not work and give you the results as you desire all the time but it should at least serve you as a
guiding light to navigate your way through hundreds and thousands of booths.
1. Whenever you come to a booth showing a product you are interested in, the first thing you can do is scan the supplier’s booth thoroughly and see if they are specializing in your products category or have similar products displayed.
So, for example, if you are looking for Power Banks and see that the supplier also has phone chargers, USB displayed also, you can conclude that at least the supplier does not have a too diverse range of products displayed. So, this kind of booth is probably worth your time and you can continue with your Investigation.
If the supplier has displayed power banks along with products from non-electronic categories like bed sheets, t-shirts, pens, you can safely assume that this is most likely to be a trading company and move on to the next booth immediately. If you wish to thoroughly educate yourself about your product you can ask the price of the power bank from this trading company and check its quality just for
your reference. As a buyer, its best to keep an open mind and at times act innocent in front of these trading companies and talk to them as if they are the manufacturer. You can still learn a lot about your product through these trading companies.
2. Let's suppose you are now in a booth of power bank supplier who could be a manufacturer, you can ask them the price and see if their price is better than the trading company’s price and also check if their quality is different and better. You can check the supplier's name card and catalog for their address to see if they are situated in an Industrial part of China where Manufacturing is taking place.
Most trading companies will show commercial building addresses on their name card and catalog because that is where their sales offices are, where they operate from. However, some trading companies play it smart and do not show their sales offices addresses on their name cards/catalogs. These trading companies are sneaky and tricky to deal with at times.
3. Once you know that power bank supplier is situated in an industrial zone of China, their pricing is quite competitive, and their quality seems quite good, you can ask more questions to the supplier about their product and their factory.
A good manufacturer should have deep knowledge of the specifications and quality of their exact products. See if they have knowledge about customizing their product to your needs and if they can do some product development in the future.
Normally many trading companies don’t have much deep knowledge about their products because they are selling so many different kinds of products. Also, you can tell their supplier that you wish to visit their factory before confirming any bulk orders and the supplier’s first response can give you a good idea about their true identity. If
the supplier is openly welcoming you anytime for a visit, then that can be a very positive sign.
Trading companies, on the other hand, can come up with various excuses like -
a. Their factory is too far and hard to reach
b. They have other customers visiting them so not sure when to fix a date for your visit
c. A factory visit is not necessary because we are a good company.
d. If you continue pushing, some of them will open up a little and say that they have “Invested” in a Factory hence have 50% ownership of the factory. Most of the time this is not true and they are simply just a trading company (Middlemen).
4. Sometimes even after doing the necessary research, you still doubt the supplier. From our example, even though you find power bank supplier to be open, reliable, having good prices and quality, your intuition still says that you as a buyer should continue your investigation to get the best deal possible for your company.
This is when you can be a little more creative with your investigation. You can ask other power bank suppliers at different booths about your supplier’s reputation and also confirm if they are a manufacturer or trader.
You can always get some clues even though these companies could try purposely to misguide and confuse you. Another way you could check your supplier’s true identity is by calling up their factory’s landline number.
During the canton fair, most of the English-speaking sales team will be at the booths, so if the buyer has a Chinese speaking colleague, you can calling their landline number and by talking to the staff/Engineers there you can get more clues. It’s worth a shot and won’t cost much of your time and money.
I am pretty sure there are many ways to weed out the trading companies during these exhibitions. The above information will help you during your marathon walks at the Canton fair exhibitions!
31. THE CANTON FAIR SERIES | DON'T DO LIST FOR THE CANTON FAIR.
Below are a few things you can avoid doing to have more productive Canton Fair.
1. Taking a little too many of your business cards with you each day you visit the canton fair.
When you have a lot of your business cards with you, you just easily start handing them out more frequently whenever asked. Even when you just take a cursory look at a booth, ask a question or two and then tell the supplier that you are not interested in their products, most Chinese suppliers will still insist for your name card.
For some reason many salespeople at these booths still think by collecting as many name cards from different buyers will increase their chances of closing out more deals at a later stage. Perhaps, it could also be that these salespeople just want to show their bosses how hard they have worked in collecting all these name cards.
The point is - You as a buyer need to value your time at the canton fair and can’t be handing out your name cards to every booth you find interesting. Sometimes a lot of time can be wasted as you have to do small talk with suppliers whom you won't be working with. On top of that, you might be later be spammed with a lot of emails from most of these suppliers for products that you are not interested in.
I try to take only 15 to 20 business cards maximum for each day of the exhibition and then simply give out the business cards to the ones with whom I am most likely to work in the future. Although not usually, when I run out of name cards, I just let the suppliers take a picture of my name card which is saved on to my phone.
Also if it’s a really good supplier I immediately add their WeChat on my phone. (The Chinese version of WhatsApp so to speak).
2. Now some buyers who are looking for several products in different product categories will be collecting more than 30 or even up to 50 supplier catalogs in a day. They might want to do thorough research and hence have decided to collect as many catalogs as possible. Now some of these catalogs have dozens of pages thus weigh a lot.
As a lot of walking has to be done in these kinds of exhibitions, it can get quite exhausting and eventually irritating if you have to carry along so many catalogs with you every day. Even if you have a nice bag to put in all the catalogs and pull it around, this can still drain a lot of your physical energy.
So sometimes if I have more than 40 to 50 catalogs, I simply tear out the catalogs cover page along with the pages in which my product details are there. In this way, I can keep a proper record of all the suppliers I would later need to contact after the exhibition and at the same time not have so much of a heavyweight to carry around the whole day. And most suppliers have a website so you can always check that also for later reference.
3. Many times, at exhibitions buyers will meet their old regular suppliers or new ones with whom they wish to do business in the future. So, some of these Chinese suppliers invite buyers to dinner along with some KTV (Karaoke) and some drinking. Now there’s nothing wrong in trying to build a better relationship with a supplier but what could be a bad idea, if you decide to take up this offer on the very first or second day of a 5 Days Event.
If you do take up a supplier's offer for a night out, then there will be drinking/singing competition at a KTV or Disco Bar. For Chinese
suppliers, it’s impolite and rude if you refuse to drink with them (Chinese drinking culture). Very likely, the next day, you might arrive at the canton fair a little late than usual with not enough sleep, and probably a nice little hangover. So it might be a better idea to take up these “Relationship Building” evening dinners on the 4th or 5th day of an exhibition when you feel you have got most of your work done already and would like to enjoy yourself differently.
4. Many of the buyers who attend the Canton Fair are dominant males. Depending on the phase of the Canton fair and products category, at times females are more prominent. Like in nearly every business field here at the canton fair too, a few Chinese suppliers choose the strategy of attracting buyers (Males mostly) to their booths by hiring both Local and Foreign good-looking models. Now there is absolutely nothing wrong with this and often is a good business strategy to attract new people to your booth.
In my opinion, if one has a good product and business module, why not display that out openly to attract buyers to your booth. Instead of investing money in hiring a few models for a few days, a good supplier can invest all that money into their product/business and sales team to get the attention of buyers.
Unfortunately, many good suppliers still choose to keep this strategy, even if they have a really good product, prices, and services. Many of them simply just want to exploit our basic human psychology and try to influence our decisions by adopting this kind of strategies.
5. Another good way for you to save some time for yourself at the canton fair could be you planning to eat your lunch in the Non-peak hours. Normally the peak times for Lunch in China are
between 11:30 to 2:30. You could save up to an hour sometimes if you pick your eating time more strategically.
6. Last but not least surely, it’s best not to get frustrated or discouraged and give up eventually if you are unable to find your target product(s) or suppliers on the first 2 or 3 days of the Canton Fair. The canton fair is quite big and sometimes suppliers are spread out unevenly.
If a supplier cannot get a booth in the area designated for kitchen utensils, some suppliers find themselves a booth in a little different product category and thus their booth can be at a different corner of the exhibition. So, if you fail to get the job done on the first 2 or 3 days, you can still decide to have a quick walk around the other product category booths and from my experience, you will eventually find what you want. Especially when you have a low ROI, you feel it’s time and energy-consuming, but really what’s the harm for in hours of walking and searching!
Life is always full of surprises!
32. CANTON FAIR WEAPONS
As the Canton Fair and Hong Kong Exhibitions are coming up in April 2018. I decided to share some of the things I take along with me whenever attending these Exhibitions for the last 7 years. The below weapons are just something I have acquired so that I can use at each time I visit these exhibitions. It just makes the day more productive, organized and fun!
1. The first and the last thing I Check for before leaving my house is for My Canton/Hong Kong Fair Badge! Even my passport, driver licensee, any legal identification is useless in this case. You cannot attend exhibition Halls without this Badge.
Twice in the past, I had forgotten to take my Canton Fair Badge and I wasted several hours commuting back home and coming back with the badge. However, nowadays at some of the exhibitions, you can have an E-Badge for which you can download the Badge (App)
2. My Metro/Subway Card, even though I avoid using the subway as it’s simply too crowded. It’s best to take the free shuttle buses to the exhibition. Most of the Hotels provide this service during this time.
3. Pen (Ideally two) and a notebook, the notebook is also good to have as I can staple all the name cards on to the notebook that I will be collecting at the booths.
4. Even though I speak Chinese Mandarin Fairly well for business purposes, I make sure to update You Dao Translator App which has instant text and voice translation. It always helps!
5. Lots of business cards, ideally 50 to 60 for each day.
6. You will get a mix of western fast food and Chinese food. Although the food is relatively good, it is not as tasty. I am health conscious and hence like to have a huge breakfast at home and I also take a box full of almonds, cashews, and walnuts. Sometimes I put a few pieces of fruits such as Apple or Banana in my bag.
7. Bag either a small handbag to hang on the shoulder or a bigger one where I can put in all the Catalogues. It depends on my day to day objectives.
8. Long sleep shirts/t-shirts or a thin jacket as it can get pretty cold at these Exhibition Halls!
9. Good comfortable walking shoes, as you have to walk a lot looking for the right suppliers and products!
10. My Earphones to listen to a little bit of music so that you can relax and take a break from walking.
So, these are some of the things I take with me during trips to exhibitions. (Please note the above-mentioned tools and things are just something which works for me.)
33. CHINESE NEW YEAR HOLIDAYS
Below are some of the kinds of gifts you could give your supplier to show them appreciation or to build friendship and stronger relationships.
1. Any Pig related souvenir or item would be quite a safe bet.
2. Tea (preferably a brand from your own country) as many still Chinese suppliers prefer good/pure Tea over Coffee.
3. Alcohol or cigarettes (preferably a brand from your own country). I don’t enjoy drinking but many suppliers simply love it during the holidays. Though please be careful and thoughtfully give gifts to your suppliers.
4. A box of chocolates or biscuits.
Please avoid giving any gifts in a small Red envelope, because in Chinese Culture they expect money to be inside (Lucky Money). So, in a business relationship, this would not be appropriate and it could be seen you are giving a gift in expectation of a favor in the future.
Below are some words or phrases we can use with Chinese suppliers, especially when talking to them on Wechat. It resonates with them when used correctly, at the right time, and with positive intent. It can make the conversation more human and makes them feel a little more comfortable.
A lot of suppliers now have a very fluent English-speaking team, so the below words and phrases should be best used when you are dealing with a sales rep who maybe not so fluent in English. You can also use them when talking to the manager and the boss of the factory who can understand only basic English.
1. My Friend/Friend how are you
2. My Dear/Dear/Hello Dear/Please Dear
3. Please La/You can do it La
4. Hello Brother/Hi Brother
5. Need cheap price
6. I give you a big order if you give me a cheap price
7. Hello Boss/You are big Boss now
8. This price I losing money/This Price no profit
9. Need Good quality
10. Need Fast Shipment
There are more I guess though these are only coming to mind for the moment. Please share if you have some of your own too!
35. GUANXI (RELATIONSHIPS)
Building stronger relationships and trust with your Suppliers/Chinese companies.
You can have all the contracts, trademarks, NNN agreements made and vetting done, but in business building relationship and trust is very important to keep things smooth and rolling for the long-term. Sometimes being so deep into E-commerce makes us forget the value of getting to know the other person and understand them as human beings.
So, if you have a chance to meet your supplier at an exhibition or their manufacturing plant then your supplier might offer you below things. Many of these things apply to whatever country you source from but may differ a little according to the country's culture. If you don’t enjoy any of these things, you can always politely refuse or substitute it with something which you like. It also depends on how big of a buyer you are for the supplier.
1. Chinese Tea: Most Chinese love tea and each city/province have its specialty.
2. Personally, this is my favorite way to get to know a supplier and talk because it’s the healthiest and can be carried out in a more quiet setting as compared to other methods.
3. Being offered a Cigarette, just out of courtesy.
4. If you do smoke, then you can enjoy some really strong local cigarettes, though a lot of the suppliers themselves prefer smoking foreign brands.
5. Being invited to a lavish lunch/dinner with several dishes and a lot of exotic meat. If you enjoy eating weird delicacies, then you will love this part. So, everything from chicken, fish, beef, pork, seafood, frogs, a snake can be ordered all in one time. Unlike most cultures, in China, they almost eat every part of an animal including the heart, tongue, testicles, intestines, brain to name a few. Many believe there are health benefits to eating all this. Also, the kind of dishes you could end up eating will be largely dependent on which city you are visiting and the personal taste of the supplier.
6. I have yet to meet a Chinese Supplier who is a vegetarian!
7. Being offered to drink some Chinese Alcohol (Baijiu!)
8. Baijiu has a minimum of 30% to up to even 70% alcohol and I have never tried drinking this. Some of my friends have fainted after drinking this too fast. So, please take this one slow even if you do enjoy drinking. You can always have a beer/wine if Baijiu is too much for you.
9. Invited to go to KTV, which is a Karaoke where you are all in small room singing (and dancing sometimes) to popular songs from all over
the world. Often significant drinking/smoking/eating is involved in this activity, so please be prepared for that.
10. Being invited to enjoy a day at the beach or mountain climbing. Many Suppliers also understand the value of being in a quiet and relaxed environment. Great place to stay clear-headed and really get to know the other person and even yourself.
36. WECHAT APP
With Facebook and WhatsApp being blocked in China, the WeChat App (Called Weixin in China) can be very useful and at times a must-have when sourcing and doing business with Chinese suppliers/companies. Below are some of the benefits of using the WeChat App.
1. Free voice/video calls and the Clarity for both voice & video is pretty good. One can also send Audio messages through WeChat which will be saved similar to text messages.
2. Groups can be made in the app where you can add several people to keep everyone in the loop.
3. Sending large pictures, files, videos is quite fast and efficient over this app.
4. You can check the moments of the suppliers you add on your WeChat. This is where you can see the other person's social media page and pictures of their business. It's a good way to verify a
company. Though of course, the other person can always choose to block you from seeing their moments.
5. WeChat has a large number and sometimes really funny Emojis, which you can share with your Chinese counterparts. Significant use of Emojis is very much encouraged and liked by the majority of Chinese people. It's a good way to build rapport and relationship (Guanxi in Chinese) with your Chinese suppliers.
6. If your supplier's English is not good enough, the WeChat app also has an inbuilt translation software for text messages.
7. WeChat also has a very strong and secure mobile payment system. So, if you happen to travel to China you can open a bank account in your name and link it up with your WeChat App Id. You can then receive and send RMB (Yuan) to Chinese companies. The fees are close to 0% and money can be received/sent in an instant.
8. The WeChat App also has a Desktop/Laptop Version where you can simply download it on other devices. If you are based in China, it does make life easier for people who don't know Chinese.
37. THE TYPE OF CUSTOMERS A GOOD CHINESE MANUFACTURER AVOIDS DOING BUSINESS WITH
Let’s try to look at the things through a Manufacturer/Supplier point of view. Of course, one cannot always know beforehand the other person’s true Intentions when starting any business with them.
Hence, experiences often teach us the biggest lessons and can be helpful in filtering out what is bad for us. I have mentioned below the type of customers (E-Commerce Sellers, Brick & Motor Importers) every Manufacturer wants to avoid.
1. Most suppliers understand that when a Customer/Seller sends a new inquiry to them and wishes to give a big quantity order, they will not do so later. Many buyers always send an inquiry for several different quantity prices, so that they can have a better idea of how low price can be for a particular product.
For example, they will ask the supplier to quote them the prices based on 1000pcs, 2000 pieces, 5000 pieces, and 10,000 pieces. This helps a seller understand the price differences and make a better decision.
Now what a supplier wants to avoid is, doing business with a customer whose intention and capability is to book only 1000 pieces initially, but they keep on pushing for low prices as if they want to book 10,000 pieces. Logically, for any product, the price difference between 1k & 10K should be quite Significant and sometimes can be more than 10% difference. Some customers try to take advantage of this and try to squeeze out the best possible price from a supplier.
And so, when a supplier refuses to give a cheaper price because they see that the quantity will be very low compared to what was initially promised, then the customers start telling the supplier that they are not professional and are looking for a new supplier.
This is how some of these customers try to create this fear of loss scenario for the Supplier.
2. Be it a new or experienced customer, most suppliers don’t have a problem working with any type of customer. When a customer tries to bend the rules, every supplier becomes vary of them.
For example, some customers will ask a Chinese manufacturer to print “Made in Italy” on the Product and Packaging.
Basically, by doing this the customer only remains the biggest winner in the long run as they get to buy a product from China which is much cheaper than manufacturing in their country. Some Customers do this because they wish to sell their product at a much higher price in their respective markets and also at the same time try to build up their product's brand image by printing 'Made in Italy' on them.
Now some Chinese suppliers are indeed more than happy to do this as they too just want to do business and make quick money. However, these days most reliable and good Chinese manufacturers completely refuse to do this and many times will stop communicating with these kinds of customers.
Even though there are many ways and loopholes to exploit the local port customs in China for, the risk level is simply too high and penalties could be very harsh.
In the past, many Chinese suppliers have been hit with huge penalties or their business licenses revoked by the Chinese Government/port customs authorities for trying to export a “Made in China” product with a “Made in Italy” printed on them. So now basically, most Chinese suppliers try to avoid doing with customers who want to do this type of risky business.
3. Another type of customers whom supplier never wants to do business with is -
Those who start crying and making a huge fuss after they receive their goods or the customers who after sending a 30% Deposit do not want to ship out the manufactured product because of a price drop or increased competition in the market.
Sometimes when a customer receives their goods, suddenly market demand for that product goes down or the competition increases. At such a time, the customer doesn’t want to lose money and starts coming up with some creative ideas to reduce their losses even though the quality and packaging of the product is perfectly fine.
They try to find a problem in the supplier’s product or packaging, delivery time, or quality. By quality, they could mean the size, color, material, look, feel. They sometimes tell the supplier that, due to their One-week late delivery they have lost out on the Sale Season in their market. The customers want to minimize their losses in these cases.
The customers start blackmailing the supplier in a way by telling them, if they don’t help with a discount or refund, in the future they the customer will not give them repeat orders and will find a new supplier. Sometimes the customers even say that they will put out a bad review of the supplier on Facebook groups & other e-commerce platforms.
So sometimes some Chinese suppliers out of fear and desperation agree to give a discount on the current order or in future orders.
4. Another type of customers suppliers want to avoid are those who are like the Black Plague. Their only intent is to use your product ideas and copy them at a factory where they are already working to manufacture that product at a cheaper price.
For example, if a customer finds a supplier who is making a particular product which is quite exclusive and selling well in the market, they start giving false promises to that supplier and express to work with them for a long term. They then ask the supplier to arrange a few pieces of samples to be courier to them. Later, this customer finds a new supplier who could copy and manufacture this exact product at a much cheaper price.
So basically, these are few things I have experienced in my 7 years of living in China.
38. MAGIC COSTS
Many times a supplier magically comes up with additional costs while negotiating prices or before finalizing an order with them. Most buyers, who have had some experience in dealing with Chinese suppliers have faced this issue.
Many of these costs just randomly sprout out at any given time during your negotiations with a supplier. Sometimes they come up during the initial negotiation stage, after you approve samples, just before you are finalizing the contract, or just before you are sending the deposit. Often these unexpected additional price increases make a buyer rethink their strategy for selling their product and if needed they also have to change their supplier. Sometimes your supplier could make a genuine mistake in quoting you the wrong prices or not giving you the full cost details related to your order. Unfortunately, for any buyer, the true intentions of a supplier are hard to tell. Especially, when you are not dealing face to face with your supplier!
However, this is not to stereotype or bash Chinese suppliers but these are simply some of the observations and experiences I have had when dealing with different Chinese suppliers. The majority of Chinese suppliers are still very much genuine, good and quite professional.
I have mentioned below unexpected costs that pop up during dealings with a Chinese supplier.
1. When the RMB becomes stronger against the US Dollar.
2. The Chinese Yuan is relatively stable and doesn’t often drastically fluctuate. Though every once in a while there's a fluctuation, and the price of your product could go up by 1 to 4%.
Let’s say a buyer buys a product in January and the exchange rate at that time is 6.32 RMB against one US dollar. The same buyer
comes back in May to buy the same product but now the exchange rate in China is 6.20 RMB against one US dollar. That’s about a 2% difference in the exchange rate. Many manufacturers will increase their products price accordingly or even more than 2% to cover up the exchange rate difference.
3. Your manufacturer changes its packaging supplier. Many factories still prefer to outsource the packaging for their product(s) to other smaller suppliers, who just specialize in Product Packaging. Often, it’s just too time-consuming, and not cost-effective for these manufacturers to get the packaging done in their factories. So, when they change their packaging supplier for whatever reasons, the new packaging supplier could be charging a higher price. Hence the overall cost of the product goes higher.
4. Your Manufacturer changes its raw material supplier.
5. Many manufacturers are dependent on other suppliers for their raw materials supply. For example, a factory which manufactures plastic buckets will be buying raw plastic material in bulk from other suppliers.
So, when these manufacturers decide to use a better quality & higher-priced raw material supplier, invariably the final products cost also goes up.
6. It's not uncommon in China for factories to go bankrupt (though less frequent these days). At times, even good and reliable manufacturers are forced to increase the cost of their products when their packaging or raw material suppliers go bankrupt.
These manufacturers then have to find a new packaging or raw material supplier, who, then tries to take maximum advantage of the situation and quotes high prices to these manufacturers.
7. Sometimes for niche products or when there aren’t too many suppliers for that product the prices could often fluctuate. There was a time when we used to buy a TV set box (Satellite receivers) from a particular supplier in Shenzhen. One day, we found out this supplier had gone bankrupt and the factory’s boss had flown to Canada to evade the Chinese Tax authorities.
We were forced to find another manufacturer for this same product and we finally did. Later, we came to know many other buyers who had done business with the now-bankrupt Shenzhen factory had also found this same factor. Hence, there was more demand and limited supply.
Often in these cases, these new manufacturers will try to take full advantage of the situation and hike up their prices and tend to not be overly worried about customer service/delivery times (due to lesser competition)
8. In some rare cases, your product mold could get damaged or broken in the Manufacturer's premises itself. The manufacturer now has to invest money in repairing the mold or buying a new one and hence are forced to increase the products price to avoid losing money on that product and covering their mold repairing cost.
9. Labor wages increased.
10. One of the most challenging aspects in running any factory is keeping the labors happy and motivated so that they continue for the long term. Be it for monetary or working environment reasons, labors too want the best for themselves and are always on the lookout for better opportunities.
So they go to work in a bigger factory with better wages or to different business industry altogether. So sometimes manufacturers decide to increase the cost of their products
because they have to increase the basic wages and benefits of the factory’s labors to retain them for the long term.
11. Many times, when any manufacturer is growing rapidly, they decide to reinvest a lot of their profit into the business. They put in more money in hiring a better export sales team, bigger factory, new imported machinery, better-qualified engineers, product development research, skilled labor, etc.
These manufacturers will then increase the cost of their products to cover all these new expenses and investment. Also, at times these new manufacturers try to capture a particular market or try attracting new customers with very low prices in the beginning. Once they see the fish (buyers) are caught in their (manufacturers) net, they gradually start increasing their products cost.
12. Many manufacturers specialize in doing business with buyers from developing countries (Africa, India, middle east), where the emphasis on quality is less. It’s all about the price and these factories tend to ship massive quantities annually. Even if their profit margins are low, the huge order volumes are enough to make these manufactures happy and satisfied with their income.
These factories also make higher quality products for Amazon sellers but it's not their main focus. However, at times these manufacturers decide to change their business strategy and start to focus more on developed markets (Europe, USA), where quality standards and requirements are higher.
These manufacturers decide to invest more money in their factory for a better working environment, qualified engineers, stronger QC, Certifications, better quality raw material. That is when they increase their products price significantly to cover all these new expenses and investment.
13. Last but not least when a buyer is showing too much interest, eagerness, desperation to order or reorder a product, many manufacturers try to take advantage of this and increase the products price with no logical reason and could use any of the above reasons to justify their new higher cost.
Hope this was useful to readers!
39. WHY DO SOME CHINESE FACTORIES GO BANKRUPT AND CLOSE DOWN
Every year, hundreds if not thousands of small to big factories go Bankrupt or are forced to close down their businesses due to negative circumstances. Many of these factories which shut down or go bankrupt still manage to set up a new factory with a different product line or at times make the same product under a different registered company name. Also, local businesses here have strong support from the banks. Below are some of the few reasons why a Chinese Factory goes Bankrupt and closes down -
1. One of the most common reasons why many factories still go bankrupt every year in China is because of their product becoming outdated. As consumer trends and technology are constantly and rapidly changing across the world, many of these factories fail to keep up with the market or simply don’t have the resources to do so.
For example, when I first came to China 7 years ago I used to work with a lot of factories making Fluorescent Bulbs and CRT TVs. These products have been selling for decades but due to new LED technology, a lot of these factories had to close down their operation or change their product lines. Most Fluorescent Bulb factories now are making Only LED Bulbs, because that is what the market is demanding. Hence many of them have no choice. Same for CRT TVs Manufacturers.
As LED technology is getting better and the cost of it is falling drastically, hundreds of CRT TV manufacturers were forced to close down their operations simply because of no Demand. Most customers now don’t see any point buying a CRT TV when you can buy a LED TV at nearly the same price.
2. Another reason why many Chinese factories close down is because of a bad quality product.
These factories simply don’t take care of a customer’s needs and are later have to face customers who complain about the poor-quality product. Now because of systems like Alibaba Trade Assurance & PayPal, many factories are forced to return significant amounts of money to their customers simply because the factory refused or failed to improve the quality of their products. When these factories receive such claims several times from customers, they have to shut down or change their line of product(s).
3. Even today, many Chinese factories still manufacture and ship out products which are patented, use a Big Brands Logo/Name, or use celebrities pictures on their product. They do this because they can sell that product at a much higher price and also simply because there is still a demand for these kinds of fake products.
For example, in mobile accessories, some small factories only work at night time when producing phone covers with a celebrities picture on it. They do this at night time and behind closed doors because they know they are violating the local law and are not respecting the copyright laws. Later, to get through the Chinese customs, these suppliers will show a different product name on the documentations when trying to clear the goods.
However, nowadays it’s becoming much harder to do so, as the Chinese government has cracked down hard on these kinds of activities. Even when they sometimes do manage to ship these kinds of products out of China, a lot of times when the goods arrive at the customer’s port, the local authorities there don’t let the customer clear the goods from there. Hence disputes come up and these suppliers eventually are hit with all kinds of bans and penalties, having to shut down this kind of operation.
4. In the last few years, the Chinese Government has become quite strict about the rising pollution levels in the air and water across the country. Many factories were directly responsible for these issues
and thus had to completely shut down their operations. The local governments of each city or district were authorized to do random checks on factories. They forced many factories to close down their production lines if they were found to be causing too much harm to the environment.
These factories were told to improve their production systems and reach an environmentally acceptable level. At times these factories were closed down for months and hence they lost a lot of money and business because they had to pay their employees and labors during this time.
Also, many of these suppliers were not allowed to even ship out their existing goods which caused them to lose their trust and business. Eventually, many smaller factories had to close down due to these circumstances. The positive thing about it - this “Operation Blue Sky” has worked out pretty well and we can see some stars at night time here.
5. Sometimes a factory closes down when the owner decides to mess around with the local tax authorities.
In China, all manufacturers get tax rebates for whatever products they ship out from their factories. This could range from 5% to 15% depending on their product category. If a factory ship out USD10, 000 worth of goods and are eligible for a 10% Tax rebate from the local government, then they would get an extra USD 1000 from the local government on top of the profit which they make from the customer. So sometimes the owner of a factory tries to manipulate the system by showing on the factories invoices a higher amount of exported goods.
For example, in a year, if a factory has shipped out USD100,000 worth of goods they will show they have shipped out USD200,000 so that they are eligible to get more tax rebates. Many of these factories are eventually exposed and forced to completely shut down by the local authorities.
6. Last but not least the other common reasons any manufacturer shuts down operations is because of low demand, increased competition, shortage of labor, and because a good Sales employees leave.
40. PROTECTING YOUR PRODUCT IDEAS/DESIGNS/MOLDS FROM BEING COPIED BY UNSCRUPULOUS SUPPLIERS!
Below are a few of the methods you can use when dealing with Chinese Suppliers. There are always chances of a supplier finding loopholes and running away with your ideas. Also, a lot of the below tools play more of a role of being a psychological deterrent for suppliers with bad intentions.
1. Getting your product Trademarked in the country you are importing to and the country you are exporting from. Working with a reliable & experienced law firm or attorney who specializes in this field often can be a good long-term investment.
2. NNN Agreements: From what I have been hearing, the more experienced sellers feel this is a little overrated and has not stopped
unscrupulous suppliers from finding ways to copy a product/mold. Though again it’s a legal document and works quite well in many cases.
3. When you source a supplier from Alibaba, try not to give too much information about your product design/mold immediately. Vet the supplier and see if they are trustworthy and someone whom you could do long-term business with. Sending suppliers prototype design or pictures of your product could be a better strategy initially.
4. When confirming an order with a supplier, ask them to use their company’s Stamp, sign and fingerprint on the contract. The stamps do carry some legal weight and can stop many suppliers from getting the wrong ideas for your product/mold.
5. If you are planning to book large quantities of your unique product idea or at least see a big opportunity in the coming future, then paying a visit to suppliers can also be worth the investment. If you are a person who understands people well and enjoys making that personal connection/relationship, then this could a useful strategy too.
6. Some big importers/sellers even have strong relations with the local authorities of the country they are importing from. So, when speaking to their suppliers, they let them know (politely/delicately) that they have high-level connections with people in power and this can stop suppliers from stealing ideas.
Again this has to be done carefully and not misused by sellers & importers. You don’t want your supplier to get too nervous or make them feel you don’t trust them.
7. Work with a smaller supplier or with a supplier outside Alibaba who is growing fast but has not reached a level, where they have the capability and intentions of copying their client’s ideas. These kinds of suppliers need business and execute orders properly. However, you have to make
sure that these smaller suppliers will be able to make and deliver your product/mold as per your requirements.
What are some of the methods you use in protecting your product and mold ideas?
41. HOW SOME SUPPLIERS TRY TO GET YOU TO CONFIRM ORDERS QUICKLY THROUGH URGENCY AND FEAR OF LOSS
Launching your products as quickly as possible is, of course, a very important part of keeping your E-com business running and scaling up. When dealing with any supplier (new or old), it's best to do all your vetting, due diligence, price negotiations, sample quality check, and rechecking all the details related to your order before pulling the trigger.
However, some suppliers might be in urgent need of orders and hence don’t want you to spend too much time vetting and thinking. They also fear you might change your mind.
Some also try to speed up the process in the hope you might overlook some important detail about the order be it either the quality, packaging, pricing, contract terms. So, they don’t have to be responsible if things get tricky later on.
A good-intentioned and long-term thinking supplier will also focus on speeding things up as much as possible but will balance it out by being professional,
guiding you through the whole process, being patient, and respecting your working process.
Below are few of the things some suppliers might say to you to get faster order confirmations:
1. Tariffs are coming, better to confirm now and ship as soon as possible for you to make a higher profit.
2. Our price will increase next week, so please confirm and send the deposit out this week.
3. Please confirm the order soon so that your order can be put in the pipeline and the production not delayed for several months
4. Our currency is appreciating against the US Dollar/Pound/Euro so please confirm the order ASAP for you to avoid the jump in prices from next week/month.
5. This is our once a year promotion price and it won’t last long.
6. Please confirm soon & send over the deposit ASAP so that we can pay our raw material suppliers quickly and keep for you this same price.
7. We quoted you this wrong & lower price but we are willing to accept our mistake and still keep for you this price for the next few days, so please send over the deposit ASAP.
8. Our company will move to a new location soon and our operations costs will increase so better for you to confirm this order ASAP.
9. Labor/raw material costs are going to shoot up soon, so kindly lock in this order ASAP.
10. Our boss has personally given you this special price, which will be valid for only a few days. It is 'First come, first serve', so please confirm the order soon.
11. The shipping, port, customs costs will be going up very soon so you should confirm this order soon.
12. If you don’t confirm soon, we will not accept your order later because we will be signing a big contract with importers from another country and our production capacity will be full for the next half year.
13. The product might get trademarked/patented soon by others, so you should take advantage while there’s the opportunity to do so.
14. We will be attending an exhibition next week, hence please confirm the order now so that we can put it under process immediately.
15. The Chinese New Year/National Day holidays are coming up, so you should place an order quickly to avoid a long lead time.
16. Your competitors are placing large orders with us, so what is stopping you from confirming an order with us right now.
17. This product is going to be super-hot selling in your market if you place an order during this time and get it shipped out ASAP.
18. Please place an order quickly because the local government will lower our tax rebates on this product very soon.
19. If you place a bigger order within this week, we can give you a small discount.
20. If you place an order and pay the deposit this week, we promise to give you the topmost priority and ship it out to you after 15 days. This will help you be the first in the market and have a head start over the competition.
21. Please confirm the order ASAP because the raw materials are at their lowest prices for this particular product and could shoot up anytime.
22. We will give you better payment terms (25% Deposit) if you agree to place an order ASAP.
23. The supplier could be a trading company who sometimes get good pricing from manufacturers hence push fast for getting in as many orders in that period as possible.
24. We will lower the MOQ of this product for you if you can confirm an order ASAP.
25. In some worse cases (fairly rare), a really bad supplier who may be going bankrupt, could go on to give you a really low price to give you a high incentive to confirm the order ASAP.
Their strategy is to collect as much deposit from different clients/markets and then make a run for it.
Though do please note some of these statements by these kinds of suppliers might be genuine and they are meaning well. In those cases, the situation could work in your favor too.
42. SOLVING CASH FLOW ISSUES BY GETTING BETTER PAYMENT TERMS FROM YOUR SUPPLIERS
Getting better payment terms from your supplier is challenging but very much possible for you to solve some part of your cash flow issues. A lot of the sellers/importers who are growing rapidly after a year or so do face similar issues and cash flow hurdles. Below are a few of the tools/tactics you can try implementing when speaking to suppliers for better payment terms:
However, do note that a lot of the below things will depend on your supplier(s) personality, their company policies, their financial strength to give you better payment terms, their past experiences in giving credit to clients (if they had done so).
1. Your sales and business (large orders) with a particular supplier will be your biggest weapon to leverage when you go in with a request for better payment terms. As they say, our actions/results speak louder than what we say and promise.
2. Some importers who are very confident about a particular product, their selling skills, do thorough market research to sign a contract with a supplier for the whole year with a gap of 2 to 3 months between each shipment. You would most likely need to offer some kind of insurance to the supplier such as letting them keeping a fixed amount of your Deposit (USD2k to USD10k) with them at all times.
3. Giving suppliers a reference from another big importer/seller from your market, whom the supplier may know. After this, the supplier could do research and inquire about things.
4. If you are on good terms a Chinese trading company or sourcing company or even a law firm, make them say spread a good word about you and even pay a visit to the supplier.
5. Video calling, visiting your suppliers to build a relationship and trust with suppliers (Guanxi). If you have the capital, patience, and intention to grow your business and make it work for the long-term, then this could be something worth exploring.
6. Using a sourcing company or trading company in the country you source from to give you better payment terms. You would need to have some sort of personal relationship with these companies and quite a few companies out there are capable and happy to give this service.
7. Being transparent with your suppliers and even inviting them to visit you and see your business module, the speed you are growing at, your plans, your intentions.
8. This is E-com and many things here are not tangible but a supplier who may be in a similar situation as you, might be open to this and wish to grow with you. Some importers also use this opportunity to show their suppliers that they are secure financially in terms of owning properties, cars.
9. Alibaba is now offering Loan/credit services too: please do look into that and how it works.
10. If you have done some good business with a particular supplier in the past, you can maybe leverage that relationship and request that supplier spread a good word about you to a new supplier you wish to work.
11. Some countries still use cheques and some suppliers do offer better payment terms if they have a post-dated cheque written out by you from a reputable Bank.
Good payment terms can range from anywhere between 15 to even up to 150 Days.
Some of the bigger sellers/importers who are doing 7 to 10 figures, even work with their suppliers as partners and share sales profits. They just have to pay their suppliers after they have sold a certain number of units. For this, one has to be working with a supplier for several years to form this kind of trust and understanding.
43. 11 TIPS TO DEAL WITH THE "LOOMING" TARIFFS ON CHINA BY USA
If you still want to keep China as your Primary Supply Chain source, then the below tools could be useful to consider and implement.
1. You are in the same boat as every other seller importing into the USA from China. They will eventually get affected by these tariffs if they are implemented.
2. Sourcing and product research becomes even more important, where you get the best pricing possible from your suppliers without you compromising on quality and your brand building experience.
3. Increasing your selling price and passing some of the cost to the end consumer will most likely be necessary, as it just won't be possible for you to take up the full % of the tariffs.
4. Many suppliers will not want to lose the USA as one of their markets, so negotiate hard by using the tariffs as one of your main reasons to do so and many suppliers will also try to support in a situation like this.
5. You could also lower your margins by a few % initially for certain products of yours, just so that you can enter the market and continue to stay competitive.
6. Being a little more creative with the bundling of your products and providing extra value to the end consumer through either better branding, packaging, quality. If you are going to be increasing your price for the end consumer then it's best to provide them something in return too for them to accept the higher prices.
7. Focusing on products which China is specializing in regardless of the tariffs being there or not. Each country has its strengths and China is still quite ahead on products which require more technology, skilled labor. Developing Molds, electronics, Polyester material products are some of the examples.
8. These are uncertain times and many of your competitors are already looking for alternative options such as Vietnam, India, Bangladesh. This could give you more opportunities for sourcing better suppliers and products from China.
And in a situation like this quite a few suppliers could end up supporting you in terms of better pricing and a higher quality product because they might have lost few of their existing clients to other alternative countries.
9. Maybe exploring other Amazon markets like the UK, Europe, Germany, India, Middle east could also be worth it now.
10. Especially if you already have some products selling well on Amazon USA.
11. Negotiating better pricing for your shipping & logistics with your suppliers/freight forwarders. Look for alternative options if needed. If you import large quantities, the money saved on shipping could be significant. Maybe even try accepting a week or so longer transit time if you are getting lower shipping prices.
12. Stay Positive and continue keeping that mindset! This is simply all part of the game and business. If the tariffs are not there, then we will simply have other challenges to deal with whenever doing business and navigating life.
44. WHY MOVING YOUR MANUFACTURING BASE TO ANOTHER COUNTRY IS EASIER SAID THAN DONE.
With the Tariffs looming on China by the US, a lot of the even bigger manufacturers whose main market is the US and who have the financial muscle to move their manufacturing base to another country, still face a herculean task in setting up their whole production base into another country.
It’s not like you are moving to another city with your family (though that too is challenging enough). So many factors have to be considered and a lot of external forces greatly impede any company in setting up foreign operations in a different country. Though of course many manufacturers in the past have done so successfully and will continue to do so.
A lot of sellers are already looking (as they should be) for alternative options other than China as their country to source from.
Countries like Vietnam, India, Bangladesh, Cambodia and even the US itself are being explored more aggressively now as possible long -term options.
Though again, sourcing from different countries has its challenges and every country will have its strengths and weaknesses. One of the biggest reasons for China still being at the forefront in global manufacturing is its overall package of combining lower costs + good enough quality + logistics + speed + customer service. This kind of package and opportunity has continued to attract buyers not only from the US but from all over the world for the last 20 years or so.
Below are some of the factors which a manufacturer has to take into consideration when thinking to move their production to a new country:
1. Initial Huge real estate, operation costs.
2. Maintaining the same quality and speed of production of the products
3. Hiring a new team and labor force
4. Understanding local Tax Laws
5. Understanding local culture, language, and building relations with local authorities
6. Underdeveloped local infrastructure to support manufacturing
7. Finding the right raw material suppliers
8. Finding the right logistics suppliers
9. Current political climate and support were given from the local government
10. Understanding of Local laws
So, when considering these kinds of massive challenges, many manufacturers often prefer to start diversifying their markets and look for buyers from other countries to export to instead of taking the route of setting up a manufacturing plant in a new country.
Though again all this temporary “Chaos” (Tariffs) could disappear if the US and China come to some sort of mutual understanding in the next few months or so. The uncertainty is not helping anyone for the moment, though the real hustlers out there will continue doing what they always do and will try finding opportunities even in this kind of situation.
45. CANTON FAIR "FOOD FOR THOUGHT"
I have seen some of our clients and the general public bringing below food items, snacks, drinks along with them from their own countries when attending the Canton Fair. These are clients from all over the world (USA, Europe, Africa, India, Middle east).
People bring stuff which they regularly like to eat and don't want to run for food and waste time in trying to find these things in a new country. Also, some clients enjoy sharing with their old suppliers, also with the ones they wish to work with. Do note, the majority of people who attend the Canton Fair or any exhibitions are perfectly fine without carrying any of this and prefer eating the local food and delicacies.
2. Dry Fruit (Almonds, Pistachios, Dates, Dried grapes
3. Gluten-free bread/Regular bread
4. Dairy-free milk/Regular Milk
5. Protein Bars/Protein powder/Energy Drinks
6. Packaged Noodles
8. Parathas which is a kind of bread made from wheat or flour (clients from India/Pakistan/Middle east usually bring this).
9. Alcohol (Yes!) had once seen some Russian fellows bring their Vodka along with them to more "enjoy" their walks in the halls.
10. Tea/Coffee Bags.
46. CANTON FAIR: TOOLS & “WEAPONS” NOT NECESSARY TO BRING ALONG
1. POWER BANK: There will be power banks available at the exhibition which you can rent out for a couple of hours. Though the payment would need to be done by either Wechat/Alipay. Any supplier or local staff there could help you with that and you can give them cash.
2. Passport: Best to leave it at your hotel room as it won’t be required for entering the halls if you have completed your registration.
3. Too much cash: $100 for a full day is more than enough for one person for food and transport. And if you are traveling back to your hotel by the metro which can get pretty crowded during peak hours, then it’s probably best not to have too much cash on you.
4. Laptop: I have seen some buyers bring along their laptop to use when having short meetings with suppliers. As little amount of walking is required during this time, it’s best to leave it at your room and use your phone apps to get the job done.
5. Water: Most booths will have bottles of water in them which you can request for whenever you need one. The salespeople at these booths often will be more than happy to give them to you for free. Even more so, if you have a short chat with them, you get to give out your business card.
6. Bag: At the fair, you are given a carry bag to carry your catalogs and other small things you wish to put in it. So not necessary to bring your bag and this can simply help you stay more focused on the task in hand instead of worrying about your personal belongings. (Though the Ladies would likely disagree on this point!).
7. Cigarettes: if you enjoy your smoking, then you might as well give the local cigarettes a shot and either you can ask one of your old suppliers to share one with you or who you want to do business with. It could help build that rapport and Guanxi (relationship) also.
Enjoy your upcoming walks
47. ALIBABA TRADE ASSURANCE DISPUTE/CASE
Below is the kind of ammunition you can use to present to the Alibaba Trade Dispute Mediation Department and leverage it in try winning a case against a supplier in situations where either you get shipped defected goods, a failed inspection, late delivery, or constant changes in prices or payment terms. The more proof you have, the more chances the case should be swinging in your favor.
Although we have been hearing from several sellers in the past, that’s not true always as Alibaba is known to favor suppliers. When doing business with any supplier through Alibaba, you want to take all the necessary precautions just to be safe and to have a strong foundation for any future potential disputes.
1. Try communicating more through emails preferably company email ids instead of personal IDs. This applies for the supplier too. You need information which is especially important to your project such as AQL levels, shipment time, product details, final pricing, payment terms.
2. Always have a fully detailed contract made with your supplier regarding your project. Best to make one from your side and have the supplier send there’s over too, so that you can match the details accordingly.
Even if you feel the information is trivial and not so important, there’s no harm in getting everything mentioned on a contract with your supplier. If possible, even have them stamp on it with their company seal and signature/fingerprints stamp.
3. If a lot of your communication with the supplier is through the Alibaba chat app/Wechat/Skype/Whatsapp then do keep screenshot records of all the important/essential information related to your project and also please avoid confirming important details over a phone call or video call.
4. Please do keep all the samples sent to you by the supplier. This gives you a chance to compare the initial sample quality with the final produced goods. You can take pictures/videos of these samples, in case they don’t match and could also be used as evidence when filing for a dispute with your supplier.
5. Please make sure to work with a vetted and reliable inspection company whose report can be used & leveraged accordingly when dealing with the Alibaba Trade Assurance dispute department.
6. Sometimes involving a local Chinese company that you really trust such as a trading company/sourcing company/shipping company to represent you and talk to the suppliers and Alibaba during this dispute can also help you, as the Alibaba Mediation department might see a Chinese company supporting your case as a positive sign and that makes it more genuine (social proof).
48. UNETHICAL LABOR PRACTICES
Last week we had a Factory Audit done to check if a supplier was a manufacturer or trading company. Turned out to be a manufacturer, though our inspector found 10 workers to be under the age of 16 (Legally, minimum age has to be 16 in China). The inspector found out the age through the manufacturer's employee name list that mentions the date of birth of each employee working in that company.
Naturally, this was a huge concern for us and the client. The manufacturer said because of summer holidays, they sometimes use younger people to get the work done. They added that those young workers were going to work for a few more days only'. Thus, they told, 'it won't be a big problem'.
Unfortunately, in this case, the goods were produced and shipping cost was paid already and so we had to ship out the goods. But we told the supplier that this was unethical and unacceptable in the future. The supplier continued to repeat the above excuses and they did freak out a little, because they never expected a factory audit in the first place. Naturally, we are going to have to source an alternative supplier after this episode.
Anyone else faced something like this before?