Sourcing (from China) 101
As an e-commerce seller, you want to focus on your marketing, your sales and finding that golden product that sells like hotcakes. Making sure your site or your pages on a selling platform look the best to make your sales run like crazy!
But what about getting those wonderful products in stock? You need to have your goods in stock for a reasonable price otherwise no matter how well they sell you are not making the money you want.
Without a good profit margin, you have wasted all that time on your market research and marketing. So how to make sure you buying the good quality goods you want, for a reasonable price?
In basics there are two choices you have, you can either make use of a sourcing agent or you can put a lot of time in yourself to make this happen. Making use of a sourcing partner will of course normally cost you money, but will also save you a lot of time. Time you can use to focus on your core business of E-commerce selling and everything involved.
Now being part of a sourcing company myself I would always suggest to do this as the time you save and the expertise you get will (in my opinion) always weigh up to the costs. However due to my position I am by no means objective in this situation, and therefore I will not explain anything further about working with a sourcing partner, in this article I want to focus on the basics of sourcing. The basics to help you do your sourcing yourself. What are the difficulties of sourcing? What are the basic do’s and don’ts? How can I get a supplier from China? How do I buy from China?
And how to make sure you receive good products on time so you can have your sales machine running in top gear.
So you have done your research and found the perfect product to sell, you’re excited to get the ball rolling and now just have to find the best place to buy it.
You can buy from many places all over the world, but let’s be honest, unless it is a very specific product chances are that you will end up buying it from China. Being the current factory to the world this wonderful place can offer you virtually any product you like. Because of this, it means buying from China can be overwhelming the first time you’re doing this. Who to trust? What quality level? Am I getting the right price? How to transport the goods? Where to find the right supplier? All these questions are being thrown at you when deciding to buy yourself from China.
For now I would like to help people brand new to purchasing from China, and who knows perhaps even longer term buyers as well, in this process by explaining a few of the basics of what to do and perhaps even more important, what not to do.
Before I break it up into a couple of individual important points there is one step I would like to mention that a lot of people forget. It might be very logical, even on the nose, but perhaps because of that people tend to not take into account, that time is an important player here.
It is very tricky to balance finding the right supplier, with the right product at the right price with not spending your entire week only doing your sourcing/purchasing and not having any time left to focus on your core business of selling your product. Now this could sound a bit to obvious, but don’t underestimate the amount of time it can take to find the perfect solution in sourcing (if this “perfect” solution exists at all!!)
So make sure you put enough time and effort in to get good products, but make sure you are not turning into a purchaser for your own company. Always remember you are in the business of E-commerce!
Always keep this in mind when making decisions and choosing what you are doing when.
So with no more delays herewith the main points of what to focus on when buying from China:
- Where do I find suppliers?
Of course the place to go is online, in the digital world that we are living in, everything is done online. The days that people did 2 or more roundtrips to China to visit fairs and suppliers is long behind us and with the current Covid climate we are in, this process has only accelerated. It makes it easy and convenient but at the same time you’re missing a level of control and information that can only be found in person, physically there. Now online there are many options nowadays, however there is one very obvious source that most people use, Alibaba is an unbelievable source of suppliers. You can find anything and everything on this platform. Because of this overkill in suppliers there is the problem of choice, as in too much to see the forest between trees.
Secondly there is a site called 1688, this site is more focussed on Chinese local markets, there are more smaller players here (with less experience), but this also means there are more opportunities to find.
There are some things to always remember when starting to look on a site like Alibaba or 1688.
- What to do and what not?
Don’t underestimate the suppliers, you need to have done your homework and know all there is to know about your product, if you are talking to a professional supplier they will ask you questions about the product and if you don’t show that you know your stuff, they will not take you serious. This same principal works the other way around as well, if they don’t ask any questions and just say yes we have it, I can supply and “no questions asked”, move on to another supplier as this one will not be professional enough for you.
Never give the complete information of what you want, don’t let them know what your target price is, not even by the 5th time they’re asking. Always have the supplier start with the first offer/price and take it from there. Never be the first to name a price!
Also don’t give a full good explanation of your company. Especially when you are a start-up or still relatively small company. In the west we tend to like to know who we are doing business with and a good story of your company can help convince people to deal with you, make them believe in your ideas and plans. In China they will only look at the situation as is, not as potentially could be. If you explain you’re on a tight budget and just starting up, but with great plans, they will just hear “small orders” and “small budget”, in the best case their service will be worse, and in worse case they won’t talk to you. Golden rule when talking to a Chinese supplier is: Make it sound bigger than it is! Just tell them you are the CEO or Purchasing manager, tell them you’re working with big numbers, and want to order big in the future, but want to start small to test the waters with them as a new supplier.
Finally while communicating with suppliers, make sure the important information is confirmed by email. Always make sure before you seal the deal you have everything you agreed upon on paper (digital paper in the modern world of course!). If you want Quality control, make sure is confirmed by email that the supplier acknowledges this. Incoterms, MOQ’s, clear delivery prices and delivery times. Make sure you have everything in writing by email. In China they tend to work with WeChat (the Chinese WhatsApp) and this can make things unclear to you and hard to keep track off. Don’t hesitate to send one last email to your supplier naming everything agreed upon and asking them to give final confirmation.
Lastly a few quick small reminders of things that will sound very logical and obvious, but make sure to always do these things:
- Always have multiple alternatives, make sure you are not dependent on one supplier, Chinese suppliers tend to make changes along the way, and if you have an alternative ready, you have leverage in the process with your chosen supplier. And with that can say NO.
- Never trust your supplier 100 %, no matter how “nice”, “professional” or trustworthy they seem. Perhaps this would be the same for a new supplier no matter where they are located.
But even when you are on your 5th order with same supplier, never have full trust, as things can still change and happen from their side.
- Never make assumptions (well duh!), yes this sounds too simple, but when communicating with people from the other side of the world there are many things that can be overlooked. The differences in culture, language and way of thinking are probably bigger than you can imagine. So if you think something is very logical and basically too obvious to even mention, mention it! Anything that makes perfect sense in your own culture, could be very illogical in someone else’s. The meaning of words like “quality” and “good service” are not set in stone even within your own country, let alone in a country and culture very far from yours.
NO ASSUMPTIONS, EVER!
Finally a quick word on prices, this is of course an important part of purchasing as they determine your profit margins, and competitiveness of your prices. Most people think they will get ripped off by Chinese suppliers, and in a way you will. However this is not because the suppliers are all evil money hungry narcissists, this is because in their local culture they do anything to get the best price for their goods, whether they are selling to Chinese people or foreigners, this is the standard way of working. This is by no means considered wrong or devious. This is just standard business ethics in their own market.
So just presume you will pay a little too much and don’t worry about it that much, better to spend you energy on making your webpage look good. Of course this doesn’t mean that you accept their price without a fight. From their starting offer you should always complain it’s too much and always have counter offers ready. Not unlike a negotiation as you would do it locally. However I strongly believe that you should have an acceptable price in your head that would make you happy with the deal, don’t mention it to anyone (especially not the supplier), but if you are happy with the deal, that means you have made a good deal, no matter what others try to tell you.
Remember you are in E-commerce, doing sales of your products. You are not a sourcing company. If you can have a good deal done in half the time of a great deal, how much money are you saving on all the hours not spent sourcing?
Time is, as always will be, money!