This article will guide you on the steps and precautions that should be taken when sourcing from China. This is Part III of a 101 series that has been culled by a certified sourcing agent in China – Matchsourcing.
China is among the leading countries with a supply of high-quality products. Products from China are considered by most customers and retailers since the quality is not compromised. You might be asking yourself how you will start the whole process of sourcing from China at some point. Before everything, let us have a look at a few factors to put into consideration before sourcing from China.
1. Look for the right supplier
Many people seeking to import products from China use the internet search buttons as their default option. You can as well visit online sourcing platforms such as Made in China, which gives buyers suggestions of suppliers in China. It is always advised to identify a manufacturer and directly source from them since this will help you to reduce costs. Consider the following factors when looking for the right supplier
Background Information. Most companies have their own website where you can access their background information including status on their registration, where they operate from, business coverage, and many more. If you don’t come across the word “production” in registered business coverage, then the supplier you are working with might be a trader and not a factory.
Manufacturer Certification. A Production certificate is a good sign of both the capability of the supplier and industry knowledge. To own a manufacturer certificate means your factory is tested and verified to produce reliable products.
Export experience. Experienced suppliers know everything about the export process and the safety or compliance regulations involved in the sales market. Ask your supplier about the export process to your country or location, you can alternatively ask the supplier to provide you with the shipping B/L from the past shipment for verification.
Location. Always consider the distance from your supplier to the seaport or the airport. The shorter the distance the lower the pre-carriage transport cost to your shipment.
2. Request for sample(s)
The majority of suppliers prefer the use of minimum order quantities. This means a supplier will only allow orders from a certain limit say the minimum order is 500 units so that buyers will not take advantage of wholesale prices for small orders.
Alternatively, the supplier knows that some of the clients or retailers may want to see and feel the product physically before making an order of thousands of products. Inquire from the supplier to give you a sample product. Most of the suppliers will have to sell you a sample of the product you want to purchase at the retail price.
In case the supplier you have identified offers any custom or private labelling on your products, for example including your logo or other unique designs, having to order a sample is very important. Having seen and felt a product will help you know whether it is ideal for your business and whether you prefer to invest heavily in the product.
3. Consider quality over cost
Most of the purchasers globally look at suppliers in China and ask for their requirements. One of the main reasons is low manufacturing costs, which even after the add-ons of shipping charges and import duties it still ends up being cheaper for the purchaser than importing the product from elsewhere in the West. During the negotiation process with the suppliers, it is important to know that all suppliers have the minimum cost it takes to manufacture the product.
In case you have done your research concerning the product, the costs incurred on raw material and market, it will be easy to determine the price. Also, do not go for suppliers who will provide you with a lower price than the cost incurred for the whole production process. Secondly, the ideal purchasers for example those who buy products in bulk from the viewpoint of the supplier may attempt to beat down their chosen supplier’s price even further.
Remember when suppliers set their prices below their minimum price limit, definitely it will have an effect somewhere else. It could lead to either a reduction in the quality of raw material or have an effect on workers’ wages or even affect the conditions of work. It could also lead to the supplier not following the recommended steps in the quality control process.
Mostly when packaging consumer products, you prefer using high-quality materials. Nobody wants to purchase premium products like cosmetics with cheap packaging. In the long run, all these effects will not only be felt in the finished product but will also downgrade your reputation and could even have legal implications.
4. Negotiate with the suppliers
In case you make orders for large volumes of products, manufacturers will be able to earn more money since they normally offer low prices. So the more their products are purchased in bulk, the more they will earn more profits.
Therefore, you as a retailer have to show your manufacturer the idea that you are planning to have a big start. The moment you are done finding a reliable manufacturer, you can send them a message requesting them to offer you the best prices.
It will be ideal to have your order placed for around 50 or more units at the beginning of your business. When you order a few products, say one or two products will give your supplier the impression that you don’t have enough capital to invest with them and for that matter, they might not make more money having you as their retailer.
5. Learn the shipping
In order for you to gain a reasonable profit margin, the total shipping cost should be around 10% to 15% of the selling price. Let us assume that there is 10% to 20% in sourcing, then another 30% of the selling price in distribution, marketing, or referral commission, leaving out a range between 30% to 50% for the gross margin.
However, some customers incur more shipping fees than the product sourcing cost, mostly when the products are light and bulky. Let say 120 pieces of plastic bottle packed in a big carton Therefore, the quantity and size, shipping volume, and shipping mode are deciding factors for your shipping cost.
With the help of sourcing agent companies like Match Sourcing, all your shipping problems will be sorted out from China. Thanks to their cooperation with qualified shipping agencies, they will help you do the hard part of shipping and leave you with the simple steps to complete your order. They collaborate with you and have the process and steps well known by taking your orders, package safely, and ship to your destination.