What Amazon Sellers Can Do When Products from China Are Not as Expected
There are things you can do when your consignment is not what you expected.
This blog article was first published on www.sourcingallies.com
Amazon sellers in the west have remained loyal to Chinese factories on the basis of consistent quality at low costs. That said, no two Chinese manufacturers are the same.
Generally, a factory that specializes in a single product category is easily able to meet performance standards expected in western countries. Their staff has a well-rounded understanding of the product, and a singular focus increases the likelihood of receiving top quality products. Partnering with a Chinese factory that has experience manufacturing your product can go a long way in avoiding quality-related disputes.
Price, years in business, and recommendations from a trusted business contact; these are all convincing reasons that may propel you to choose a factory that makes a broad range of products. Make sure you do your due diligence and take a closer look at quality indicators before entering into an agreement.
In this post, we look at what to keep in mind when reviewing a Chinese factory and how to deal with quality-related disputes.
Audits are necessary
A factory’s quality control process may look great on paper but your final product may disappoint you. Another factory may not appear to have the quality control processes you were anticipating but manages to meet or exceed your product expectations. How do you tell the two businesses apart when checking for quality?
- Make inquiries about the manufacturer, determine its reputation in your product category.
- Don’t trust that everything is fine. Just because the factory has an in-process quality control officer there is always a chance your specifications can be lost in translation.
- Instead you should engage a China sourcing agent to identify a reliable manufacturer and conduct quality inspections at all stages of production.
- Conduct a factory audit yourself or arrange for an inspection by a respected third-party agency.
Chinese factories are open to requests for inspections and audits. Any factory that acts evasively in this regard is best to be avoided.
Quality is directly proportional to cost
Chinese manufacturers run on thin margins. To offset costs of production, they set higher minimum order quantities (MOQs), such as 1,000 pieces, for common goods. You will find that MOQs are smaller for complex or expensive items. Not only do manufacturers have to contend with fluctuations in raw material prices, they will need to manage disruptions in their supply chain or at their factory. If they can’t it will be reflected in increased production costs.
To remain operational and profitable, producers must set a price floor for the item they make. This is the minimum price at which the product can be made at an acceptable quality. During your research phase, you will come to understand the average price for manufacturing your product. When you reach out to suppliers you will receive similar quotes from many. This should help in confirming the actual costs of making your product.
Beating down the quoted price almost always results in a drop in product quality. You may feel that you won at the negotiating table but you lose overall if there are no takers for your poorly-made goods.
Manufactured product does not match the sample
The ‘golden sample’ is commonly used to secure a purchase order from a potential customer. It is likely that the very first trial product you test with the manufacturer satisfies your quality requirements, or you may be offered to request a few modifications to the sample to bring it perfectly in line with what you want- so you make a purchase commitment.
The problem starts when your products don’t look or feel, or aren’t packaged like the sample. Perhaps every batch suffers deficiencies, maybe a few random items you checked failed the test. Could you have avoided the situation?
Ways to enforce quality standards
- Send the approved sample under seal back to the manufacturer. The purpose is to ensure that factory staff have a handy reference when they’re producing your items.
- Be specific about your requirements to the factory manager, key factory workers and if possible, to a higher-level decision maker. Reiterate that strict adherence to specifications means ensuring that finished products match 97%-100% of the sample.
- Make it known in your manufacturing contract, emails and in-person meetings that a third-party quality inspection agency will conduct a random pre-shipment check. Any issues with a batch need to be resolved on a priority basis. Hire a licensed agency whose inspectors have the competency to do a multi-point inspection of batches based on the specifications document you’ve provided.
- Partner with a China sourcing agent who has experience working with Amazon sellers. You can keep product quality issues to a minimum, even eliminate them entirely. Here’s why: a good sourcing agent will keep the sample and compare against products after mass production has begun, allowing them to detect discrepancies, take the matter up with the factory and have the products fixed or new ones made. Additionally, one of the sourcing agent’s staff members supervises your order on the factory floor, ensuring that the golden sample is duplicated on a large scale.
If you weren’t aware about enforcing quality requirements, which has led to a disappointment with your first order, you can exercise certain options based on the type of issue.
Dealing with bad quality products
Your consignment may have one or more problems. Minor inconsistencies in length (of textile) or size (of holes in accessories or components) can be fixed. So, if it’s a matter of drilling larger holes or making alterations should the usable width of the fabric be greater than that specified in the manufacturing agreement, the factory won’t have to go back to square one. But if the dimensions are off by a long shot or inferior quality raw materials have gone into producing your goods, you will need to negotiate a replacement.
Unmet packaging requirements or poor quality finishing can also be resolved. But if improper packaging (or any other issue) results in damaged goods during transit, there’s nothing you can do. Your customer orders may also be affected if the factory has delivered the wrong quantity of goods.
Include terms around remaking defective products if they exceed a certain amount. So, if 100 components in a batch don’t meet specifications, the manufacturer will need to remake them at a priority. If the number of defective items is below this minimum, they can be replaced when you order your next batch. Be specific about the waiting period for receiving replacement items, i.e., the time between registering your claim and shipping the products.
Most manufacturers will not cover the cost of shipping, duties and taxes accrued for additional shipments. Check if your insurance company can cover shipping costs. Free on board (FOB) shipping terms are associated with lower custom duties. Local tax and customs authorities may consent to a deduction, making it worthwhile to explore this possibility in keeping your costs down.
Manufacturers generally include free parts for automobile parts, LED fixtures and small machinery. Any malfunctioning component can be replaced with the spare. Depending on the type of item you’re sourcing, you could require the manufacturer to ship replacement parts.
Some points to consider:
- Will the parts be provided free of charge and if so, what is the validity period on the replacement parts?
- Do you have to order above the MOQ to get replacement parts?
- Who will be responsible for the delivery costs?
- What is the timeframe for receiving the spare parts?
Repairing the product
If defects in the product can be corrected, then the manufacturer may be able to accomplish it faster than remaking the items. Determine who will pay freight costs, how much time the manufacturer has to repair the items, and the next steps if the products cannot be made compliant.
Getting a refund
Compensating a buyer for a full order can have a drastic impact on the manufacturer’s profit. A full refund is rare, a partial refund is always possible. A small manufacturer may not be able to offer either, unless they sell some of their assets. Converting assets to liquid cash takes time, so expect a lengthy waiting period to get your money back. Passing your order on to another customer can allow a larger, more established producer to provide a refund.
Three dispute scenarios
#1: You made a one-time purchase from a trading company or a Chinese factory
The dispute probably won’t be solved to your satisfaction as the supplier will stop responding to your requests for a refund or replacement. If you sourced from a legitimate company, you may be able to recover some of your money but if your contract does not specify quality requirements, expect a lot of back and forth.
Chances of refund are high if you’ve sourced from a supplier on Alibaba and signed an agreement with the Chinese business. Alibaba’s Trade Assurance service offers full payment protection to buyers if quality falls outside predetermined quality standards, or if shipment is delayed. However, claim assessment by a third-party inspector can add days or weeks to the refund process.
#2: You made a one-time purchase using a China sourcing agent
Quality related complaints are fewer when you commission a reliable China sourcing agent. Your agent works closely with the manufacturer from the time the sample is made. They clarify terms and conditions of your contract to the manufacturer, and do in-process checks to ensure product compliance. Despite these measures, quality may sometimes fail to meet expectations. Your sourcing agent can help both parties cooperate and minimize any financial repercussions.
For fair and effective negotiations, you must establish that lapses occurred and attribute fault correctly. This way, you can argue a strong case for replacing or repairing your products, or let the matter rest and focus on future orders. Some of the explanations you may need to provide from your side include:
- What constitutes a defective item? How to distinguish between good and bad quality? (your contract should lay this out clearly)
- What evidence listing the defective items need to be provided? Ex: photos, comparisons with sample, documented errors, and so on.
- How many items will be checked and indexed? If a product fails compliance testing, will the entire batch need to be replaced?
- How many days does the manufacturer have to repair, replace or refund the products?
- How many days do you have, from the time of shipping the consignment, to bring defective products to the attention of the manufacturer?
#3: You have a long-term relationship with the supplier
This is the best-case scenario for a refund or replacement. If you’re a source of recurring revenue for the supplier, they will remake or replace products without hesitation.
The only setback is the lead time to replace products. Longer lead times may require you to push back your delivery dates. Typically this is manageable and you don’t really have anything to lose.
Taking the manufacturer to court
There is no point in filing a case against your supplier in an American or European court as China doesn’t recognize or enforce foreign judgments. You can appeal at a Chinese court, but the process is time-consuming, expensive and stressful. In fact, manufacturers and importers prefer not to get entangled in litigation, and try to settle disputes amicably. For smaller value consignments, this should be the norm.
If the manufacturer is uncooperative and has caused you a significant loss, you could consider suing them. The legally binding contract you’ve signed can help you secure favorable judgment. The alternative is arbitration, where a neutral third party settles the dispute out-of-court. The decision by the neutral arbitrator is final and binding.
To avoid quality-related disputes in the first place, work with a trusted manufacturer with the production capabilities, product knowledge and experience demanded by your product category. Create a solid contract that explicitly states each party’s obligations and what happens if either party fails to honor their commitment.
You can push back politely if the supplier has been careless with your order, and keep the relationship intact during a conflict. As long as you don’t let emotions get in the way, and allow the manufacturing agreement to do most of the talking, you should be able to get past the conflict without any financial impact.