If you wish to launch a small business or sell goods online, you must find a source from where you can purchase products at lower costs but without compromising on quality. It will help you increase your profit margins. China is one of the top sourcing countries in the world, where a wide range of industrial and consumable goods are offered at extremely low prices. So, direct product purchasing from China can be one of the best options.
Most businesses in the world are now buying their goods from China. However, before you seriously consider buying from a Chinese company, you need to ensure quality, delivery and a host of many other things.
No doubt, you will find good quality products from the Chinese market at an unbelievable price, but you need to be fully aware of the whole nitty-gritty of the buying process and also find a trustworthy Chinese supplier to make sure your business can flourish. There are a lot of companies from Western countries that have succeeded in their business by importing from China, but it is also a fact that some of them have faced several problems during the process.
Therefore, those who are new in the business need to learn lessons from the mistakes that many companies have made while sourcing from China. It is important to consult with the experts in this field and create a proper strategy before you decide to do long-term business with Chinese companies.
Common problems while sourcing from China
If you are someone from a Western country who intends to source your products from China, you will be encouraged to find the range of products available in the country. However, when you try contacting them, you may come across the following issues:
1. Language and cultural barrier - The first shock you will experience when you try to communicate with any Chinese company is the language barrier. In China, there are only a few executives who can speak or understand English clearly, most companies do not have English-speaking people. Despite that, you will notice that due to cultural differences, there is often a misunderstanding, and it is tough to communicate. It is very likely that after waiting for several months, you may end up receiving something different than what you had anticipated.
2. Geographical constraints - Since China is located on the opposite end of the globe, it will not be convenient for you to visit China every now and then and resolve your issues. Unless you appoint your representative in China, it will be quite difficult to sort out any small issues quickly.
3. Quality issues - Quality is one of the biggest issues that can damage your business reputation. There can be quality issues due to miscommunication, poor raw materials, not conforming to safety standards, or damage during transportation due to improper packaging protection, etc. A few years back, Chinese companies had a terrible reputation for supplying poor-quality products.
4. Currency fluctuations - Due to geopolitical issues, there are often difficulties in trading with China as currency fluctuations can seriously dent your profitability. Most Chinese companies prefer to deal with the US dollar, and if the dollar fluctuates, then companies from Europe or other part of the world can be affected.
5. Legal constraints - The Chinese legal environment significantly impacts global sourcing, with unique laws and varied interpretations causing misunderstandings for European businesses. To understand these constraints, one must recognize China's long-standing policies promoting economic modernization and internationalization, which include enacting foreign investment-friendly regulations.
6. Shipment issues - When dealing with extensive distances and different rules, logistics and shipping management can get complicated. Careful preparation and coordination are necessary to account for problems such as delays, shipping faults, customs processes, and transportation expenses.
7. Intellectual property issues - Businesses can benefit greatly from sourcing items from China, but there are drawbacks, including the need to protect intellectual property rights. China, a centre of the world's manufacturing, has advanced significantly in intellectual property rights protection in recent years. During the stage of product purchasing from China, companies must put in place strong measures to protect their intellectual property.
How do you buy products from China?
Let us now discuss the steps that you need to follow when you are planning to source your product from China.
1. Know about your product thoroughly
To begin with, you must decide which product you are interested in sourcing from China. Any product that you choose, you will be able to find many Chinese companies available to supply you. Therefore, you must know the technical specifications of your product. To make sure you understand the products the Chinese provider is offering, you can also ask specific and detailed questions with them.
The next thing to check is whether you can import that product into your country. The rules and regulations of every country may be different. You should not end up sourcing any product from China that is banned in your country.
2. Identify suppliers
Now, you must try to search online and shortlist a few companies that can offer your product as per your specifications. While identifying Chinese suppliers, you may come across 3 different types of suppliers:
- Manufacturers
China has a variety of manufacturing facilities that vary in terms of size, quality, output, and product offering. Given that their area of expertise is production rather than marketing, they might not have enough qualified English communication staff. However, as they are production professionals, they can comprehend your technical needs, provided they have expertise in creating your products. As a result, you must be extremely knowledgeable about your product and communicate your expectations to the factory.
- Traders
They are experts in particular markets or product lines. They serve as middlemen, buying goods from manufacturers and reselling them for a premium. This implies that when dealing with trading companies, you might have to pay more than factories. However, working with trading companies can be more convenient for you. They employ qualified English speakers who can communicate and offer services more effectively. Additionally, because of their connection to the factories, they will be ready to deal with fewer MOQs that manufacturers are unable to. Trading firms have a bigger product range and a substantial product catalogue because they may represent several factories, allowing you to centrally purchase many of the things you want from them.
- Sourcing companies
Sourcing companies do not receive commissions from the intermediary, in contrast to trading companies. They act as the client's agent in China, overseeing their import and quality control activities and serving as their representative. Their expertise is more comprehensive, they comprehend many sectors, and they are well-versed in the import procedure. Typically, sourcing organizations don't have their own price lists or product catalogues. Instead, they customize and buy each product based on the needs of the client. In the event of a disagreement, the sourcing companies may act as the client's representatives.
3. Verify suppliers
To source products in China, start by searching for manufacturers and contacting them via email with product details and inquiries about their experience. Alibaba is useful for hardgoods and home consumables, providing seller details like:
- Experience
- Manufacturing capacity
- Payment terms
- Ratings
- Reviews.
Note that Alibaba may not be the cheapest or best for all products. For direct sourcing, research potential suppliers and email them for quotes and delivery times. Be prepared for some non-responses or delayed replies. You can verify about the manufacturing factory by demanding the following:
- Examine the business licence.
- Ask for a VAT invoice copy from the factory.
- Verify ISO 9001 certification.
- Check the MOQ (Minimum Order Quantity).
4. Factory visit
It will be worthwhile if you personally visit their facility in China if you are interested in outsourcing your manufacturing there or are searching for a long-term business partnership. This will offer you an opportunity to see how your products are manufactured in China, and also, you will know that you are dealing with a genuine manufacturer and not any trading company.
If you have no spare time to visit China, then either you send any of your employees or hire the services of an English-speaking Chinese agent who can visit the factory and send you the factory visit report.
5. Sample verification
It is important to obtain a few samples from the supplier before approval. You can buy samples of the product from different batches and then try to measure its specifications in your own environment. You can also evaluate the sample under different environmental conditions and satisfy yourself whether the product is suitable for your customer. Often, Chinese suppliers may not be ready to offer you a free sample, and therefore, it is preferable that you pay for that.
6. Negotiate terms and conditions
It is time to bargain over the price and other terms and conditions if you are completely happy with the quality and specifications of the product that you plan to purchase from China. While negotiating prices during product purchasing, it is important that you do not push too much on lower prices. If you compel your supplier to offer a lower price, then it is very likely that your supplier will compromise on quality to maintain their profit margin.
Another important thing to remember is that while considering the price, you should consider the total price to get the product on your end, which should include all other costs, e.g. transportation. It is also necessary that you have quotations from at least 3 to 5 other similar suppliers so that you can know whether you are getting the right price for your product.
Your payment terms and conditions must include the following:
- Quality standards: It should be clear to your supplier what criteria your product will be approved after inspection and who will inspect.
- Dispute settlement: Both the supplier and you must have an agreement on how any dispute (if it arises) will be settled. What guarantees is your supplier offering you?
- Compensation and punishment: Both parties must be clear about the action to take in case products fail during inspection or the delivery is delayed due to certain reasons.
7. Quality control
Quality control is one of the main issues that must be clear to you. Third-party inspection companies are available in China. You can either hire such services or you should be ready to send your own quality inspection team to China. Quality inspections can be done in several stages:
- During the incoming of raw materials
- During production
- After production
- Post-packing inspection.
The criteria for acceptance during each stage must be clear to both parties.
8. Transportation
There are 3 modes of transportation:
- Air freight: Air transportation is fast and safe but costly with limited capacity and strict weight/size requirements. Few routes exist in some regions. Ideal for high-value goods needing quick transit.
- Sea freight: Sea transport is cheap and has high capacity but is slow, risky, and subject to environmental factors. FCL involves ordering a whole container for goods, while LCL means sharing a container with others.
- Express delivery: Express delivery differs from air transport by offering door-to-door service. It is timely and has simple procedures but is costly, with strict weight, size, and value restrictions on goods.
You must, therefore, discuss these terms in detail with your supplier. Most suppliers may demand some advance money first, which is usually around 30%. The balance amount can be released after the products are ready for shipment.
Conclusion
We hope this article has given enough food for thought about product purchasing from China. China has now acquired the position of “Factory of the World” by virtue of developing its production capacity and supplying almost all kinds of products.
However, if any company plans to exploit the opportunity of buying low-cost products from China and become successful in their business, it must thoroughly understand the whole process. You can make your effort easy by hiring any reliable sourcing agent in China. The sourcing agents can act on your behalf in China and are quite familiar with speaking both English and Chinese language, they are well aware of China’s market and offer you end-to-end support.
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