Product sourcing from China can be tricky but well worth the effort. Here is how you get high-quality products at the right price consistently from China
Online or retail businesses outside China can benefit greatly from sourcing products from China. Contrary to the popular belief that China is the home to cheap and low-quality products, many manufacturing units in China produce high-quality products that are competitive in any market. When starting your business, you have the option of manufacturing the product yourself, buying locally, or sourcing from a foreign country. Product sourcing from China may seem more daunting than the other two alternatives, but it is also the one with the potential for maximum profit. But dealing with the complex system of Chinese business needs some preparatory steps and strategies. You can navigate through the complexity and grow your business with a sound product sourcing strategy.
Before we delve into how to source high-quality products from China, let’s have a look at why China has become the primary country of choice when it comes to sourcing products.
You will find numerous opinions on why China is the hotbed of product sourcing. These opinions are often laced with personal biases. From a strategic and economic point of view, China offers numerous benefits that no other economy can at this moment.
Cost: Cost is the main reason so many businesses rely on China for their products. China has a huge, low-cost labor pool. The cost-effectiveness of this labor force is unparalleled. Other aspects where you can save money by sourcing products from China are tooling and molds, unit costs, packaging, design, and engineering functions. While sourcing products from China, you must also be cautious about the quality of the product you are getting. The Chinese market is flooded with poorly designed products with low-quality materials. However, a little knowledge and understanding of your niche will give you access to high-quality products manufactured at a fraction of the cost than they would if produced anywhere else.
Elimination of middlemen: A safe way to boost revenue is to deliver products to customers at a low price without compromising the quality. One of the ways to achieve this is to cut out the middlemen as much as possible. Chinese manufacturers recognize this and deal directly with the business they are sourcing to. Chinese sourcing agents eliminate the role of middlemen and deal directly with your business. Apart from the huge cost saving that benefits you, you also develop a better understanding of how the seller works and how to get the best products from them.
Chinese supplier base: It is a known fact that the Chinese supplier base is one of the best in the world, if not the best. China imports subcomponents and materials from other countries and does all the assembly in China. No matter which industry you are dealing in - textile, electronic, automobile, plastic, toys - you will find numerous suppliers in China. The factories in China are also well connected to a robust infrastructure that facilitates the production and transportation of goods, both finished products and raw materials. China’s booming economy is the reason such a vibrant supplier base exists there.
Reduced risk of fraud: Sourcing products from China is done through a well-managed process. It reduces the risk of fraud happening over business transactions. Since you will be directly in touch with the supplier, you will know what’s going on at every step of the process. You can deal with problems of untimely delivery, poor quality, and fraudulent transactions directly without any middleman. You are much more aware of what’s going on behind the scenes when you source your products from china.
Scaling capabilities: The efficient Chinese infrastructure coupled with manufacturers with in-depth knowledge and understanding of the global supply chain makes it possible to scale up production significantly with no additional hassle. You can scale up production from hundreds to thousands in just about a week’s time. On top of that, Chinese manufacturers allow a low Minimum Order Quantity (MOQ). If you have a startup or small business, it will greatly benefit you to be able to place small orders at a time, and then scale it up as and when your business grows. The time needed to scale up production will depend on the availability of raw materials and production time, but it would be better in China than anywhere else in the world.
No wonder China is often the first choice for businesses when it comes to product sourcing. The benefits listed above can boost your business to a different level. If you are looking for growth and boosted revenue, product sourcing from China is a reliable option. However, you should always be vigilant about the quality of the product you are getting. If the quality does not live up to expectations, you will lose customers no matter at what price you sell your products.
Sourcing products from China is definitely beneficial for your business, but this does not mean that it is easy. You will want a steady supply chain of high-quality products. To get the best value out of sourcing products from China, you will need a robust business strategy before you engage in business deals. Since the Chinese economy, culture, and people are often alien to us, it is very easy to make mistakes and bad deals. With just a few pointers in mind, you can greatly reduce any chance of making wrong business deals with Chinese manufacturers.
Trade companies: Trade companies are large factories that offer a huge range of products. They would put an additional cost over the manufacturing cost for profit. If you need a low minimum order quantity, it would be better to deal with manufacturers themselves instead of trade companies. It is worth noting that when trading with trade companies, you will not be directly familiar with what is going on in the factories. For huge orders in a diverse range of products, they can be your top choice.
Wholesalers: Wholesalers typically deal in standardized products, and you do not have the option of customizing according to your needs. Wholesalers often have warehouses in foreign locations, which saves shipping and storage costs. To make a profit, wholesalers add a margin on top of the manufacturing costs. For new eCommerce businesses, wholesalers can be a good option.
Manufacturers: Dealing with manufacturers directly is the most cost-effective option out there. The profit margin is higher than what you would get from trade companies or wholesalers. The difficulty lies in effective communication with manufacturers because many of them do not have English-speaking front desk staff. Many manufacturers are also already acquired by big companies like Alibaba, so it will be difficult to find what you are looking for.
Now that we have distinguished between the three avenues from where you can get your products, it is important to know exactly how to prepare for product sourcing from China, and what are the things to keep in mind.
It is imperative to research the market for products that are in high demand but low supply. In the Chinese manufacturing industry, you can grab hold of absolutely anything you want. But if the product you are thinking of selling is already sold by established companies, it will be very difficult to grow your business. To make a mark in an already competitive market, your product and marketing need to be unique. Research on the internet to find out how you can obtain those unique products from Chinese manufacturers, and whether the total cost leaves a margin for profit.
Alibaba, Global Sources, and Made-in-China.com are among the most popular product sourcing platforms in China. In these platforms, you will find various suppliers labeled “gold member”, “verified supplier”, “onsite supplier”, “accredited supplier”, etc. These tags, however, do not guarantee the quality of the products they produce. It simply means that these companies’ existence has been verified. Platforms like Global Sources will give additional protection to buyers. Global Sources also publishes a report called China Sourcing Reports (CSRs). These reports are a good source of gathering information about product suppliers in your niche, their reviews, performance, etc.
Chinese suppliers get a lot of orders from all parts of the world. To get the best price, you must project an image that you are ambitious about your business and intend to order in bulk if you like the product samples. If your order quantity is not enough to generate the supplier the desired revenue, the price quoted to you will be higher than usual.
If the option of visiting China physically is open to you, you can gain a great deal by talking to manufacturers directly. Visiting would cost you time and money, but often you will get the best deals at some trade show or by negotiating with the supplier after seeing the samples yourself. Be mindful of how social exchanges happen in China and maintain the necessary etiquette if you are planning to visit. Use an experienced China sourcing agent can be wise. They can guide you through the process and also manage the daily tasks on the supply side.
China has emerged as a giant in the world economy. Sourcing products from China is a great way to make optimum use of this booming economy. Maintaining a business relationship with Chinese suppliers is a matter of time and patience. With strong interpersonal bonds, your business contacts will also strengthen. Trading with Chinese suppliers requires overcoming a language and geographic barrier, but the results will be well worth it. Competition in the market is going up every day. Once you have decided that you want to grow your business, you should waste no time and start your research. Good research and strong connections with the right suppliers, combined with the Chinese market, will boost your business in no time.
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.
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