How to Source Products from China
How to source products from china — This quick guide covers the basics for you to get started and be successful with your China sourcing efforts
This blog article was first published on www.sourcingallies.com
China is an attractive marketplace for Amazon sellers who are looking to establish a profitable business. Once known as the ‘world factory,’ China can now produce high quality and high value goods. Before you start your google search on the best suppliers in China, you need to have a sound China sourcing strategy. This will help you avoid getting scammed, find a reliable supplier and negotiate the best deal.
Here is a quick guide to sourcing products from China
It’s not just about finding deals. Try to build relationships
Business transactions are carried out differently in China and in most other eastern countries as compared to the West. In China, the way business is carried out is through ‘Guanxi’.
Pronounced as ‘gwon-she,’ Guanxi means “connections” or “networks” that facilitate deals and open doors for business transactions. A person with plenty of guanxi is in a better position to grow their business than a person who lacks it. The Chinese term originates in Confucianism with the underlying philosophy of conducting any type of transactions, be it personal or business, is based on hierarchies and filial piety (‘xiao’). In business transactions as well, it is about establishing a relationship on a personal basis with the supplier first using communication channels to build respect and trust. The success of a deal depends on how well you can build a personal rapport with the Chinese supplier. The stronger your foundation, the higher the pay off in terms of an ongoing successful business relationship.
Research the supplier carefully
Sourcing products from China is a complex process for Amazon sellers who are just starting out. It will take some thoughtfulness, effort and time to find the right supplier who is reliable and can meet your quality specifications.
Here are some of the most common platforms where you can look for suppliers in China:
Alibaba is a good place to start your search due to its sheer size. In fact, its size has prompted many to call it the Chinese Amazon. Founded in 1999, Alibaba had 960 million active customers in 2019 while close to 1.3 billion businesses are on the marketplace. To start searching for suppliers, you need to first create your Alibaba account. The next step is to go to “Sourcing Solutions” where you need to submit your request for quotations by filling in the relevant details. These details include:
- Keywords of products- Put in a few keywords related to your product that might attract the attention of some suppliers. Including as many generic terms as possible can help capture the attention of as many sellers as possible. On the other hand, if you have a niche and complex product, using specific keywords will help attract the attention of those who do manufacture the product.
- Detailed product description- Give the exact description of the product you want and include the measurements, dimensions, materials, logo and other customization required.
- Quantity- After the product, one of the main things China suppliers look at is the order size. The more the order quantity, the lower the per unit price likely to be. If the order quantity is very low, suppliers may not show interest.
- Photos- Ensure you have good quality photos of the product you are looking for. Take a few close ups from different angles to give the suppliers a clear idea of what you are looking for.
The other way to find suppliers on Alibaba is to actively search for potential suppliers on the website. Type the product name in the search bar and Alibaba will throw up dozens of results. All of the results may not match with what you want and you have to spend some time to find the ones that match.
Ensure that it is a manufacturer and not a reseller before you message the supplier. Many resellers also pose as manufacturers which can be confusing to sort out. Although Alibaba is the biggest marketplace, the possibilities of you getting scammed is high. It is important to find legitimate suppliers, which can be challenging for first time Amazon resellers. Here are some tips that you can follow to find a legitimate supplier on Alibaba:
- Look for Gold Supplier- Alibaba provides a ‘Gold Supplier’ tag for suppliers who have been vetted by the marketplace and passed their scrutiny. If you also see that the supplier has Trade Assurance, it means that Alibaba acts as escrow service for the transaction.
- Find out the product line- If the supplier offers hundreds of products that are unrelated, it is a clear sign that you’re talking to a reseller or a trading company. A manufacturer makes a limited number of related products.
- Ask for documents- Ask the supplier for documents and certification such as ISO 9001. Check if the supplier can show you business registration certificates and confirm the dates. Ensure the information given to you by the supplier matches with the details on the business certification.
- Personalization- A manufacturer is typically able to customize your product as they directly access the machinery.
- Tell the supplier you plan to visit- A legitimate supplier is fine with your visit. Red flags are when a supplier makes excuses and tries to discourage you from visiting.
The other platform you can go to is Global Sources. While this is not as huge as Alibaba, it has much better quality as each supplier undergoes a pre-qualification process of vetting which is much more stringent than Alibaba. You can also see the China Sourcing Reports on the site, which provide an in-depth look at different industries.
If you are looking to establish Guanxi, the best way is to head to trade shows and contact the supplier in person. Here are some of the most important trade fairs in China:
The Canton Fair
This is the largest trade fair in China and is held twice yearly and covers every industry related to physical products. The three phases of the trade fair are:
Phase 1 where you can find building materials, chemical products, machinery and electronics
Phase 2 is about home decor, gifts and consumer goods
Phase 3 deals with office supplies, textiles, health and premium skincare products, shoes and medical products
The entrance is free and you can see the samples that suppliers bring to get an idea of the quality. However, the sales representatives are not well versed with English and you may face problems in communicating with the supplier when you want to explain your requirements and technical specifications. While the Canton Fair is a massive one, the same suppliers take part in the fair each year. You can check the website of the fair in advance to know the location of the booth of the exhibitors you are interested in.
The Yiwu Market essentially is for resellers and trading companies and not for manufacturers. Located in Zhejiang, Yiwu market is open throughout the year and has forty thousand shops.
If you are looking to source shoes, watches, accessories and bags at low prices, this marketplace may be considered. Most products here are targeted towards buyers in Africa and India and do not meet the safety or quality standards set in the U.S. and Europe.
Do not rush to finalize the first offer
Negotiating is one of the most crucial aspects of sourcing products for your Amazon reselling business from China. The negotiations are not limited to price, but extend to the term of the transaction, quality, negotiate the terms and the type of business relationship you have. Apart from local and federal laws, you can pretty much negotiate on everything else.
When it comes to price negotiations, keep in mind that the supplier, just like you, will have a price threshold set at which they absolutely will not go below. Instead of getting stuck at price negotiations, work out other details. Explore if the supplier will be able to offer a lower price if the order size is increased. The supplier may also give you a discount if the amount is paid upfront. Ask the supplier if a lower price can be agreed upon if you place multiple orders. Instead of only focusing on the price point, evaluating the other areas of negotiation can probably get you a better deal overall. The other reason to not fixate too much on the price point is that there can be negative consequences elsewhere, as in, the supplier may use poor packaging or cheaper materials for your order.
Before you negotiate with a supplier, ensure that you know the market price of your product. You will generally know the prevailing rate when you compile a list of suppliers from your research. Talk to different factories even if you have found a supplier who you think is good. You can use the quotes provided by one of the factories to negotiate with the other one.
One of the most crucial aspects of sourcing from China as an Amazon reseller is knowing how to spot a scam and avoiding getting duped. Here are some ways you can avoid fraudsters:
- Google the supplier- A good and legitimate company will typically have a web presence. Ensure there are no warnings about them on online forums.
- Beware of very low prices- Remember the adage ‘ if it is too good to be true, it probably is.’ when it comes to sourcing from China. A supplier who offers very low prices is a red flag. You should be suspicious of the supplier’s authenticity if they give you a quote that is much cheaper than all other quotes in the market and is an exact match to what you want.
- Check the supplier’s email address- The supplier’s email addresses can give you a clue as to their legitimacy. QQ email addresses are commonly used in China and are as reliable as gmail or yahoo.com email addresses. Check also if the supplier has an email id with the company name.
- Ask detailed questions- A reliable manufacturer will have answers to all your questions on the process, quality standards and timelines among others.
- Look at pictures- An authentic supplier can usually supply detailed pictures of their factory and the product if you request for the same. They should also be able to give you the pictures quickly while also being able to meet your request for specific product details or equipment close up pictures.
- Get a sample- Any legitimate supplier should be able to ship you a sample.
- Evaluate the selling history- It is a good idea to ask the supplier who they have sold the particular product to and ask for reference from one of their customers.
- Request a factory tour- While it is difficult for you to personally visit the factory, you can partner with a reputable and experienced China sourcing agent to carry out the inspection for you.
- Beware of payment fraud- Payment frauds are one of the common frauds in the past few years. The scammer accesses the account of the supplier which is typically the email and gets to know which orders are being paid. They communicate using the same email with the buyer and provide a different bank account for payment. The unsuspecting buyer transfers the money to the account of the scammer. By the time the supplier or the buyer realizes they have been scammed, the fraudster is long gone and it is virtually impossible to track them. To avoid the payment scam, verify the bank account details with the supplier before making a payment.
Work with a China sourcing agent
There is much more to sourcing products from China for your Amazon selling business than searching for suppliers on Alibaba or other platforms and negotiating. From unexpected price increases to shipment problems, communication barriers to poor product quality, a lot of issues can crop up during the business transaction.
The right China sourcing agent can inspect the production site as they have their office in China. By communicating in Mandarin or the specific local dialect, the sourcing agents can ensure the supplier has understood the product specifications and technical aspects fully. They can also work out a backup plan when things go wrong in the last minute and the supplier is unable to deliver.