From time to time, some small importers find me, tell me the story that unacceptable Chinese products are received, and ask me how they can force a Chinese supplier to refund an order.

My response is usually “forget it, and do things right on your next order (make sure you read about best practices).”

There are four important things to keep in mind when you buy from China:

1. Preproduction samples are not indicative of average quality

Your supplier might show you nice samples, and pretend that they come from a past production of that factory. Do not think that’s what you will receive.

Even if that’s true, who knows if they were the nicest pieces out of a batch that counted 90% defectives? Don’t forget, most assembly and finishing operations are done by hand in low-labor-cost countries.

2. After you have paid, you have no more leverage with your supplier

What will a supplier tell you if you complain about their product quality/performance, after the order was shipped and paid in full? They will probably promise to give you a discount on your next orders. But do you really want to give them more orders?

If you want to avoid bad surprises, you should check product quality (and probably also the production status) in the factory, before shipment.

The details depend on your mode of payment:

If you pay by bank wire, make sure you confirm quality before you transfer the remainder.

If you pay by letter of credit, don’t forget to include a third-party inspection company’s certificate in the list of required documents.

3. It is pointless to start thinking about arbitration after production

Did you know that a purchase order is not a contract? Actually, it will often protect the seller in a court of law, not the buyer.

Did you know that countries such as China do not apply judgments from American courts? If you need to take legal action against a company that owns assets only in China, you’d better have a contract that is enforceable in that country (and that was properly chopped by that company).

If you need a contract, go and see a specialized lawyer and ask for an enforceable OEM agreement. Before you wire your deposit/open your letter of credit, not after.

4. Qualifying a supplier is necessary, and so is monitoring production

A British importer told me he had received unsellable products, and he has not checked quality before shipment “because it was a Gold Supplier“.

Unfortunately, suppliers pay to get a “Gold” status on Alibaba, and it means nothing for the importer. The sad truth is that nobody certifies the past performance history of a supplier in China. It is entirely up to each buyer to pay for his due diligence… or to take huge risks.

The solution is simple, but it takes the importer money and/or time:

Asking for customer references, paying for background checks, and auditing factories is the solution for qualifying a supplier.

Being present in the factory or sending third-party inspectors is the solution for monitoring production.

How To Import From China

Elksourcing：How to Evaluate Chinese Suppliers?

Apr 10, 2021 Elksourcing, supplier by 露露

When sourcing from China, one of the most important things you as a buyer need to do is to make sure you are working with the right supplier. So, where do you start?

Define your ideal supplier. This is unique to each buyer and depends on a number of factors, including price, quality and lead time.

Define your location. Where factories are based should also play a role in supplier evaluation. While factories in China’s northern and western provinces have lower manufacturing costs, the quality is often lower. Those located along the coast and in the southern region have higher production outlay but the quality is generally better. Note as well that the farther inland you go, the more expensive your logistics costs will be.

Look in the right places. B2B websites can help buyers find suppliers, but it’s highly recommended meeting suppliers face to face. Further, always do your due diligence and verify suppliers before working with them.

You must visit the supplier yourself or pay someone to do it for you BEFORE you wire any money.

Narrow down your choices: You should narrow down potential suppliers based on non-price attributes before initiating contact. This is basically sending an email to ask for product-specific information, including price, minimum order quantity and lead time. Below are some points that are often overlooked when requesting for quotations.

Mould charges

Payment terms

Quality requirements

Bill of materials

Packaging

How to identify a legitimate manufacturer:

Avoid factories that refuse to list the name or location of the production facility.

Focus on factories that can clearly show manufacturing experience with your particular product or production method. They should have samples and quality documents readily available if they are a real factory.

If you are able to arrange a factory visit:

Do your contact’s business cards match the factory staff’s information? If the cards do not match in name, color and address, then your contact is probably a middleman.

Do the people at the factory clearly know your contact?

Look for clear information about operation size, equipment and staffing.

Be wary if the supplier offers a very large range of products.

Be aware that polished English skills do not reflect production skills. Often the most polished websites are set up by trading companies.

Ask for ownership papers of the factory.

Be explicit that the production location may be audited by you in person.

Spend more time on the production floor than anywhere else.

Visit as many sites as possible.

Inspect workflow systems for efficiency and check whether they are actually practiced.

Test your supplier‘s understanding of your product’s requirements.

Request samples to be sent to you, to your exact specifications (pay if necessary).

Evaluate the factory’s quality system.

How To Import From China

Elksourcing：Tips About Negotiating with Chinese Suppliers

Apr 10, 2021 Elksourcing, negotiating by 露露

So, you have narrowed down your list of potential suppliers, done your due diligence and decided on one factory to manufacture your product. But before you sign that contract, you would most probably need to negotiate quality, price and payment terms.

The first thing you need to make sure is you are talking to the decision maker. Quality and production concerns, for instance, should be discussed with engineers, managers and QC personnel, not salespeople. It is also better that you have your own translator, one whom you have briefed in advance about terminology and what to expect.

Before you start negotiating terms with the supplier, be aware of the following:

Face to face meetings are always the best way to communicate.

Most factory representatives will not tell you “no.”

There will always be problems-you just will not know about all of them.

Do not confuse being polite or even “yes” with agreement.

The more time you spend in the factory, the better quality product you will get.

You must take care of all legal issues at home and in China before you do anything else.

Contracts are rarely the final words.

Save all phone call notes, photos and emails.

Keep your processes and communications consistent.

Be prepared to renegotiate everything.

Negotiating quality terms:

Specify every single component and standard you can think of.

Clearly communicate every aspect crucial to your finished product.

How your final product should look, feel, fit and function.

All internal, external labeling and user instructions.

Packing instructions (quantity, assortment, packing materials).

Overcome language barriers by communicating with:

Photos.

Technical drawings.

Written, translated instructions.

Physical samples are the best.

Negotiating price and payment terms.

Do your own research on prevailing prices before you start negotiating.

Make a road map for better terms; consider a 30:40:30 payment scheme.

Your payments, penalties and shipping dates should be contractually tied to QC reports.

Be careful if transferring funds to a private account or a third-party trading company.

How To Import From China

Elksourcing：3 Main Traps to Avoid for China Industrial Sourcing

Apr 10, 2021 Elksourcing, sourcing by 露露

China industrial sourcing has many challenges. Most of them are a result of the Chinese business environment and the fast pace of the country.

But some problems are self-inflicted by buyers and are not related to suppliers. The three main traps I have seen buyers fall into are:

Buyer improvises a project and launches ill-prepared sourcing missions because they cannot secure the right expertise;

Buyer gets the first steps right but then hesitates for a long time because of the complexity of the project or because of internal conflicts;

Buyer has been waiting for a long time and suddenly gets impatient and makes hurried decisions.

This is how these three sourcing traps play out. I am sure you will be able to relate at least to one of them, even if the cases below are a little of a caricature.

1. Improvise

Someone decides that it is time to source goods from China. The company has no experience but management wants to get the ball rolling and get things done. “We need to improve our margins. Our competitors produce in China. We are late in the game and we need to catch up. This is a question of survival.”

A few people are put together and assigned to a special sourcing team. The new China sourcing initiative is launched.

Sooner or later, trouble starts:

The team cannot identify a suitable supplier;

First samples are substandard and cannot be accepted;

Or worse, quality problems arise after a few initial deliveries.

No one in his right mind will proceed with these suppliers. It seems that the sourcing initiative has stalled and that all is to be done again from scratch.

2. Hesitate

Three years ago, a company launched a China sourcing project for sub-assemblies to be assembled into its main product. For the initial steps, the project team has done pretty well. They have brought in all the relevant expertise from within and have also sought assistance where they needed.

Within 12 months, they identified seven suppliers that displayed the right capabilities, offered interesting pricing and were willing to move forward. The company COO visited all suppliers during an intensive tour and was impressed both by what he saw on the shop floor and by the attitude of the suppliers’ management.

Then things started to slow down. Every time the China sourcing topics comes on a company management meeting’s agenda, participants raise many questions such as:

Are the suppliers really as good as we think?

Will our customers push down our prices if they know we are making these parts in China?

We are far from China, how do we manage these suppliers from this far?

The projects cannot proceed as no one takes the decision for the next step.

None of these questions is a new issue. They were there already at the outset of the project. But now that the prospect of sourcing from China is real, they come up in the discussion all the time without being resolved.

It seems that the sourcing initiative has stalled and that it will take either serious strategic thinking or strong push by the top management to start again.

3. Hurry

The company has considered China sourcing for several years. A couple of people from purchasing have even visited factories they had discovered at various industrial trade shows. But business is so hard these days with the economic crises and no one really got the time to seriously go through the sourcing process.

The wakeup call came one month ago at a tender post-mortem meeting. “We lost mainly because the winner was able to go down in price” says the sales manager. He continues: “They could do this because they buy all their peripheral equipment in China and also source some motors and control systems assemblies there.”

“We gotta move now! “says the GM. “We started exploring China suppliers at least 3 years ago. How come I still have not seen a single order from them. I need this… now.”

Pressure is high. Purchasing department goes back to the files built throughout the last few years. They reactivate the suppliers they had met then. They send RFQ and request samples. The technical department makes a first analysis. It does not look bad.

Before the engineers can make deeper tests and confirm how the product really performs when put in the full system, the company is invited to a large tender in Turkey. Normally a very competitive market. It is decided to use some of the Chinese suppliers to reduce the total cost and protect margins.

The tender is won. Everyone is very excited about it… until project implementation:

Supplier had misunderstood some key requirement in the RFQ and quoted a substandard product;

Supplier can meet the requirement but it will be more expensive;

Delivery is delayed three weeks because of the rework;

Export is trouble too: supplier sells CIF and has selected a cheap forwarder and custom agent with poor service.
The company managed to keep the final customer immune of all this and no damage is done to the reputation. But the total cost of the project proves to be higher than what it would have been with traditional suppliers. And no one is keen about working with China.

It seems that the sourcing initiative has stalled and that it will take lots of work and convincing to restart it.

Conclusion

None of the difficulties faced by buyers of industrial goods in China are simple.

The cheapest suppliers may be good marketers with poor quality.

A good prospect supplier may expect much more business than the buyer is able to generate.

This supplier met 2 years ago was only average, but it may have tremendously improved since then.

Successful China industrial sourcing is both about expertise and about process. When so many things can go wrong, success lies to a large extent in how these aspects are evaluated and addressed. And this takes knowledge, a rigorous approach and time.

Some of the keys to success in China industrial sourcing are:

Get well prepared;

Go through each step thoroughly;

Make clear go/no go decisions, avoid half measures.

How To Import From China

Elksourcing：Step by Step Guide for Sourcing from China

Apr 10, 2021 Elksourcing, sourcing by 露露

Sourcing From China can be a daunting task, especially for small businesses and first-timers who might not have the means and global resources to establish full-scale overseas operations the way big businesses do. That’s where other sourcing tools come into play.

Here is a step-by-step guide that can help businesses like yours get an idea about the various options available out there in the market, and zero-in on the right suppliers to meet your sourcing needs.

1) Look for suppliers

Use various sourcing tools to get an overview of the options available in the market.

An internet search on sites like Alibaba, Google, etc. can generate great sourcing leads on reliable suppliers.

Sourcing magazines & trade shows are also vast sources of information on wholesale distributors, manufacturers and suppliers of products. While social media cannot be used in isolation to identify suppliers or for product sourcing, it can be very useful to get feedback on particular suppliers.

2) Short-list suppliers

Visiting a company personally is the best solution for verifying its authenticity, of course.

When that’s not logistically possible, turn to reputable third party QC companies that do a series of verification checks, such as due diligence, factory audit, etc.

Get samples from the suppliers, review the function, appearance and packages, do test at a lab when necessary. Compare the quality of samples from various suppliers.

3) Negotiate with suppliers

Once you have pinpointed the supplier you wish to deal with, then comes the need to negotiate a mutually-beneficial deal with the supplier. This would involve negotiating the price, payment terms, delivery schedule and contingency plans for unforeseen situations.

At this point, you could also make inquiries about drop-ship product services as these may be drop-ship suppliers as well.

Alternatively, there are local third-party sourcing agents who can represent your firm in all negotiations, easing the process for you. This ensures that there is no miscommunication due to language or cultural differences, and it also reduces the risk of unscrupulous suppliers taking you for a ride!

Common issues like packaging, shipping, taxes, payment terms, etc. should all be clearly spelled out at this stage to avoid later disputes.

4) Establish a long-term relationship with suppliers

Even in business, establishing a long-term personal relationship is very important to the Chinese; hence it should be to you too, to ensure that your sourcing is smooth & hassle-free over the long term.

The cultural, language and business expectations of the East and the West are vastly different and you need to respect these differences in order to maintain a healthy long-term relationship with your supplier.

While factory visits and product QC are key, building ‘Guanxi’ (a relationship) with your Chinese supplier takes personal time & commitment. But it will definitely be worth your while!

How To Import From China

Elksourcing：A Cost Down Guide for Product Sourcing in China

Apr 10, 2021 Elksourcing, sourcing by 露露

Cost down your product sourcing in China is half success of your importing business. As a first-time importer, you need to test your market first with smallest capital at beginning, and put your investment in more important things: marketing & sales. Below is a cost down guide summarized from my experiences of China sourcing business.

#1 Start with sourcing one product at a time

You can easily find many successfully proven cases that just start with one or handful products, and per the response of the market to decide the next step afterwards. Expanding a product line needs a single product to be proven at the beginning.

If you plan to start with a plenty of products, it will be required a lot of time and money to invest. That’s a hard and difficult path to go as a first-time importer or startup.

Investing in one product is a good option to cost down and lower risk for your first step of China sourcing journey.

#2 Find a professional supplier who specialized in your target product

If you focus on single category that you would like to put on a long-term consuming involvement, to work with a professional supplier instead of a vender who provides a vast range of products.

Do some research about the supplier to check if it’s a specialist in the field of your target product before you contact the supplier. And it’s unnecessary to care too much about if they are a factory or trader because a professional trader must have strong advantages of sources that allows them to provide you a still competitive price even lower than a factory.

So, find a specialist as your importing business partner to keep cost down constantly in the future.

#3 Always negotiate price with Chinese suppliers

Remember, anything is negotiable when you dealing with Chinese suppliers.

Thanks to internet, usually it’s easy to find so many suppliers for your products, so, feel free to ask for a lower price once you decide to work with them after compared with different suppliers.

But keep in mind, the seller is a person try to earn money (just like you) – always be respectful. Just don’t be too demanding to lose the quality. Once a Dubai businessman told me he placed an order at a price much lower than the market price, in my opinion, it’s even lower than manufacturing cost, guess what, the supplier disappeared after the deposit was paid!

#4 Try to keep your product design as simple as possible

In the aspect of design, less is more. It will generate a certain cost because most of new products require moulds (metal or plastic) to produce. In some cases, it would even cost more than your total product value. It will be a high risk to invest too much on a new project which is not proven by market. So, don’t pursue a too complex product on design.

You can go with existing product or just change a little about it, like color, material and packaging. Many experienced brands take this way to test the market as the first step of sourcing in China with a low cost.

#5 Consider to go with appropriate quantity

Try to reach manufacturer’s MOQ as possible as you can. Although it increases your total cost, but will significantly reduce your average product cost.

So, it’s important to consider a suitable quantity to cost down your sourcing result.

#6 Select shipping method by sea, not air

Shipping by air is quick but costly, only use it when you need to check samples, small trial runs, or urgent replenishment.

To cost down your product sourcing result, shipping by sea always is your first choice. 90% of trade is through sea shipping in the world. In many cases, shipping cost is only a few pennies for each product.

#7 Don’t expect the highest quality

You maybe hope your products are made of the best material and at the highest quality, but truth is that 80% of major retailers use normal standard materials which just meet the quality requirement of the market average.

It is profitable to import standard quality product; you only need to focus on better marketing skills. No need to chase highest quality unless your ideal product has generated sales by your target market.

#8 Go with simple packaging for your first time of product sourcing in China

It will consume lots of money and time if you attempt to chase a fancy packaging at the beginning. Don’t do that unless the unique selling point of your product is the packaging design.

Conclusion

Keeping cost down always should be the goal of your China product sourcing journey, however, it’s unnecessary to chase the perfect products at beginning, all above points could be improved along with time when your products generate sustainable revenue.

How To Import From China

Elksourcing：How to Succeed a Smooth Start to Manufacturing in China?

Apr 8, 2021 Elksourcing, manufacturing by 露露

It’s not easy to start manufacturing your products in China, below are some tips learned from my experiences as a sourcing agent in China.

1. Set-up a mutually beneficial partnership

As a start-up, you may not be taken seriously by the big manufacturers, because the volume of business you bring to their table is not significant. So, it is better to source a small/medium sized manufacturer to create an incentive for the manufacturer to work with you.

2. Check references

Finding the right manufacturer is difficult. Unlike programmers, few manufacturers have a digital presence. Checking for references is paramount.

3. Take baby steps

Start your own manufacturing takes a lot of time and money, you cannot afford mistakes. Depend more on manual labor and low-investment tools in the first few months, gradually increase your investment when your products keep bringing revenue.

4. Research

If you are looking for a manufacturer online, you need to do extensive research before you decide.

5. Have multiple open partnerships

Have multiple reliable options, rather than fully rely on a single manufacturer.

6. Get the legal details sorted out

Once this is done, you can confidently go ahead with investing in moulds and materials for your business.

7. Know the people you work with

Your manufacturers are critical to your business. It is imperative that you know them well before working with them. This is true especially when your manufacturer is in China, far away from your home.

How To Import From China

Elksourcing：Why You Cannot Find a Factory to Manufacture Your Products?

Apr 8, 2021 dropshipping from China, Elksourcing by 露露

We hear it all the time from importers sourcing from China, “I can’t find a factory to manufacture my products!” This is especially so when the product you are seeking to source is unusual: you will not have any difficulty finding factories for white T-shirts or running shoes, this only is a challenge if you are trying to source from China a rare or unique product, something your competitors don’t know about or don’t have yet. Which, of course, is what gives importers a lead in the market place.

This happens to both large importers who want to stay ahead of the pack and to small importers who are looking to branch out and find uncommon products. It seems strange that in the “World’s Factory”, as China is often referred to, it is difficult to find factories to source your product. I mean, in this day in age, you expect to find things quickly. Thanks to the internet, people are accustomed to finding an instant answer. So, they’re baffled when they come across websites like Made-in-China and Alibaba and they can’t find what they’re looking for. Well, here’s why:

Small Factories: When sourcing from China, rare products are more likely to be made by small factories. Products like green rubber pigs with wings or flasks in the shape of a dice will be hard to find – because specific and special items like this would more likely be made by small factories. And small factories, you guessed it, are not easy to find. In most cases, you will only find small factories like this if you are working with an agent or consultant who has many contacts and has been sourcing from China for a very long time.

Language Barrier: Most small factories do not have the resources to employ people who speak English. Therefore, they cannot target or appeal to companies, like yours, when they cannot communicate effectively. If you can’t get your ideas across to a factory that can’t speak your language, you’re going to end up with a sub-par product, if you end up with one at all. Even if you can find a factory, if they can’t communicate with you, they’re basically useless to you.

Marketing: The role of a factory is to produce goods. Therefore, they’re, often, not very well versed in marketing. This is especially the case with a small factory. They don’t have the know-how or resources to advertise or market to companies in the West who are interested in sourcing from China, often because of the language barrier previously mentioned. It would be rare to find any factory, much less a small factory, ranking high on Alibaba or Global Sources, because much of the skills used to rank highly on these platforms are similar to those that would be required to rank highly on Google. There are large American companies that haven’t mastered this – we can’t expect a small factory in rural China to figure it out.

Copyrights: We tend to forget when sourcing from China, because there are so many copycat products imported from China every day, that copyrights DO exist. If you’re a serious China importer, copyrights would be #1 on the list, BEFORE researching factories. Thus, because of this, many factories keep the products they are manufacturing a secret in order to avoid copies being made.

Sourcing from China is no simple feat. We find that the companies that are the most successful in finding these elusive China sources have their own sourcing office in China, or hire a professional sourcing company.

Category: How To Import From China