This guide to product sourcing for Amazon will get you one step closer to Amazon success.
It is a widely held belief today that businesses don’t compete, supply chains do. The role of product procurement in business sustainability and growth has become increasingly significant in the Amazon age. Shorter time-to-market, superior product and service quality, and lower operating costs are game-changers for just about anyone that sells on the internet. The jolt from the Novel Coronavirus pandemic to supply chains underscores the importance of making product procurement resilient to risk.
Amazon sellers relying on the tremendous opportunities provided by China – the world’s factory – also need a procurement plan that reduces uncertainty, ambiguity and market volatility. Finding a supplier from a low-cost country may seem straightforward on paper, but it is seldom simple and poor decisions can spoil your chances of building momentum early on. An understanding of what is involved in sourcing from China usually encourages Amazon sellers to be more open-minded about engaging an agent that has boots-on-the-ground in major manufacturing zones. Here are some tips on forming relationships with Chinese suppliers and the advantages of going through a China sourcing agent.
Alibaba is probably the first place you’ll check for Chinese suppliers or manufacturers. Some of them may be trading companies, so verification is important. Use the detailed supplier information the website provides to conduct due diligence at your end. Call them up. Check their business license. Ask for references. Do a background check. Cover all the bases.
You also want to do a factory visit. Alternatively, you can have a China sourcing agent act as your intermediary. Agent services are usually comprehensive, and recommended if you’re new to selling on Amazon and navigating unchartered waters.
Amazon sellers who are in it for the long haul and have some import/export experience may be able to connect and work with Chinese manufacturers by themselves. It may involve visiting the Canton Fair and maintaining ongoing relationships with China-based businesses to keep their Amazon venture on track. Even if they face a negative experience eventually, they have some sort of fallback by maintaining these relationships.
There are stark differences in Western and Chinese styles of working and doing business. While companies in Europe and the United States are likely to enforce rigid rules and written principles, China’s businesses emphasize relationship-building and internal cohesion.
Building harmonious relationships with your Chinese supplier from the outset is important. Repeated social interactions can sustain mutual trust and understanding, laying the foundation for a long-term relationship.
Across-cultural comparison will tell you that China’s businesses are restrained about sharing bad news (ex: there may be a production delay) and prefer an indirect style of communication (a nod of the head may mean a ‘yes’ or ‘I get you but I don’t agree’). Figuring out and getting comfortable with such non-verbal cues and indirect language takes time.
Mandarin fluency will obviously work to your advantage but the question to ask is: can you make the time to initiate and coordinate dialogue as and when needed? There may instances other than a dispute where you need to communicate personally with your Chinese manufacturer. Determine the limits of the time and effort you can spend on establishing and maintaining a mutually-beneficial relationship with your Chinese supplier.
A well-drafted contract in Mandarin will protect your business interests. It should include a provision for informal negotiations, so you can resolve any dispute via mediation or arbitration. Suing your supplier for breach of contract can be complex and time-consuming not to be mention emotionally overwhelming. Working it out with your manufacturer is a better option as you avoid the costs thereof and don’t have to deal with a case that drags on and on in court.
However, in an instance where your supplier is uncooperative and has acted egregiously, you can consider pursuing legal action. When you do, the legally binding agreement you signed will determine whether the outcome is favorable or against you. If your contract is not specific with regards to the expected quality of goods ora third-party pre-shipment inspection, you may find yourself on the losing side.
Quality inspection should invoke the image of an inspector who is physically present on the factory floor and reviewing production and product quality. Ideally, this individual has experience evaluating tooling and capacity, technical standards, R&D, security and working environment. When the raw materials/components have arrived, a second check is done before the materials head for assembly lines. Ongoing monitoring at different production stages offers more encouragement that your products will turn out exactly how you wanted.
Can you inspect the manufacturing process and quality control mechanisms at your Chinese manufacturer? Most probably not. Amazon sellers rely on China sourcing agents for factory audits and quality checks at different production stages. This way, any issues or misunderstandings grasping product specifications can be addressed quickly.
A safe bet is to find a Chinese manufacturer that specializes in a niche item or one that has experience manufacturing a spectrum of products you will be selling on Amazon. In the former case, the factory will obviously be knowledgeable about the product. Someone that has supplied to western businesses will be familiar with your expectations.
Nevertheless, the general rule about conducting quality inspections applies here as well. Also put down everything agreed upon in writing and clarify that the manufacturer has no doubts about your requirements. In keeping with their culture, Chinese suppliers may not actively seek out clarifications or ask questions. Recognizing this tendency will help you frame your messages and communicate effectively, ensuring that assumptions or mix-ups don’t occur.
Chinese negotiating style is more about the means and less about the ends. You should definitely have multiple conversations around product quality, terms and price to reach a good compromise. Price efficiency is a huge advantage of Chinese manufacturing, so negotiating a lower overall price or asking for discounts should be on the agenda. A word of caution: avoid driving the price below which the supplier just cannot go. This price floor is tied to quality. Any less and an inferior quality product is pretty much guaranteed.
It is no secret that timely payments to manufacturers, vendors and contractors support the business relationship and may even earn your account more preference over other Amazon sellers. Given that Chinese suppliers care a great deal about honor and commitment, you can avoid any problems by meeting your contractual obligations.
To be sure, you need to draft strong payment terms and release payment after you’re satisfied with the quality of shipment. You can also choose your preferred payment method. When your manufacturing partner has met your expectations and shown they value your business, on-time payments will only help your relationship.
A sourcing agent assists Amazon sellers in locating manufacturers for products at low prices. The agent reaches out to various manufacturers, sourcing the product you need, and makes a percentage of the order value. In contrast, a distributor purchases products wholesale and sells them at a marked-up price.
A China sourcing agent that has been in business continuously for a couple of years can coordinate with manufacturers that supply to Western retailers. Depending on what you’re selling, you can enter an agreement with a manufacturer that makes the products you need and is familiar with Western business communication styles. If there is a different factory that can make the same product at a lower price but has little to no experience dealing with American or European sellers, a sourcing agent can reach out to them. You can capitalize on their manufacturing capabilities and increase your profit margin.
Negotiating with Chinese suppliers can be intimidating simply because they speak a different language. When you have to communicate technical specification and quality expectations, putting them down on contract won’t suffice. As explained previously, Chinese suppliers are not forthcoming about requesting for clarifications. At the same time, their business relationships are based on mutual trust and friendship. It’s a bit of a paradoxical situation that can be solved by frequent engagement and conversations in the local language. A sourcing agent’s assistance is invaluable in helping your China supplier understand everything they need to know about your product and business.
As negotiating on price won’t happen over one phone call, you will need a representative in China to convince the supplier to lower the price by a reasonable amount. Someone who can visit the supplier in-person to negotiate is likely to close the deal faster than interacting via email, Zoom or phone from a different time zone. The most precious commodity you will be saving is time – the sooner work begins on your product, the faster you can bring it to market and have the cash flow to keep your business running.
A China sourcing agent makes factory visits at different stages of production to check on your product. Issues with raw materials or samples can be rectified at the earliest. You don’t have to deal with a shipment that will never sell on Amazon. Of course, you can refuse payment or reach a different compromise, but you don’t want to be in this situation at all. Partnering with a reliable manufacturer greatly reduces the possibility of facing disappointments with regard to product quality.
For efficient inventory management, you need to stay on top of your manufacturer’s lead times and delivery schedules. This becomes even more importance when you source from an overseas supplier, and if certain customers or types of orders have the first priority for delivery. As your sourcing agent is involved at all stages of production, they can help your order stay on track and keep communication lines between you and your supplier truly open, ensuring that unexpected delays are conveyed immediately.
In a worst-case scenario, your sourcing agent can lead arbitration and mutual concessions can be made. If your product requirements have changed and you wish to part ways with your current supplier, the agent can connect you to someone that is a better fit to your new needs. You can respond to the ebbs and flows of business more flexibly with a sourcing agent by your side. After all, the success of your business is hinged on successful procurement.
Millennials are more likely than any other generation to pay more for sustainable products. A large percentage of Amazon shoppers are in the 18-29 age group. Overall, purchase trends generally favor ecologically friendly products. Perceptions have come to matter a great deal, with social issues and environmental advocacy influencing consumer attitudes and choices. As an Amazon seller, you have to research purchase drivers of your product. If you find sustainability, fair factory working conditions and social impact to be influencing factors, showcasing your green credentials makes good business sense.
Sustainable sourcing can be a measure of a suppliers’ greenhouse gas emissions and carbon footprint. It could be efforts to make manufacturing processes more energy-efficient, to source recycled raw materials, or to dispose of hazardous waste responsibly. Sustainability gains can be made in shipping, such as minimizing air freight, consolidating shipments, using hybrid or electric vehicles for road freight, or participating in carbon offset programs.
The big question is, how can you find Chinese manufacturers with a demonstrated history of sustainable practices? Like the mandatory factory checks at the time offinding a supplier, verifying their sustainability program becomes important if you want to make environmental consciousness one of your USPs. You can leverage a China sourcing agent’s supplier network to locate a business that shares your values which can help you look good before your customers.
If you don’t have inventory, you don’t have a business on Amazon. Making the best procurement decisions from the beginning will save you a lot of headache down the road. As an integral part of your procurement operations, a sourcing agent with a physical presence in China can help you navigate complexities and build a successful business.
Sourcing Allies is a team of expert China sourcing agents that has helped western customers manufacture and source products from low-cost regions since 2006.
October 15, 2020
What are the key considerations for your China supply chain?
October 14, 2020
There are a lot of moving parts when it comes to sourcing from China. The right sourcing agent will cover all your needs on the supply side.