Sourcing Products to Sell on Amazon

Selling products sourced from China is an effective way to build a profitable business. Many Amazon sellers source products from suppliers in China at different qualities and prices. Given the competitive nature of Amazon, finding the right supplier in China who makes good quality products is crucial to ensuring business success.

A China sourcing agent can help you partner with the best China suppliers and provide end-to-end sourcing solutions, including

• Identifying suppliers in China for your product niche
• Verifying the supplier’s capabilities and credentials
• Negotiating the best deals and MOQ
• Mode of payment
• Ongoing quality inspection of the factory and manufacturing process
• Handling of shipping
• Drawing up OEM contracts
• Maintaining communication channels with the supplier
• Handling of disputes, if any, with the supplier

Challenges of sourcing from China

There are multiple challenges associated with sourcing from China that a legitimate sourcing agent can adeptly address.

Product selection- Product selection is one of the first obstacles Amazon sellers often face when they are starting out. While you can search for the most profitable products to sell on Amazon by looking at the sales figures, popular keywords, and other relevant data, you will need to match the demand on Amazon with supply from China. There are thousands of manufacturers in China who can make simple to complex products. However, some of them are not suited for Amazon selling, such as:

• High value and complex products: Products that are of high value, are difficult to manufacture, have complex technical or quality specifications are not suitable for e-commerce. Some high-value products that can pose a challenge to Amazon sellers include jewelry, consumer electronics, and skincare products that require sourcing of components or ingredients from multiple sub-suppliers. This can pose quality risks as controlling quality down the supply chain is difficult and increases error margins.
• Labor-intensive: Products that require a lot of labor, such as garments, handcrafted products, and shoes, are unsuited for Amazon selling. Minimum wages have risen in China, keeping with the global trends, and can vary within China depending on the cost of living and development level in each province. Recent figures show that wages range from 1200 RMB ($189) in smaller cities to 2500 RMB in Shanghai and other big cities. High labor costs can eat up into your profits.
• Counterfeit products: Counterfeiting was the world’s largest criminal enterprise in 2018, according to Forbes. The annual sales of pirated and counterfeit goods reached $1.7 trillion globally and are expected to reach $2.8 trillion by 2022.  As per the Counterfeit Report, China and Hong Kong account for 80% of counterfeits produced in the world, followed by Singapore, Germany, and Turkey. Counterfeit products are those that closely imitate another product’s appearance to mislead consumers, including unauthorized production of products that have intellectual property protection (trademark, copyright, and trade names). 

Communication difficulties - Language and cultural differences can pose unique problems to Amazon sellers looking to source products from China. Some of the most common misunderstandings occur due to culture, lifestyle, or language barriers that are related to a lack of clarity on the intended use of the product. Some products that find widespread use in the western world may be rarely used or not used at all in China. For instance, cloth dryers and ovens are not common in Chinese households.

Secondly, while in the US the Imperial system of measurements is used, the metric system is followed in China. This can lead to miscommunication of product dimensions or measurements. A lot of emphasis is given in China on establishing ‘Guanxi’ or the personal relationship, which plays a critical role in business transactions. Strong Guanxi can help you build a long-term profitable connection with the supplier and increases the chances of your getting favorable deals. However, not many Chinese suppliers are fluent in English, making it difficult for you to build strong Guanxi with a reliable supplier.

Finding reliable suppliers - A key challenge related to sourcing products from China is concerning finding the right manufacturer in your product niche. While B2B marketplaces such as Alibaba.com, DHGate, and Global Sources provide a list of companies or suppliers in China, this can include manufacturers, drop shippers, and wholesalers. Dropshipping is a business module where the Chinese supplier directly ships the item to your customer after purchase on Amazon. Wholesalers resell goods that they purchase from manufacturers while a manufacturer produces the goods in their factory. Evaluating whether a supplier is a drop shipper, wholesaler or manufacturer is important as only manufacturers have the experience or expertise in making and supplying the specific product that you need.

Verifying the supplier on marketplaces is another challenge for most Amazon sellers. While Alibaba gives ‘Gold supplier’ certification to suppliers who pay a membership fee, this by itself does not guarantee high quality.  You will need to spend a lot of time and effort verifying the business registration, license, factory address, and ratings of a supplier before you finalize. One of the best ways of finding out if a supplier is genuine and suitable is to visit the factory in China. While you can visit initially to check the supplier’s capabilities and reliability, one visit may not suffice. Regular visits and factory inspections are the best way to ensure your product is of the highest quality and that it is delivered on time.

Quality issues/disputes - Many first-time Amazon sellers find that the consignment from China does not meet quality specifications. These issues can occur despite drawing up a detailed OEM contract with the manufacturer that specifies quality, dimensions, timeline, and other details. Some of the issues that can be encountered include

• Sub-standard packaging
• Poor quality product
• Sub-optimal finishing
• Damaged goods
• Wrong or inferior quality of raw materials have been used   
• Dimensions are not as per your specifications
• Delay in shipment

While minor defects can be addressed, such as drilling larger holes or trimming down the excessive fabric, many other problems such as poor quality of raw materials, poor finishing or packaging cannot be rectified. If you have made a payment without an inspection at the factory before shipment, your requests for refund or replacement may not be entertained by the supplier.

If you have partnered with a reliable company and have drawn up a solid contract with specific quality details, it may be possible to recover a part of your investment. Some B2B platforms, such as Alibaba.com, offer ‘Trade Assurance,’ which is similar to Escrow. This can help buyers when a shipment is delayed or the product is not as per the agreed standard. However, not many suppliers are interested in this type of payment mode. Even when there is a refund or replacement, it can take a long time for these to be processed, which can have a huge impact on your Amazon selling business.

Advantages of working with China sourcing agents

Experienced and reliable China sourcing agents have an office in China apart from decades of experience sourcing and shipping products from China to Amazon warehouses.

Being based in China gives the sourcing agent the ability to build a vast network of suppliers and manufacturers across the country. This will help you find the most reliable supplier for your product category in a quicker time, which means you can start selling on Amazon sooner.

The sourcing services can help you shortlist the most reliable suppliers in China based on their experience and database of contacts and also recommend the best one who specializes in your product and has good experience in the industry. Some China sourcing agents specialize in certain product/manufacturing niches, such as metal die casting and plastic injection molding, which are the most common methods of manufacturing products in bulk at low costs.

Experienced China sourcing agents can also help you find good quality manufacturers in China who may not be listed on sites such as Alibaba.com, Global Sources, or other marketplaces. The agents conduct an audit of low key suppliers to verify their manufacturing process, license, and other documents, ensuring you partner with the top supplier in the product category.

Shipping assistance

Sourcing services also provide delivery assistance and handle the shipping to your warehouse, Amazon FBA warehouses across Europe and the USA. Whether you require ocean freight or quicker air delivery, the sourcing agent can handle and coordinate the shipment while taking care of the various documents that need to be produced at customs and to the freight forwarder.

On-site quality inspection

A key advantage of working with a China sourcing agent is that they can carry out on-site inspections and quality audits at the factory in China. While they visit the factor initially before entering into a contract with the supplier to verify their capabilities, they conduct regular inspections to ensure the production is happening as per agreed timelines and quality standards. The agent inspects the products before they are shipped and identifies any quality issues which can be rectified well in time.

Price and MOQ

The procurement staff of a reliable China sourcing agent has extensive purchasing experience and is familiar with specific techniques of sourcing from China. As they already have established long-term cooperation and connection with different factories in China, they are well-positioned to guide you on finding the best products to source from China at low prices.

Apart from pricing, many Amazon sellers face a problem in terms of minimum order quantity or MOQ. Most manufacturers in China have an MOQ and will not work with smaller orders. Suppliers may ask for your target price before providing a quote or may have minimum pricing below which they are unwilling to go. One way to know your target price is by getting quotations from different suppliers and factoring in the costs of components and raw materials required to make a high-quality product. You can also ask the China supplier for their best quote for your order quantity.

The order quantity also plays a major role in determining the price points. Larger orders generally have lower prices. Suppliers may also be willing to consider lower prices if you are going to be a long-term customer. When you contact suppliers through emails, you may encounter several that are unresponsive. There may also be unscrupulous suppliers who may quote a higher price, particularly if you are new to the business.

While opinions can differ on negotiating prices with suppliers in China and to the extent that you can go on to insist on a price point, your China sourcing agent can guide you on the most reasonable price based on current market trends. They are well aware of the negotiating techniques and are aware of the prevalent prices in the location where your shortlisted suppliers are based.

Contract terms

A key advantage a China sourcing agent has is the ability to converse in Mandarin and other local dialects used in specific regions across China. This will help them establish Guanxi and earn the trust and respect of the supplier before negotiating the price and terms of the contract. As the OEM contract and NDA are drawn up in Chinese, the services of a China sourcing agent here is invaluable. They can ensure all details of the product - including quality, quantity, timeline, price, and other terms - are clearly mentioned in the contract, thereby minimizing the risk of misunderstanding.

Drawing up a detailed contract is a proven way of ensuring the supplier understands your requirements and helps to minimize or avoid disputes. The sourcing agent ensures the terms you and your China supplier agree to are stated clearly, including the scope of the engagement, timeline, quality specification, dimensions/size, the technology and equipment used, raw materials to be used, and termination of the contract. The contract should also include clauses to protect your intellectual property. Protecting IP is crucial to ensure the supplier does not sell your products at a lower price in your target market or makes any claims to owning the product’s IP rights.

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.

For more on China sourcing visit our website or write to us at info@sourcingallies.com.