10 Things You Need To Know About China Sourcing

Looking to make your first order from a Chinese factory?

Or maybe you’re currently doing it and still crossing your fingers that it is going along well.

We know how nerve racking it is, and hope to help you today.

Here are some 10 tips we have learned over the years from our own experiences and talking to experts in the field.

If you want to avoid problems with a Chinese factory, then look professional from the beginning. If you come to them looking like an amateur, then they will underestimate you.

What can you do?

Be prepared!

So do as much upfront research and work on your product as possible before approaching a factory. Is it a pre-existing product, an enhancement, or a brand new innovative product? Each one of them requires different level of specifications, but the more homework you do the better. And the ideal is to have a sample of the product in your hands and sending it to the factory, they can look at it and give a full and complete estimate.

But please be careful and make sure this factory is trustworthy before sending over your hard work.

If a factory can tell you are looking at price and price alone, then in my experience the good factories will step away and the lower quality, more desperate factories will step forward. I’m sure you want the best quality product with a top supplier, so don’t show them that you are a cheap buyer.

If you want a cheaper price, they can go as low as you want to go.

But don’t expect a nice and shiny new toy…

I can speak from firsthand experience, in my early days in China I kept pushing down the price of a wine corkscrew, and the factory finally “broke” and agreed to my price. Unfortunately for me, the metal was a cheaper one that would rust quicker and I had many returns on my e-commerce website for the next year or so.

If it’s your first time to buy from China, don’t rush it. And this article isn’t going to make you an expert, sorry to say. Give it at least six months I’d say to do your first order.

Think about it.

Between:

* Finding the supplier
* Shipping samples back and forth
* Negotiations
* Making a sales contract
* Sending a deposit payment
* Quality inspection
* Shipment to your facility

Just listing these out I’m thinking this is longer than six months!

This is where people get impatient and rush. They get one sample that is “kind of close” to what they want. They are based in USA and Europe and tired of spending the 80 US dollars for UPS to ship the samples back and forth each time, so the factory convinces them this is a “basic idea and they will change X, Y, and Z” to make it the way you want.

So then get them to make that sample and send it back!

Yes, it is exhausting but if you cut corners at the beginning, it will cause bigger headaches later on.

Buy from a couple factories a lower quantity.

The best time to get to know a factory (or anyone in life or in business) is to do a practice run with them. This is when their true colors come out, as often during the sales process all the promises in the world are made, now is the time to see if they can execute.

Many people always talk about going “factory direct” and “cutting out the middleman”, and yes, while you may keep more of the money yourself, there are sometimes extra value add services they can do.

Another reason to use a trading company, they have a network of factories, so you can do a lower quantity across multiple product categories, while a factory has higher minimum order requirements and then you’d need to coordinate with all of the factories yourself.

Similar to potentially using trading company, there are a wide range of third party service providers out there. From quality control, CAD design, sourcing, to logistics, the more of these you use yourself the better control of the entire process you will have. Normally the factory will tell you not to worry about these things – as they have their own partners they work with or they don’t do these services at all! But of course if you pick your own third party vendors you can rest assured they will help you more ensure the factory is doing things in your best interest.

I remember when I was first searching for a factory while home in USA. I had no idea where these factories were located and I thought they were all in the same vicinity. Yup, I didn’t comprehend at the time China is a massive place, and various “clusters” of factories form in certain cities – for example Ningbo is where a lot of gifts and home decor is made, Shantou for toys, Shenzhen for electronics. Learn where these clusters are, and then determine if you can source all your various products and components in that area. Why? This will reduce headaches long term when consolidating shipments and doing just in time (JIT) scrambles for unexpected situations.

Many people look at R&D and they think, yes, this is a worthwhile cost to design a new product. But I think they don’t classify things correctly – I put a ton of various costs as R&D – flying to the factory, sample shipments, buying samples from various potential factories. We can’t cut corners on these upfront investments, and we need to look at them like this – investments – not expenses. As like any investment, the value increases over time, and the knowledge, awareness, and correct suppliers you find at the beginning will save you countless hours and dollars in the long term.

Sadly, when we make the right decisions it isn’t as easy to see as when we make the wrong ones. But if you’re not having headaches in the years ahead, count your blessing and thank yourself for making the right investments and decisions at the early stages

This one I wish I knew when I first started buying from Chinese factories. And you can’t just find one on a Google search and tweak it, this is something that will be with you for years to come. Find a qualified lawyer, on my podcast we have Mike Bellamy sharing some of his legal contacts there to use. Or go through recommendations in your own network. While if you’re a smaller buyer, a contract may be hard to enforce, at the minimum it sets the rules of engagement from the beginning and reduces miscommunication later.

So I hope today’s rather brief article helped and got your brain flowing here. It’s a daunting task, sourcing from China, but we need to stay motivated and do it step by step. If you’re currently buying from wholesalers in your home country (like I was) take it one product at a time until you’re confident and comfortable to expand.

This was a guest post I wrote originally on JumpStart Magazine.