Month: March 2021

Shopify Tutorial

Elksourcing：How to define relationship with Chinese suppliers?

Mar 30, 2021 , by 露露

Managing the relationship with Chinese suppliers is not easy, the cultural difference, the language issue, the communication problem, China has another social system, different business culture and practice.

Managing the relationship with Chinese suppliers is not that difficult at all, if you can answer one question: How do you define the relationship with Chinese supplier? Do you think your relationship with the supplier is equal? Do you think your order is a blessing or giving to the supplier? Do you often threat the supplier that if they don’t do this or don’t do that, you will change the supplier, as you said there were handful of qualified suppliers lining up for your order?

The relationship should be equal

We recently read a story on the leading international trade forum fobshanghai.com, a Chinese supplier complained how their big buyer (Target) behave arrogantly and how Target was indifferent to the benefit of their suppliers, Target often cancel orders without prior notification, which has caused huge money loss to the supplier as they have already started production. Target doesn’t give any reason and refuse to compensate the supplier for the monetary loss.

The relationship between Target and the supplier is not equal. Target might think that their big order is a blessing to the supplier, so the supplier should do whatever they are asked to do to please Target, fair or not. However, in the end, the supplier refuses to supply to Target any more. Target maybe think they have plenty of backup suppliers to replace that supplier, however, if things go on like this, Target might develop a bad reputation among Chinese suppliers.

Even many small and medium sized buyers are as arrogant as Target. Gradually they will find the relationship with the suppliers become intense and tough. Like human being, organizations like company seldom do self-exam; they always think it is other side’s fault.

Vice versa, it is very common that big suppliers belittle small buyers, we are helping a big Brazilian electric bike importer find Chinese suppliers, out of the vast suppliers we contacted, a few of them are very arrogant, they even don’t have interests to answer the telephone, reply the email and try to learn our inquiry. We also help small and medium sized buyers verify Chinese suppliers, oftentimes we heard the suppliers says they are too busy, too many orders, and they don’t care if they buyers buy from them or not. Our advice to the buyers is “dump those arrogant suppliers”.

We compete as supplier chain, we are partners.

Companies need to cooperate with upstream and downstream companies, suppliers, service providers, distributors, logistics companies, etc. You need the cooperation and support from other partner companies in your supplier chain to improve your competitiveness; otherwise your company will achieve nothing.

As partners, we should try to share market intelligence with suppliers, we help them grow, we give them feedback and suggestion to improve their products, we let them feel we not only buy from them, we see them as partner, we help them grow. If the R&D ability of the factory grow, if they can lower their price and improve the competitiveness of their products, in return, that will help the buyer’s company grow.

How To Import From China

Elksourcing：For New Importers How to Import From China?

Mar 30, 2021 , by 露露

This article is for new importers. As a sourcing agent in China, we would like to share our years of experience of helping overseas buyers to import from China.

1. Feasibility Study
Before you start to import, you need to research the feasibility of your sourcing project. You need to set up a goal, decide the budget, make the plan, consult the import expert, research the market, learn the import process, and calculate cost. In the end, you should come up with an enforceable plan, which should include the following: the products, the market, the process, the people, the cost, the margin, and the marketing.

2. Products Ideas
What products you will buy from China? If you don’t have any clue, you could check ecommerce websites like alibaba, ebay, amazon, see what products are highlighted on homepage. Every product from missile to toilet paper has its own market, so do something you are familiar with, do something you have resources to sell.

3. Know where to buy Chinese goods
Ecommerce makes international trade easier. Search your products on alibaba, globalsources or made-in-china.com, you will find thousands of suppliers. If you are a small fish, your quantity cannot meet the MOQ set by factories, you could go to Chinese wholesale market such as Yiwu wholesale market, to buy small quantity and consolidate them into a container.
Or, if you think it’s too much troubles to source a good supplier among thousands of candidate, you can go to a trustworthy sourcing agent like Elksourcing, and focus more on the things you are strong in – selling good products.

4. Screen and verify supplier
By comparison, a final list of suppliers meet your price target, how to select Chinese suppliers? Don’t pick the one with lowest price; otherwise you should worry about the quality. Don’t pick too big supplier, you won’t get VIP treatment there; pick a supplier with reasonable price, good service and medium size as start. Do the due diligence properly; send inspector or a trustworthy sourcing agent like Elksourcing to check the factory’s credit and capability, capacity and quality system.

5. Price negotiation
In today’s market, price is very transparent, so it is more of price comparison, than price negotiation.

6. Contract negotiation
SIGN CONTRACT IS A MUST and DON’T USE PI AS CONTRACT. Try to cover all details in the contract.

7. Collect Samples
A few Chinese suppliers offer free samples, many do not (but usually will refund sample cost when PO is placed later-on); but it is reasonable to pay for the sample and shipping cost. China DHL, UPS, TNT agent gives better rate as 20~50% lower than freight-collect, so, ask your supplier to recommend a shipping agent.

8. Communication
Chinese sales normally don’t speak good English, for important matters, better to communicate by emailing. Try to explain the terminology. Use simple and basic English.Or, if you believe communication is critical, you can go to a trustworthy sourcing agent like Elksourcing.

9. Payment terms
T/T is the most common terms, if after verification you believe the supplier is trustable, T/T is acceptable.
Usually 30% deposit and 70% payment before shipment is common for first few orders, once you have built up trust, suppliers may accept less deposit.

10. Quality Control
Don’t save money on quality control, send a reliable QC inspector or a trustworthy sourcing agent like Elksourcing to inspect the quality before shipment.

11. Shipment
There is flood of shipping forwarders out there that provide one stop shipping solution. You need to learn how to screen shipping agency. Or, use CIF terms so your supplier will take care of the logistics.

12. Dispute Settlement
Hope you have a proper contract signed before you have to go through the dispute settlement stage. Lawsuit is the last solution, try to solve the dispute outside the court, get in a lawyer, send a lawyer’s letter, with lawyer chasing behind, many cases are solved outside the court. Arbitration is always easier than lawsuit, so it is advised to use arbitration as the dispute settlement method.

shipping FAQ

Elksourcing：Most Common Shipping Terms You Should Know

Mar 30, 2021 , by 露露

There are totally 11 shipping terms (Incoterms), which define the various responsibilities, costs, and risks that are borne by the buyer and seller when goods are traded internationally. I am not going to go through all 11 but I will give a brief overview of the most common:

EXW = Ex-Works: This is where the seller of the goods is not involved at all with the transportation costs or risks (i.e. damage in transit). They simply make the goods available to the buyer for collection at their site. It is then the buyer’s responsibility to collect the goods from the seller and get them back to the Europe, the buyer also bears all the risks from the moment the goods are collected so insurance is advisable. 

FOB = Free On Board: This is where the seller is responsible for the costs and risks of getting the goods on board the ship. Once the goods are loaded on the ship, the costs and risks then transfer to the buyer. So this means the buyer will pay the ocean freight from the port of origin, plus all of the other transport charges, customs clearance cost etc. to get the goods back to their destination. Again as the risks pass to the buyer once the goods are on the vessel, insurance is always advisable. 

CFR = Cost and Freight: The seller is responsible for the costs (but not the risks) up until the goods arrive in the destination port. The buyer then has to pay all of the costs to get the goods from the port to their premises.

CIF = Cost, Insurance and Freight: This is like CFR but the seller also bears the risks up until the goods arrive in the UK port. Therefore they insure the goods whilst they are on the ship.

DAP = Delivered at Place (formerly Delivered Duties Unpaid): The seller is responsible for getting the goods all of they way from their factory to a named place at destination (usually the buyers premises) but are not responsible for customs clearance or payment of import duty / vat. The seller also bears all of the risks.

DDP = Delivered Duties Paid: This is like DAP but the seller is also responsible for the customs clearance at destination, and payment of duties / taxes. Some small courier shipments will travel this way.

This is just a very brief overview; as to go into real detail and all of the various nuances would take all day. Wikipedia have a good page on Incoterms and some additional resources, you may search for it yourselves. 

The reason why freight forwarders always bang on about FOB for import shipments all of the time is twofold. Firstly the European freight forwarder will the one making the money on the freight rather than the Chinese / overseas forwarder, but in addition it is very often much cheaper overall for the importer. This is because many suppliers in China are getting free or even negative ocean freight charges up to the Europe. The European agent of the Chinese forwarder will then make their money back by charging the European importer extortionate handover / ancillary fees, which can come as a real shock. Therefore if you buy FOB you will at least know your final overall costs and have better control of the shipment. 

However I will also say that it is not always the case that FOB will be cheaper, particularly if you are importing from countries other than China. It is sometimes the case that the supplier will just have more buying power and can get better rates. Therefore if you want to be sure of paying the lowest overall costs, ask for both FOB and CIF prices. Then ask an European forwarder to get you 2 prices, 1 based on the goods being shipped FOB and 1 based on the goods being shipped CIF (you will need to find out from your supplier which service they will use so the forwarder can contact the agent in the Europe and find out how much they will charge in handover / ancillary fees). Then add the respective prices together and is should become clear which is best.

Shopify dropshipping

Elksourcing：Drop-shipping from China What Products to Buy?

Mar 30, 2021 , by 露露

It is a trend that not only big buyers, but small buyers (such as retailers, eBay sellers, small businesses owners) are starting to directly buy for Chinese factories. The benefit of drop shipping is that you don’t have to keep inventory, you don’t have to rent warehouses, you don’t even need to have stores, you find the right suppliers to get good products at good price, advertise and sell the goods to the buyers in your country, have the Chinese supplier to drop ship the products directly to your buyers, and earn decent profit.

One question you have to address is that what products you can dropship from China (or are suitable to be drop shipped from China), where to get the product ideas?

What items are suitable for dropshipping?

Generally, products that have high value and light weight are ideal for dropshipping, for small quantity dropshipping business, international shipping fee accounts for big proportion of cost. So you can’t buy 10 ordinary chairs from china, if the price for one chair is 15USD, large quantity importer can dilute the shipping cost to 2 to 4USD per unit, for drop shipping, if you ship 10 chairs by air (you can’t use sea shipping as your clients won’t wait 30 to 40 days to receive their products), the shipping fee might takes 20 to 30USD, so it will leave no profit room for you.

Where you can get the product ideas?

You could make a research to identify top dropshipper list in China, the list will definitely include dhgate.com, lightinthebox.com, and chinavasion.com.

If you go to dhgate homepage, you can find wedding dresses, cosmetics & perfume, electronics, fashion products are popular.

If you go to lightinthebox, popular items are similar, but you can get some new products ideas, such as faucets(sanitary products), car electronics, toys & hobbies, wigs, or even royal wedding gown and rings.

Chinavasion specializes in electronics, you will find what electronics products are popular, what products they promote on most of their web pages, then those products must be hot.

Similarly, you could go to auction site like ebay.com and amazon.com to get products ideas.

China Sourcing Agent

Elksourcing：Do’s and Don’ts in Evaluating China Sourcing Agent

Mar 30, 2021 , by 露露

Importers who do not have the expertise, manpower or the time to procure and manage supplies from China will often turn to the services of a China sourcing agent. However, it is not that easy to find a sourcing agent you can trust, and trust is very important in this kind of requirement. You need someone who is trustworthy and not someone who works for hidden commissions. Below are some do’s and don’ts to help you in evaluating sourcing agents in China:

Do clarify the sourcing agent’s tasks and responsibilities. This is very important when using third-party service providers. Do you want them to handle everything from procurement to quality control? Or do you only require them to perform tasks that you cannot handle? You have to be clear with their responsibilities so you will know who should be accountable in case of problems.

Don’t forget to consider the sourcing agent’s geographical presence. If the products you want to purchase are from Shenzhen, then looking for a sourcing agent or company at Shenzhen would make a lot of sense than using an agent from the opposite end. The China sourcing agent will be working closely with suppliers. Thus, you need him or her to be near the location of your suppliers.

Do be realistic with your expectations. Remember that you are working with people and not robots. Even the best sourcing agents have their flaws. They cannot guarantee you low prices, and on-time shipments all the time. Thus, you have to know what is most important for you so you know in which areas you cannot compromise. Ideally, you want someone who is competent and reliable. However, it is better to work with someone with average skills but is hardworking and reliable than someone who is smart but untrustworthy.

Don’t micromanage the production yourself. You asked for the help of a sourcing agent, so let him/her do the job you paid him to do. You want to work closely with the agent, but you can do so without interfering with his work. You want to have control over your business processes, so you show the supplier who is the boss. As a result, the suppliers won’t listen to your sourcing agents anymore and you won’t be able to maximize the benefits of using their services. This doesn’t mean you have to rely completely on a third party sourcing service either. If they go out of business, you will want to be able to continue doing business with your good suppliers.

Shopify Tutorial

Elksourcing：Why Product Sourcing China Is Recommended?

Mar 30, 2021 by 露露

China is considered as the second biggest economy in the world. It is not surprising that many companies want to make business with Chinese firms and suppliers.  Despite misconceptions by the general public about the quality of products from China, seasoned capitalists continue to source products from the country because of specific reasons. Product sourcing China is buoyed by the country’s expansive supplier base, sophisticated manufacturing and competitive costs.

Rich supplier base
To say that China’s supplier base is rich is an understatement. It is estimated that one-fifth of the world’s manufacturing is done in China. Here, almost everything imaginable is manufactured- from appliances, food, textiles, furniture, consumer electronics, cars, toys, household items to apparels.  Although many of the sub-components and materials are exported from other countries, assembly work is performed in countless factories across China.

Factories are also surrounded by supporting plants where materials are sourced or sub-assembly is made. The sheer amount of manufacturing plants in the country further lowers the cost of production in China, as manufacturers offer the cheapest prices possible in order to compete with the market.  Add to this the well-developed infrastructure which supports the efficient transportation of goods and commodities.

Sophisticated Manufacturing
Product sourcing China is boosted by the sophisticated manufacturing plants in the country. The biggest economy in Asia is also home to factories with world-class manufacturing capabilities. In China, factories engage robotics-based automation to ensure superior quality of the products. Factories in this East Asian nation also provide topnotch efficiency, quick turnaround time and excellent customer service.  

Competitive costs
But arguably the biggest reason why companies continue to source their products from China is the low cost. The labor force in the country remains as one of the most competitive in the world. While labor expenditures in China have steadily climbed annually by 15% since 2008 when a labor contract law was passed, the wages of Chinese laborers remain lower compared to their counterparts out west.  Cheap labor costs in the country are also a result of the massive workforce in China. The world’s most population nation with more than 1.3 billion people offers a large manpower complement to support the huge production demand for manufacturing and related industries.

Product sourcing China makes a lot of sense from a business point of view.  Corporations can make maximize their earning potential by ordering superior quality but cheap goods or products from China. 

China Sourcing Agent

Elksourcing：Considerations When Using Global Sourcing Services

Mar 30, 2021 , by 露露

The primary goal of companies when employing global sourcing strategies is to reduce cost. Sourcing companies will take charge of identifying and screening of suppliers, management of supplier relationships and other important tasks. But before you make use of global sourcing companies or services, there are some important factors to consider.

Lead Time

While importing products from other countries may help cut costs, you also have to consider the lead time for global purchases. Global purchases generally have longer lead time compared to domestic purchases. You have to consider sea freight, air freight, and not to mention the time it takes to get clearance from customs. This is why using local sourcing services familiar with the nation’s customs and regulations will be essential to reduce the risk of unnecessary delays.

Transportation

Related to lead time is transportation. Global sourcing will most likely require you to use different modes of transportation. You may have to combine air, water and land transportation to get the goods from the supplier to your delivery points at the quickest possible time. In this aspect, it is best to consult with experts in the supply chain to find the best solution.

Legal Issues

In using global sourcing strategy, you need to decide on the body of law to apply on your contract, whether the law of the buyer’s country, or the law of the supplier’s country, or an applicable treaty between both countries. You have to be clear in your contract to avoid complications in the future.

Language and Culture

Implementation of global sourcing strategies may be hindered because of differences in culture and language. Misunderstandings may arise if this problem is not addressed, and it may be detrimental for your company. Before you hire sourcing services, make sure to ask if their staff understands your language.

Currency

You also need to decide on the currency to be used for the transactions. There are certain risks involved in this so you will want to be extra careful. Ask the advice of experts if you are unsure.

Other than the factors mentioned you also have to look into quality and packaging considerations. If you will be using sourcing services in China, make sure they have a defined global sourcing process that will meet your requirements.

Shopify dropshipping

Elksourcing：Practical Guide for Choosing China OEM Manufacturer

Mar 30, 2021 , by 露露

The major and initial issue in choosing a Chinese manufacturer is determining whether the manufacturer is “real” or not. Chinese companies are masters of disguise. They use the Internet and sourcing websites to make themselves look much better than they are. But they can also hide the reality even on site. So you have to develop an efficient system for breaking through the façade to get to reality as quickly as possible.

The general procedure I follow and the one you should follow as well is as follows.

First, you or your representatives have to visit the factory personally. It is shocking how much variation there is in manufacturing systems even within developed areas such as Dongguan, Guangzhou and Zhuhai. Factories making a virtually identical product can range from those using primitive hand techniques from the 1930s all the way to those that use state of the art German or Japanese automated equipment. You cannot believe what the factory says about its systems and you cannot believe the photos they provide. You must go to look personally.

Second, when you visit the factory you have to use your time efficiently. You goal must be to determine whether the factory is real or is it a Potemkin village or movie set, composed of all surface and no substance. What every foreign buyer must realize is that any factory owner can create the illusion of being a strong business by putting on a show for the foreign buyer. The buyer arrives to see a buzzing, active factory with all assembly lines moving at full speed. As soon as the buyer leaves, the place shuts down again, waiting for the next victim to arrive.

I usually do the following to break through to reality:

I refuse to visit the factory floor first. The Chinese side is always upset about this decision. I just make clear that I have other things I want to do first.

The first place I visit is the raw materials warehouse. Is the warehouse full or empty? An empty warehouse is almost always a sign of a manufacturer that is struggling. If the warehouse is full, I then look to see what sort of material is in the warehouse. Are the materials consistent with what the manufacturer says it produces? Are the suppliers local, national or international? Do I recognize any of the suppliers? Are the suppliers reputable?

I next like to visit is the shipping warehouse. If the export warehouse is empty, this is an obvious signal that the manufacturer has no current business. If the warehouse if full, I then check whether the deliveries are for China internal markets or for export. If for export, I then check what the destinations for the product. Are they headed for countries that generally have buyers that care about product quality? I also pay close attention to the packing of the product and loading procedure. You can tell a lot about a company by the way it loads the product into a container.

My next visit is to the finance office of the manufacturer. I just sit on a chair for about an hour and observe what is going on. If there is no activity, I know the company is dead. If there is activity, I then observe. Is cash moving in and out of the safe? A company that relies on cash transactions is typically not part of an international sales market. Reliance mostly on cash evidences a local player with little China national and international business.

My next stop is the sales department of the company. Again, the first thing I observe is whether the department is busy. Are the sales people taking orders and working with purchase orders and invoices and receipts, or are they drinking tea and staring out the window? What language are they speaking? Are they talking in Chinese or English? No English means no international business. Finally, I just sit in a corner and listen. This can be very valuable. For example, in a recent factory visit I noted that 100% of the phone calls to the sales department consisted of customer complaints about late delivery, short delivery, incorrect delivery and faulty product. That told me all I needed to know about that company.

Finally, after all this back office visiting, I am ready to look at the factory. Here, I further frustrate the factory owner by refusing to look at the work shop floor. Instead, I make clear that I want to visit the quality control department. If there is no QC department, that tells me everything. If there is a QC department, once again I just take a chair in the corner and watch. My goal is to determine what happens when a quality problem is discovered. Do the QC people go out to the factory floor to see what happened?  Do they just pull out the defective item with no further action? Or do they do absolutely nothing? What happens to the defective item? Is it destroyed or is it put aside, presumably for sale in the local market. Some manufacturers will take you to their QC/RD laboratory. The same basic rules apply for this visit. Does the lab show signs of use, or it is just a fancy showroom designed to fool gullible foreigners? I recently visited such a lab at the offices of a food manufacturer. The equipment was beautiful. In fact, it was so beautiful that it was quite obvious that none of the QC and testing equipment had ever been used.

Finally I will visit the factory floor. By this time I have a pretty good idea what is going on at the factory. The factory floor visit is usually just a check on the equipment being used and the QC procedure is in effect.

Once you get used to using an approach like the one I use above, you will find that you can weed out the bad factories very quickly. In my experience, good factories are rare. If your initial review suggests that the factory is a good one, you should take the time to move to the next stage of discussing whether or not you can really do business with the factory. Any good factory will also be very busy. You need to have an honest discussion about what you want to have made, in what quantity and in what time frame. On the other hand, if you reject a factory, make your departure as soon as possible. Do not fall into the trap of wasting time going to lunch or dinner with the factory people that fall into the obvious reject list. On the other hand, if the good factories invite you to lunch or dinner, take the time to go. Good factories are rare and you should work immediately to build a relationship.