Your brand competes against competitors as a low production rate influences buying decisions of potential consumers. Nowadays, there are many high-quality manufacturers you can find in China, even when you factor in the shipping costs, it is still low-cost to import products from China.
However, there are many things you need to pay attention to. The importing process is confusing, complex, and costly. The expected profit margins can be consumed by the fluctuating shipping costs, long transit times, unexpected delays, and regulatory fees. However, using the following tips, you can make the process of direct sourcing from China smooth and efficient.
Determine the product to import
Choice of the right product for resale is essential. The chosen product will define your business, and represents your brand. The chosen product will impact your marketing and profit margins.
Do some extensive research on product development and sourcing. Obtain descriptive information and composition details, and verify product samples. It is crucial to determine the tariff classification number or the HS code to determine the applicable duty rate, and check the legal and logistic limitations.
Recommendations:
- Choose a product you are passionate to work with.
- Choose something unique you can resell at a high margin.
- Choose a product that can be shipped in bulk to lessen the cost per unit shipping cost.
Never go after cheap or hot products. Many people get stuck on perfect products and just linger around. Each product will have challenges but find the product that defines you and flourish from there.
Calculate landed cost
For every imported item, you need to identify the 10-digit tariff taxonomy. These numbers along with the certificate of origin will help to determine the import duty rate to be paid. After this, calculate the landed cost: FOB price from manufacturer + shipping charges + custom clearance, tax & duty + land transport to your warehouse.
If the landed cost is higher than your anticipation, then it can dent your profit margins. If it is in sync with what you expected, then move forward. It is not the exact cost, which you will know after the shipment arrives. Unexpected fees may come up, but an estimation is helpful.
Choose a reliable supplier
Finding and vetting manufacturers is time-consuming and stressful because you need to make sure about their capability, capacity, and quality level. Check their supplier reliability audit in China. There are myriads of factories capable of manufacturing orders in bulk, it is challenging to find the right one.
There are many ways to do China supplier evaluation. There are scammers and illegitimate companies in China called the ‘Suitcase Company’. These are set to look glamorous on their website but in reality, don’t exist.
So, perform a background check before placing your first order. There is no public way to check the legitimate business status in China, so importers need to have a background check conducted. Perform general online research or better still hire professionals to do due diligence.
Never look for the cheapest rates because it means quality compromise. The lowest price invites high risks, which can be a threat to your reputation.
Confirm full details with your supplier
Discuss your product specifications clearly with the supplier. ‘Not clear’ means the factory will decide based on cost-savings. Double-check the raw materials and manufacturing process, so you are confident about the goods you are purchasing. Ensure that the chosen Chinese manufacturer knows factory audit standards and safety regulations in your niche market and the locations you plan to sell.
Make sure that the supplier agrees to ship from the nearest port under FOB terms. This will significantly reduce shipping costs. Besides, you gain control over shipment.
Clearly discuss your product needs with the Chinese manufacturer repeatedly. The Chinese supplier may be unaware that the product quality requirements and functions must align with western countries, so the definition of a good product will be based on their satisfaction and not your business-standard.
Negotiate payment terms
The standard payment terms are a 30% deposit upfront and the remaining 70% by T/T on the first order shipment. For buyers, payment is risky because it is grounded on commercial credibility instead of a strict 3rd party guarantee.
Alternatively, Letter of Credit offers less risk and better guarantee to buyers and fair payment terms to the sellers. You will need to choose a payment mode wisely, check exchange rates, and even plan remittances to avoid inevitable currency fluctuations.
A golden rule is to clearly spell out the payment modes, terms, and schedules in your contract. Be considerate about your supplier’s costs and risks because it helps to build a long-term strong relationship.
Never pay to a personal account but insist on the manufacturer’s business account. It needs to be specified clearly during contract negotiations.
Integrate quality assurance into the deal
You will need to figure out what quality is needed like product function or material superiority. It is achievable via confirmation of the final sample. Importers need to settle on the AQL. It is the maximum percentage of defective features they will allow per batch.
Tell the supplier that you will need to engage an inspection service in China to monitor the product quality as agreed.
An established supplier will always make sure to manufacture high-quality products to maintain its positive reputation. The importer will also be able to build a good brand reputation with the help of professional China manufacturing agents.
Conduct quality inspections
Physically visit the factory or hire a local sourcing agent to represent your business to evaluate safety and compliance standards. Find out if they are suitable for your business requirements.
The quality of raw materials has to be evaluated and verified before manufacturing commences. Order samples and have them tested at a lab. A reliable QC company can arrange all the work for you.
When the factory starts manufacturing the products in China, you need to hire a trustworthy QC company to conduct effective in-process quality inspection.
Having someone local representing your business sounds soothing as you can avoid costly errors due to language barriers, cultural differences, misunderstanding, unclear communication, etc.
Pre-shipment inspection is also essential. It aims to check if the product quality aligns with customer satisfaction. Pre-shipping is crucial, especially when consumer goods are purchased because consumables need to fulfill specific bureau standards.
Arrange sea shipments
Bear in mind that sea transportation is quite slow and needs long-term planning in comparison to inland transportation. Moreover, the time needed to export products also includes road transportation to port, documentation, customs clearance, and port handling for goods. It can last up to 7 days.
Never doubt your manufacturer in China because international trade is built on mutual trust. If you want respect, then learn to give respect. Or no one will help you sincerely when situations pop up suddenly.
Have a backup contingency plan
Never depend on one manufacturer in China or wait for disaster to occur. There are chances that things with the supplier may go haywire.
For example, if your product sales are excellent then will the manufacturing facility in China willingly ramp up its production and grow with you. Unfortunately, many Chinese factory owners are limited on new equipment investment or hiring more labor.
So, you will need to subcontract, and this is a maddening task as you will need to engineer the subcontractor in making the product similar to the original manufacturer.
It is wise not to get locked with a single manufacturer and the last thing you desire to do is start searching for a new factory.
Have backup suppliers right from the start, which offers a stable supply chain and strong bargaining power.
Conclusion
China is the world’s largest manufacturer of consumer products. Many businesses are keen to buy low-priced products from China and import them to their country. Sourcing products from China is challenging, but not impossible. If you are a new entrepreneur and planning to import goods from China, then you will need to consider the things shown above.
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