Definitive Guide: How to Source from China? (7 Steps)
Online or retail businesses outside of China can greatly benefit from sourcing products in China. Contrary to the popular belief that China is the land of cheap and low quality products, many manufacturing units in China produce high quality products that are competitive in any market, depending on how much you are willing to pay.
Why should you source products in China?
When starting a business, you can choose to manufacture your own products, buy them locally or source them from abroad.
Sourcing products from China may seem more intimidating than the other two options, but also the one with the greatest potential for profitability.
But dealing with the complex system of Chinese business requires some preparatory steps and strategies. You can navigate complexities and grow your business with a sound product sourcing strategy.
Factories, ports, trucking, couriers, and even inspection agencies face uncertain and sporadic lockdown risks, which means delays can happen at any time if you are sourcing products from China. When you outsource your manufacturing overseas, your supply chain is only as strong as your weakest link.
This means even if your factory is operating, if their raw materials supplier goes under lockdown, if the couriers are restricted from entering provinces or cities, or if the truckers cannot deliver your finished order from the factory to the port, you are stuck.
This is not to say that you shouldn’t source from China.
For many private label products, China is still the ONLY PLACE in the world to source from right now — no matter how hard you try.
Other countries may not have the raw materials, experience, and technology to replace the breadth and depth of China’s manufacturing.
Before we continue, remember this 4 sourcing products from China principles…
(1) It’s a numbers game. More quotes = more information = better decisions.
(2) Don’t be afraid to walk away. As the buyer, you hold all the money.
(3) Compile your data. Checking supplier quotes side-by-side can help you reach a quick conclusion.
(4) Price is just one factor. Logistics, and quality control all need to be learned
In this post, we will talk about 7 steps to start source from China, and 6 tips you should be aware of during this process. If you follow the steps mentioned below, you will find yourself in a better position to source from China safely.
4 Sourcing from China Options
4 Options When Source from China
Let us further analyze which cooperation model is suitable for you when you source from China.
1. Buy directly from Chinese supplier
That’s what 82% of importers are trying to do. They want to control the process and avoid paying commissions to any intermediary or agent.
This may be your best choice if you have sufficient organizational capacity to manage suppliers (see above), and you can meet the vendor’s minimum order quantity (MOQ).
2. Use a China Sourcing Agent
There are thousands of people in China trying to make a living by providing this service. If they come from the right industry, you can use their network and save a lot of time. They can also act as your Chinese representative.
3. Buy from a Trading Company
This is a good choice if you can’t meet the MOQ, perhaps as a start-up or an entrepreneur who has been an early target.
Trading companies can place their products in small workshops that accept small ones. Apart from this particular case, I do not recommend working with intermediaries.
4. Use the Service Company
If you have find suppliers already, and need some production follow-up. Some Chinese purchasing agents provide services and charge fees. Everything is transparent (supplier name, a process followed, etc.). This is an investment in your company before you start production, but if you predict a lot of it in the future, it’s a good choice.
How to Source Products from China?
If you source products from China, you need time to identify all the suppliers, audit the candidate’s factory before negotiating an agreement, evaluate their internal product development capabilities (if needed), and spend time managing the entire project.
All the process will take several hours a day and is a complicated job. Here is the Complete 7 Steps to Source products from China:
1. Do Market Researching
You simply need to research before setting up your business. As we all know, there is much competition in the market, and if you jump into the crowded marketplace, it will be challenging for you to reach your business at the top.
You have to do more struggle to get your goals. So it is crucial before applying for any business your first step must be complete, compelling research.
2. Get In Touch With Chinese Manufacturers
Some people don’t like to contact manufacturers for different reasons. It doesn’t mean that they don’t know this, but they are confused about where to start or how to do it.
Types of Sourcing Products from China Suppliers.
There are three types of suppliers for importing from China-manufacturers, small trading companies, and purchasing companies.
Knowing which type is right for your business is crucial.
- If you are a big buyer and can meet the factory’s minimum order quantity, you can purchase products directly from the manufacturer.
- If you are not buying a large quantity, but looking for a wide range of related products, then a trading company is a good choice. You can carry multiple products in one store, and you can import a small amount of each product.
- If you are a supermarket company, you can try to purchase from Yiwu market. At the same time, you need an agent to help you turn around all these, such as Yiwu agent.
- It is better to choose a manufacturer when you supply products with technical requirements as you can source directly from them, not sourcing agent or company…
Where to source products from China?
The process of this is relatively straightforward: All you need to do is go to online wholesale websites like Alibaba (a massive network that connects you with hundreds and thousands of qualified manufacturers from China) to find the products that you want to buy. Then, Send messages to at least 10-15 suppliers. You have nothing to lose.
Share your message with your manufacturer by sending a simple message along with the mentioned below lines:
“Hello, my name is (your name). I’m texting you because I am in dire need of (your product name). Can you please offer me your price and quotations (also tell the number of units you want to order) and an estimated delivery time? Thank you! I would like to highlight one more thing as I’m not only contacting you but also your competitors, so please be kind and reasonable with your quote. Regards, (name).”
If you can fly to China, it is definitely better, you have the opportunity to participate in various trade fairs and professional wholesale markets.
3. Negotiate With the Suppliers
Before you negotiate, make sure you have all the data and information to present your case. This gives you a good reason to refute the supplier’s claim, and you understand the situation.
Every day, these Chinese companies receive so many emails and messages about samples. Sometimes, those people are also asking for samples that don’t have enough money to invest even in the first shipment.
Therefore, you have to show the idea that you are planning something big from the start. Once you have finished finding your reliable companies, you can send them the following messages to play with them and get better pricing:
“Hello (company/contact), we are looking forward to placing an initial order just to test the quality. We would like to place orders for (number of units) of (product). What will be your offered quote for this? Must keep in mind that we are receiving plenty of good pricing from your competitors too. But we want to check yours. Thank you!”
Like previously, you can check that no word like “sample” is used above either. It is better never to use that word.
The word sample order is replaced with “initial order” for quality testing of the product. See how your language affects the sentences. By doing so, you will instantly notice the manufacturers and see how seriously they take you.
It will be best to place orders for around 50 or more units for the first time. Ordering for only one to two products will give them the impression that you don’t have enough cash to invest with them and in this way they can’t make more money.
4. Start from Order Samples
After receiving the manufacturers’ quotes, you can now pick the best price among all and order your first round.
When you receive your first sample order, you should:
- Inspection of multiple units (to ensure a consistent level of product quality)
- Look for any defects, damage, or any low-quality components used.
- If you are not satisfied, you can request a second(3,4,5…) round of samples and make the necessary changes, or simply choose another supplier.
Other factors to consider when ordering your first round of samples include factory location, payment options available, and lead time.
5. Order a Bulk Amount
Once you have followed all the steps correctly, you are set to order for a bulk amount from China. But you have to pay attention to send payment to China in case face a scam.
Standard Sourcing Products from China Payment Methods
Many suppliers require a deposit of around 30%, and the remaining amount would be paid before shipment.
This means that you are risking your deposits, but you have full control over the remaining balance, which needs to be paid after quality control and lab testing.
6. Do Quality Control Checks
Although having a good production agreement is an excellent way to start your relationship with your suppliers, regular quality control inspections are necessary so that you can ensure that the quality of your products meets your standards. This prevents costly mistakes from being made in the future.
Studies have shown that late problems found in the production process are always more expensive than early problems.
7. Arrange the Shipment
The first thing you need to do at this stage is that you must familiarize yourself with shipping incoterms. Incoterms are trade terms that are used internationally for determining where and when the cargo will be transferred.
Shipping from China is also a seemingly simple job, but it is full of challenges: because there are too many forwarders to choose from, but it is difficult for you to find the real high-quality forwarders.
For the agent you cooperate with for the first time, you need him to give you some more transparent services rather than the lowest price. Usually, there are 5 ways to shipping from China.
- Air express
- Air freight
- LCL ocean freight
- FCL ocean freight
- Expedited ocean freight
|Reliability||More Reliable||Less reliable|
|Speed||3-15 days||30-40 days|
|safety||safe||possibility of damage|
|Charge method||weight/dimensions||weight/dimensions/fix price|
6 Sourcing Products from China Tips
When sourcing products from China, there are quite a lot of efforts and things to consider. Here are 6 suggestions to get you started:
1. Plan Everything Ahead
When importing products from China, time is an important consideration. Any of the above errors may cause large-scale delays and interruptions in the logistics chain, let alone two or more errors. Keeping these in mind, always start planning for the extra time to import from China.
We recommend that you start organizing your import at least three months in advance. Depending on the port and destination you are importing from China, the transit time may vary greatly. Also, remember the time required for inland transportation.
2. Quality is Directly Proportional to the Cost
Why are buyers all over the world paying attention to the needs of Chinese suppliers? One of the main reasons is the low manufacturing cost. Even with freight and tariffs, it is still cheaper for buyers than purchasing from other places in the West.
When negotiating with potential suppliers, it is helpful to remember that all manufacturers usually have a minimum price—the minimum cost required to manufacture the product.
Keep in mind that if a supplier falls below its minimum price threshold, it will impact other ways. It may manifest as a decline in the quality of raw materials or damage to workers’ wages or working conditions. It may also cause suppliers to bypass steps in the quality control process. In the long run, all of these will affect your product and your reputation and may even have legal implications.
3. Write an Effective Inquiry
After you have collected a list of suppliers, you want to contact these suppliers to negotiate transactions or custom requirements. You need to write effective, clear, and detailed inquiries to ensure that you get what you need.
Build professional relationships with your suppliers
Whether you order online or travel to China to meet your suppliers in person, you should always develop a professional relationship with them.
(If you are sourcing online, make sure to use applications available in China, such as WeChat, QQ to communicate with your supplier.)
There are many advantages to maintaining an ongoing relationship with your suppliers as they can offer you discounts and better deals.
Also, let’s say you’re looking for another supplier to make a different product. In this case, they can use their network to introduce you to some reliable people.
4. Have Confidence in the Negotiation
As we mentioned, you can negotiate with the seller. To succeed in the negotiation and reach a deal that meets the needs of the business, you must enter with a professional attitude, confidence, and reasonable requirements.
If the price of each house is $10, don’t bid $2, or the seller will dismiss you as a not serious buyer. The cost of $7 or $8 may be more reasonable, especially if you order 1,000 units.
Would you please keep in mind that the seller may not accept your first offer, so there may be a little back and forth. It would help if you made sure that the price you set is meaningful for your business.
5. Pay Through Legal Channels to Avoid Illegal Remittances
You can pay suppliers through many illegal channels, but you should avoid this practice at all costs as a good merchant.
Instead, you must choose a legal, safe, and reliable payment method. If you are using an e-commerce website, please check the Alibaba transaction guarantee.
As you can see, this is the safety index for sending money to China.
Send money to China. The key is to follow the following golden rules:
1. Never transfer money to a personal account through any payment method: be sure to ask the other party to provide the details of the business account of the company you are trading with. If the other party cannot provide it, do not do business with them. Don’t make excuses to put money into your personal account, unless you don’t want to see your money or promised goods anymore.
2. Draft a strong agreement: Ideally, before you make any payments to potential suppliers, you must ensure your interests by drafting strong payment terms in the agreements you sign with them. These terms deal with the timing of payment and the choice of payment method.
6. Use Professional Freight Forwarders to Handle the Goods Safely
Finally, look for a professional freight forwarder to deliver your goods safely and efficiently. Similarly, you need to check the company’s certificates, experience and work history. You’d better understand the basics of this industry to decide who better to hire.
Look out for companies with incomplete information, companies that claim to complete the work in a short period, or companies with incredibly low costs.
These companies are probably scammers. Instead, choose a company with a reputation, a reasonable price, and proper timing. Don’t be afraid to ask each of the shortlisted companies these questions and details so that you can make the right decision.
Sourcing Products from China Conclusion
In conclusion, It may take time for you to learn how to source from China. Once you know how to do it, you just pivot above 7 steps to source from China until achieving success.
There are many risks associated with sourcing goods in China, from poor quality goods to fraud to difficulties in enforcing contracts. Of course, none of these risks are unique to China, but because China is still a developing country, the potential for such risks is much greater than in developed countries. However, the potential for significant cost reductions may make the risk worthwhile, provided you do your research and proceed with caution..
As a beginner, you don’t want to be scammed or taken advantage of as this can seriously affect your business.
Taking your time throughout the process rather than rushing it is the best option as you can carefully consider all the factors and make an informed decision about who and where to get supplies from.
Now, leave your comment if you need a product sourcing company to help you source products from China.
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