Sourcing right from China
June 16, 2010

Since China has become the factory of the world producing everything from paper clips to planes, it becomes important to understand how to source and export wisely from China. What are the pitfalls, cultural differences and basic business nuances to look out for? Inchin Closer delves into our experience and that of our contemporaries to bring you the do’s and don’t of sourcing from China so that you are assured the best quality, at the best price with the best service delivered on time to you.

Don’t believe what you see online: Many first time buyers of Chinese products believe in the power of the internet. A typical buyer will spend considerable time online searching various sourcing websites, interacting with suppliers across the mainland and negotiating on the best price. They then confirm a small initial order of the product they wish to purchase in order to ‘test’ the quality and service of the product. On satisfaction they feel they will order more the next time, or else they don’t have much to lose since the consignment was small to start with.

This is wrong on so many levels –

  • While the Chinese government is cracking down on illegitimate fly-by-night companies, they still do exist. Don’t be fooled by the promises they offer and the long e-mail discussions you’ve had with them or the fancy website. If the company doesn’t exist there is no legal course you can take.
  • If you are serious about importing your product from China, research and narrow down on the few companies that you would like to negotiate with. Then personally visit the factory / company yourself. Ask to check account statements, see the production line, and meet with company management and if possible clients. Do not send a third-party to verify the legitimacy of a company you want to do business with unless you really trust them.
  • Do not go by fancy certificates the company will produce to prove they are genuine. While many are bought, it’s also easy to replicate a certificate and if you don’t know what the original looks like, you remain the looser.

As a result, we suggest you –

  • Study the market throughly. Understand the suppliers, buyers, their clients and market potential. Similar products in China are usually found close to each other, as a result of which its easy to understand the entire product supply chain.
  • Hire a local professional  to be on the ground, visit the factory, check the financial strength of the company and if they their quality and quantity are as what they’ve promised.
  • Don’t go with a manufacturing unit that is much larger than your requirement. If your demand isn’t big or profitable for the manufacture, he will most probably not be too bothered about your product. As a result quality, service will suffer. In stead choose a manufacturer where you fit in as his top 10 customer, this will guarantee that he will pay enough attention to manufacturing your product.
  • Negotiate your payment terms wisely. Don’t get carried away with the initial sample set. Make sure you enter into an agreement to pay in a phased manner. Be sure to get the Chinese contract vetted by a local. If anything does go wrong, the Chinese contract will stand in court.
  • Make some Chinese friends, this will not only help you assimilate into the culture and understand the Chinese way of doing business but will also help you make in inroads into manufacturing sites in 2nd and 3rd tier cities that you probably were unaware of.
  • Lastly, it would be best to set up your own sourcing office or representative office close to where your product is being manufactured.  So that you can directly interact with the manufacturers.

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