Sourcing From China- Everything You Need To Know
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As we hurtle into the 4th industrial revolution, technological advancements are making it easier for ordinary folk to start and grow profitable businesses.
One such lucrative business is sourcing goods from China and selling them online or in a brick-and-mortar store. Don’t worry, you won’t even have to step foot in China. Unless, of course, you want to.
So how will you pull it off?
Well, my friend, you’ve come to the right place as I’ll be showing you everything you need to know about sourcing from China.
But first, let’s clear a few things off the table.
Sourcing from China – The Advantages
Traditional business models advocate for buying from local wholesalers if you want to be in retail. Another strategy they encourage is retail arbitrage or buying products that are highly discounted from retail shops and reselling them for a profit. While these are all good, there’s another way you can make good money as a retailer.
You can source your products from China.
China’s economy has been exploding over the past decade. And one of the main driving forces of that explosive growth is its fast-growing manufacturing sector. Let’s quickly look at some pros and cons of sourcing your products from China.
Here are 3 profitable reasons you should seriously consider sourcing from China.
1. Low Production Costs
One of China’s biggest economic advantages is the large workforce. Coupled with advanced technology in the manufacturing sector, these 2 make it very affordable to manufacture goods of any kind. It’s no wonder many companies have either sourced or moved their manufacturing divisions to China.
Low manufacturing costs mean:
- Higher profit margins
- Enough supply to help you maintain competitiveness, especially if you’re sourcing and supplying mass-market products
Another reason Chinese manufacturers are cheaper than domestic ones is the fact that everyone is turning to China to produce their products for them. Because of this, the stiff competition has helped drive manufacturing costs lower.
2. High Volumes in Less Time
For efficiency, few manufacturers can compare to Chinese manufacturers. If you’re dealing with high-volume products, then this one is definitely for you. Because China has become the manufacturing hub for the world, it has developed systems that help increase output. That and their aggressive turnaround times ensure that your order is ready in the shortest time possible.
3. Easy to Become a Global Player
Having your products manufactured in China is a great way to position yourself as a global player. For one, with a population of over 1.3 billion. The country itself is a huge market for your products. Apart from that, once you expand into other countries, it is usually easier and more cost-effective for you to ship your products to those countries straight from China.
Sourcing from China – The Challenges
While sourcing from China is one of the best routes to take as an aspiring (or veteran) entrepreneur, there are a few challenges you need to know. A wrong step on any of them could lead you to lose your investment. So what are the challenges?
One of the biggest challenges you’ll encounter as you source and supply products from China is the stigma associated with Chinese products. This is usually because of the supposedly inferior quality of Chinese products. While this has been the case most times, it is also possible to get high-quality products from China. It all depends on your requirements and who you deal with.
On the flip side, other people would just rather buy local products as they prefer to support local businesses.
If there’s one thing many dread with sourcing from China, it’s shipping – and rightly so. Because you must ship your product from the other end of the earth, this results in:
- Longer lead times
- Increased shipping and handling costs
Another disadvantage of shipping your products from across the ocean includes a more complicated inventory control system. Failure to keep adequate stock on hand while waiting for your next shipment could cause you to lose some customers. More on this in a later section.
3. Steep Minimum Order Quantities
Most Chinese manufacturers have rather high minimum order quantities you have to meet before they agree to do business with you. And if you’re just starting out, these minimum order quantities can be quite the stumbling block. However, a bit of investigation can help you find factories that have relatively lower minimum order quantities. And this is where having a contact on the ground comes in handy.
4. Language and Cultural Differences
The Chinese are very cultured people. Doing business with them requires that you have a basic understanding of their language and culture. This is important as some things acceptable in other cultures can be an offense in Chinese culture. And, an offense is not taken lightly in China. It could cost you a great business opportunity.
Another aspect of Chinese culture that you need to be wary off as you consider sourcing from China is the fact that they take their holidays seriously. This is particularly true for the Chinese new year – a holiday that causes the entire country to shut down for up to a month. Expect these holidays and order more stock in anticipation of these shutdowns.
How to Source Products from China Successfully
Now that you’ve seen the pros and cons of sourcing from China you’re ready to take the plunge, right?
Well, before you do, let’s quickly look at a few ways you can make your China sourcing venture a success.
1. Find a Reliable Supplier
Building relationships with reliable suppliers is crucial to succeeding in sourcing products from China. One thing the Chinese strongly believe in is building strong relationships – even in business. And this is a good thing as it is a great way to minimize the risks of being ripped off.
So how do you find reliable suppliers in China?
Two of the easiest ways are:
- Searching online directories
- Attending trade shows
However, these 2 ways also pose a problem if you’re thousands of miles away – you can’t physically meet your supplier and inspect their facilities.
Again, this is why you need a partner on the ground. A company that has been doing business with various Chinese manufacturers and suppliers.
2. Master the Art of Negotiation
Don’t you just hate it?
While negotiation is something most people in western cultures aren’t particularly fond of, it is a part of Chinese culture. In fact, it is used to forge stronger relationships. Therefore, when sourcing from China, you must master the art of negotiation.
However, when negotiating, know that not only are you negotiating a lower price but you’re also negotiating on:
- The quality of the product
- Delivery terms
That’s why, as you negotiate, don’t push your supplier into a corner. They’ll only end up taking shortcuts when producing your product, leading to an inferior quality product. Instead, research the average price of similar products from other manufacturers and use that as your guide.
3. Get Some Samples
Before finalizing any deal with a supplier, always get samples of the product first. This is a good way to avoid nasty surprises when you get your consignment.
Once you know the quality of the product you’ll be getting, it’s also wise to do a bit of quality control at each stage of production. Communicate with your supplier, right from the start, and let them know the quality you need require in your product. Make everything clear especially concerning:
- Type of material used
Doing this will help you, not only create a good product, but it will to also meet product requirements, both legal and from your customers.
All this takes time. Most westerners rush when importing goods from China. As a result, they make costly mistakes and crash.
Shipping and Logistics – How to Ensure Your Product is Delivered on Time and Cheaply
One of the biggest reasons many people shy away from sourcing products from China and reselling them is that they are deterred by the logistics behind it all – particularly shipping. Choosing your shipping method is crucial to you making a profit when you sell your products as shipping can account for a large portion of your total expenses. Hence it is wise to know the cheapest options available for you.
While each consignment will have its own different costs, here are 3 main shipping methods you need to know – plus their advantages.
Shipping by sea is your best option when shipping in bulk, especially if your product is on the heavier side.
How heavy is heavy?
If you’re shipping anything above 500 kilos, the shipping by sea is definitely the cheapest option. Sadly, lead times are the longest with this option as you can expect your stock to arrive in 30 – 40 days.
Another shipping mode to consider when sourcing from China is standard air freight. Yes, air freight is expensive but it can be your best shipping option sometimes. For instance, if you’re shipping a consignment that’s between 150-500 kilos, shipping by air will be your best option as you’ll only pay something around $3/kilo. You also get the added advantage of getting your stock faster – within 10 days.
Shipping via courier services is another good option if you’re shipping products with a low volume, like rings, for example. It’s also best for shipping samples and important documents as it is the fastest shipping method. Lead times are usually within 4 days.
Cutting down shipping costs requires that you do your due diligence, not only in researching the best shipping methods but also the most reliable and affordable freight forwarders.
Sourcing from China – Not a Walk in the Park But Well Worth It
Sourcing from China may not be easy the first few times but once you get the hang of it, it becomes rather easy. Besides, no good thing comes on a silver platter – including a thriving business. No matter how challenging sourcing from China may be, one thing is certain – the profits are worth it.
So get started today. And if you need help at any stage – from product development to shipping – GlobalTQM is here to walk you through.