me and my long term supplier

How to build a relationship with manufacturers

 

Your suppliers are critical to your business success. The better you treat them the more they are willing to continue business with you and give you better service or performance than their other customers.

 

I have found that suppliers give better treatment and pay more attention to a customer’s order (crucial for you) when they get treated fairly.

You think the supplier was just waiting for your business? Think again.

Established suppliers usually have a long queue of customers waiting for them.

 

They are more likely to give priority to customers where they make more margin, and to ones that are easier to deal with.

 

In my previous job I had buyers who were very aggressive and tried to squeeze every cent out of the supplier. It was very difficult to handle these buyers and often I couldn’t find a suitable supplier for them. Even after orders were fulfilled these buyers would often come afterwards and try to claim money for a “faulty” product when there was actually nothing wrong. Many times just for the sake of it they would try to get money out of the supplier. This is not the way I work with my factories.

 

I believe in a fair respectful and trusting relationship with suppliers.

You’ll get what you put in. Want cheap? Get cheap. I guess it all depends on what type of product you are looking for. If you are in for fighting with competitors on Amazon or EbayEbay you are probably looking for the cheapest there is. But don’t be surprised when your products are of poor quality and you get bombed with bad reviews on Amazon/EbayEbay. If you want to stand out from your competition you might as well start with good quality products perhaps at a higher price. Sure, once in a while you look for the absolute price entry product, but be prepared on the quality issues.

 

Also, I gain nothing from squeezing my supplier out of every cent when he is struggling to fulfill the order and pay his workers. What if I want to place a reorder or need a favor one day? He may not be around anymore and I’ll be stuck.

 

In times when a supplier is in trouble because of another customer you may want to help him. Say he has produced a lot of product that another customer cancelled. I may even refer some customers to him. Trust me, this kind of relationship is very valuable for you. If you help him he may offer free samples, discounts on your next order, and so on.

 

I would say there are six rules to having a great relationship with your supplier:

 

  1. Make sure there are mutual benefits
  2. Respect each other
  3. Be fair to each other
  4. Trust one another
  5. Support each other
  6. Help each other

 

Having said all that, it doesn’t mean I trust my suppliers blindly. You still need to have a few control mechanisms in place such as inspection, checking reports and certificates he sends, and not easily accepting price increases. If they are reasonable issues they can be discussed but I will sure do my research on the eligibility of his claim.

 

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usd-100-us-dollars-2

Payment and delivery terms

Incoterms or Buying terms is the

http://en.wikipedia.org/wiki/Incoterms

When any supplier from China gives you an offer it’s usually FOB (Free On Board).

FOB means that he produces and ships the items once manufactured to the nearest port. His responsibility ends there and you (or your logistics provider) take care of the rest. This is the most used option when importing from Asia. There are many different other options that may suit you more, depending on your budget and experience in shipping. See the Incoterms above for more options. Discuss with your supplier or forwarder how you would like your goods to be shipped.

The longer you work with a supplier the easier it will be to deal with payments. If you have an established business relationship you can ask that the next order should be paid 100% on delivery (TT). He can always say no, but if he agrees this gives you financial liquidity.

 

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oem

OEM /ODM products

If you have gone through Alibaba you will also need to know what different types of products there are. There are open (ODM) and closed products (OEM). OEM stands for “original equipment manufacturer” and ODM stands for “original design manufacturer.”

This is vital knowledge for your product sourcing. You need to know the difference between these two. Anything that can be found on Alibaba or Gloabalsources is usually ODM.

 

OEM:

When you see a big brand product, for example Apple’s iPhone or Samsung’s S6, that is OEM. It means that Apple/Samsung designed something and has an exclusive contract with the manufacturer that does not allow the manufacturer to sell the product to anyone else. It’s an Apple/Samsung-owned design and theirs only.

That also means that Apple probably paid the supplier all the costs to make the tooling for the products. Usually toolings are very expensive. Small parts like a cover or a case can cost easily 2000USD. Toolings are necessary for production are manufacturing. A raw material will be crafted through the tooling and will eventually become the product’s part.

 

OEM products are usually not showcased on a manufacturer’s website/exhibition or even showroom. The manufacturer is not allowed to show it to the customer.

The advantage of OEM is that you alone own the design, and no one else can. The disadvantage is that there is a lot of pre-investment involved. I recommend this option only if you have the available funds/backup from your customer (for example crowd-sourcing website Kickstarter.com) or you are willing to invest yourself because you strongly believe in your design.

 

OEM should also cover a non-disclosure-agreement (NDA) with your supplier prohibiting him or any of his employees to discuss your designs, prototypes, or product developments. We will cover that in the second part of this book in more detail. In the first step you may not want to do OEM as you are just starting out. We provide a blank NDA agreement here: http://importdojo.com/docs/supporting_docs.zip

 

Keep in mind that:

  • Not every supplier is open to OEM
  • Investment is large
  • Long delivery times (tooling can take up to 60 days and manufacturing another 40-60 days)
  • Large quantities are involved
  • Your product is unique and owned by you

ODM:

This means that the tooling is probably designed and owned by the factory (or they paid someone to do it). They can sell their product and design to whomever they want to. That means when you go to an exhibition anyone can buy the showcased product.

 

This option has its advantages and disadvantages. The advantage is you don’t need to invest in any tooling and you can buy an item off the rack from the supplier. You can change colors or use your own branding but that’s the extent of what you can change.

 

The disadvantage is obviously that everyone else can buy it too, o you don’t have a unique product.

This option is the most used option to source and buy products in China. It’s easy, there is no design or investment involved (apart from order costs), small quantities can be bought from the manufacturer, and the delivery can be fast.

 

Keep in mind that:

  • Small order quantities
  • Everyone can buy it
  • Shorter delivery times

 

Some suppliers are willing to do the investment for OEM for you. But that’s usually only if you have worked with them before and done more than 100,000USD worth of business with them.

 

Here is an option on how to get your design made (OEM) without investment:

 

Insider tip: If you do not have the capital to invest in OEM but your supplier has, discuss with him that he invests first, you can have exclusivity for a year, and then he is allowed to sell it to everyone. Do this ONLY if you absolutely believe in your product. The supplier will want to have a sales guarantee from you in a separate exclusivity contract.

 

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CE

General product requirements

This goes with the previous chapter.

Larger retailers or buying companies usually have their sample tested professionally before placing an order. This is done either by their internal lab or a third party. If you would like to make absolutely sure that your product conforms to regulations and is up to quality standards take this step. It will usually cost you a few hundred USD, depending on the third party. I recommend this step if your item is costly and your quantity is larger than 500 pieces or 2000USD in total value. You will usually receive a test report that you could also send to your supplier and ask for his feedback or improvement of the product before order placement.

Today there are many basic requirements that need to be met. For example, chemical substances in plastic or textiles are not allowed to exceed a certain amount within the product. Some items need to have a certain certificate (such as FCC, RoHS or CE), which means that the product is preapproved under certain criteria and OK to import.

Of all the smaller companies that drop-ship or have smaller order quantities I know for a fact that 95% of them don’t have their items tested for chemical substances or other technical requirements. If you drop-ship directly to your customers (for example FBA-fulfillment by Amazon) you won’t get into trouble. But if you are selling to larger companies or wholesalers they will probably ask you for test reports.

If you (or the third party) found anything that you would like to change or have explained ask your supplier to look into this, either to improve the product quality or give you feedback on any problem. Make sure that the supplier will fix any problems, and indicate to him that (in case of an order) you will test again during the inspection (performed by third party, Chapter 23).

Bear in mind if you are a start-up or planning your first import this step may not be necessary as it adds cost to your product.

However, if you have an existing business and are trying to expand into larger importing this is an absolute must.

Depending on your product you can check general requirements here:

http://www.unzco.com/basicguide/c10.html

Finding inspection and third party companies that can tell you what needs to be fulfilled is covered in Chapter 23.

 

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I m thrilled with the quality of this sample!

Testing your samples

Once you receive your samples it is time to perform a visual inspection and a functioning test. Whether your sample is of a textile nature, an electric product, or a decorative item, make sure you test it. Bend it, stretch it, use it, and test how it functions. Often I receive samples and they are so difficult to figure out (for example electronics) as they are not user friendly at all.

How can your customers understand and use your product in a simple way when you can’t? Make sure that your item is easy to handle for everyone and that it comes with an instruction manual (if applicable).

You don’t need to be an engineer to test simple functions. If you do have a friend or colleague who knows technical things hand the sample to him and let him give you an honest opinion.

If you found anything that you would like to change or have explained ask your supplier to look into this, either to improve the product quality or give you feedback on any problem. Make sure that the supplier will improve any problems and indicate to him that (in case of an order) you will test this during the inspection (performed by third party, Chapter 21).

 

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I m happy with my samples!

Ordering Samples

It goes without saying that you shouldn’t place a large order without ever having seen a sample or product. You need to test your sample for function, durability, and more.

When ordering samples most suppliers will charge you. And the majority of those will charge 20-50% on top of the regular price, because making a sample is more “costly.” The actual reason they charge more is because they are afraid you only want to order a sample and then never come back.

Either way, this is an investment you need to make.
Insider Tip: Most suppliers will refund you the cost of the sample on the first order. So make sure to remind the supplier of this when you place an actual order.

Tips on sending/receiving samples:

1) When you ask for a sample, you don’t want it to be caught up in customs. There are a few items that may not be sent via airmail or courier, such as items with a built-in battery (e.g., power banks to charge mobile phones). Check with your carrier or local post office on that.

2) Ask the supplier to state: “samples of no commercial value” on the sample invoice that is packed with the sample. This way, customs will see this is a sample not to be resold and should therefore not be taxed.

3) Ask the supplier to lower the value of the sample cost on the invoice. BUT it shouldn’t be an amount that is too low; if it is it may sound not credible. For example, if you order an item that is sold to you at 9USD, then the declared amount should not be lower than 3USD. If you have an item that is obviously expensive then make sure you don’t set the amount too low (e.g., real value 99USD, but declared value 8USD).

4) In some cases large sample orders will be held at customs, mainly because samples with a value that is declared too low arises suspicion. You may have to pay the tax and duties.

5) Sometimes the supplier will ask you for your courier number (e.g. DHL/FedEx etc.). If you feel comfortable with him give it to him but NEVER give away a courier number to a supplier. It happened to me that they misuse it for their other clients. 

When you order a sample with the factory make sure of the following steps:

  • Send an email inquiry on how many pieces you would like
    State the color and describe what the sample should look like (based on the supplier’s offer)
    State the address it should be sent to
    Make sure the supplier states “samples of no-commercial value”
    Tell the supplier that you will deduct the sample charge from your first order
    Declare a proper amount of sample value

There is an example sample invoice in our document section under:

http://importdojo.com/docs/supporting_docs.zip

 

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alibaba

Alibaba and Globalsources

We have covered important groundwork and the necessary steps to successful importing.

Now let’s get to one of the most important parts of finding products and suppliers.

ALIBABA AND GLOBALSOURCES

ALIBABA:

If you don’t have contacts the easiest way is to start looking at

www.alibaba.com.

Ever heard of the biggest IPO in history? Yes, that was Alibaba in 2014. Alibaba is the world’s largest directory for suppliers.

Alibaba is also relatively simple to use.
You create an account, fill in your company information and details, and then you can start sourcing right away.

You can filter by products or suppliers. Nowadays it’s pretty safe to use Alibaba. Most suppliers are pre-assessed by Alibaba through document checking, phone calls, and various other methods. Some suppliers even have on-site checks, which means that a third-party did a factory audit and you can actually download that audit.

There are many other cool functions, such as filtering by country or region. Say you plan on going to Shenzhen or Guangzhou. You can narrow down the province in filters (in this case Guangdong province), so you only see suppliers from that region.

Most products are made in specific areas. Here are a few examples:

– Guangdong province (South of China): Electronics of any kind, especially consumer and household, toys
– Zhejiang province (Shanghai area): DIY products, tools, metals and fabrics, lighting
– Hebei province (Beijing area): Textiles, coal, steel, iron, engineering, chemicals, power, ceramics, and food.

Section 1) Begin your search:

This is fairly straightforward. You can browse two options, products and suppliers.
We will start with products since we are assuming we don’t know the supplier.

We are looking at a Bluetooth speaker.

Wow, over 1,000,000 products!!


Bear in mind, many of them are duplicates because of multiple entries by the same supplier. Also, you will often find that popular and openly available products are offered by different suppliers.

Insider tip: It’s also very easy to tell the trading companies, middle men, and scammers from the real factories.
How? Simple. In the middle of the columns I can filter by:

Gold supplier: This is a paid membership from Alibaba for the supplier. They get featured and can put up a lot more items in their catalogue (among other functions).

Onsite Check: The onsite operation of the factory has been checked by Alibaba and a third party confirmed its legal existence.

Assessed supplier: This is a third-party assessment usually done through a testing company to verify various parts of the company. This includes machinery, staff, engineers, workers, certification, and much more.

So how do I tell if it’s a trading company, an illegitimate company, or a real factory? Simple. Trading or fake companies would not be a Gold Supplier or have an onsite check done, and they would not be assessed by a third party. First, it’s quite an investment for the supplier promoting his service (Alibaba doesn’t pay anything), and second, if this third party arrives at the address to check the factory they won’t find anything but three guys sitting in a small office selling items from the real factory at higher prices.

Alibaba unfortunately has hundreds of middlemen and scammers that pose as manufacturers. Many of these “manufacturers” are not manufacturers at all, rather middlemen that pose as such, marking up the price and increasing the level of miscommunication between you and the actual manufacturer while providing little, if any real value.

With these filters you can pretty much eliminate middlemen, trading companies, scammers, and so on. Unfortunately, you will also eliminate real factories that are either new to Alibaba or do not make the effort of going through all stages of verification. If your search did not conclude anything in the first step, then you can perhaps extend the list again by unchecking “on- site check” or “assessed supplier” and looking through your options with Gold Suppliers first.

Moving on, through filtering I now “only” have 165,000 products to choose from. I naturally look at the first one and a few others that interest me in terms of design/color, etc.

This supplier uses nice photos, provides crucial details and specifications, and even test reports at the end.

The second supplier also uses nice photos, a clear description, and a clean look.

So what do I look for now and how do I go on?

A) The price

One of the first things you’ll look at is the price. For this listing we can see a price of $30-60 USD FOB. FOB stands for Free On Board and means that the seller will pay all involved costs that get the product to the nearest port. This would be the most viable way to ship goods from Asia. The buyer pays the

cost of actually transporting the goods across the ocean to the final destination. The price here is not really relevant as it is most likely just a place holder.

B) Minimum Order Quantity (MOQ)

We look at the minimum order quantity. The minimum order quantity (MOQ) is the smallest order the manufacturer is willing to accept to start production. However, it’s important to note that this is almost always negotiable. In
our example, the minimum order is nine units. I highly doubt that this is the MOQ. In this case it usually means that they have stock and you can buy from nine pieces. But for mass production (and cheaper prices) they probably have a MOQ of 100 pieces or more.

C) Payment Options

There are several common methods of payment, and each have their pros and cons for both the buyer and the seller. The longer you work with a supplier the easier it will be to deal with payments. If you have an established business relationship you could ask that the next order should be paid 100% on delivery (TT). He can always say no, but if he agrees this gives you financial liquidity.

Let’s take a look at the most common payment options and the associated risk level to you as the buyer:

1. TT (Telegraphic Bank Transfer)

Risk Level For Buyer: Risky
With a bank transfer, the supplier will receive payment before production starts. Very important: if you agree to this payment, NEVER pay more than 30% upfront. Seventy percent will be paid upon inspection and shipment release. This payment method bears a high level of risk to the buyer and generally is not recommended when dealing with an unknown supplier. There is little that can be done to get your money back if something goes wrong.

2. Letter of Credit (L/C)

Risk Level For Buyer: Relatively Safe
A letter of credit is safe for both parties. However a letter of credit is rather complicated to issue through a bank, costs quite a lot of money, and is generally only recommended for larger purchases ($20,000 and above).

3. Western Union

Risk Level For Buyer: Very Risky
Western Union generally should only be used when dealing with people you know very well. There is no guarantee if something goes wrong.

4. PayPal

Risk Level For Buyer: Fairly Safe
PayPal is a popular payment method for buyers as it presents a much lower risk, ease of use, and generally pretty good buyer protection. Although it’s a

popular option with buyers, it’s less popular with suppliers due to difficulties in withdrawing money, high tax rates, and potential charge backs from less than honest buyers.

5. Escrow

Risk Level For Buyer: Safe
When using an escrow service, the buyer’s money is held by a third party and is only paid to the supplier after the buyer confirms satisfactory delivery of their order. Escrow is a fairly safe payment method for buying and selling online because it protects both the buyer and supplier.
You can read about common payment methods on Alibaba on the Alibaba Safe Buying page.

http://www.alibaba.com/help/safety_security/class/buying/pay_ship/ 002.html

Generally, when you are just starting, you’ll probably want to look for or negotiate with suppliers to either accept PayPal or some type of escrow service to give you the highest level of protection.

The next step would be to start communicating with the supplier.

D) Contacting Suppliers

Now that you understand how to better protect yourself when doing a transaction on the other side of the globe, it’s time to contact some suppliers.

Introduce yourself to each supplier professionally. When I first contact a supplier it usually looks like this.

You can copy this section or look under supporting documents for a blank supplier introduction form (http://importdojo.com/docs/supporting_docs.zip ) and use it for your first contact:

Dear…,

My name is ….. and I am the ….(Manager/President/Buyer etc.) of …. Limited/Inc.

We are a (fill in your company’s business, e.g., Importer/Buying Office/Whole seller/Online shop) and are operating in (fill in your country).
You can also check out our website under: www. …..

I am writing to you today to inquire about the product I saw on your website/catalogue/exhibition.

The model number is….

Could you please give me the following information: You can fill in the details in the attached quotation format or send me your quotation in the first step.

Unit price based on …. Pieces
Minimum Order Quantity
Available certification (CE, RoHS, FCC, GS, etc.) Production lead time
Available colors
Payment terms

I would then evaluate and get back to you as soon as possible. If you have any questions please don’t hesitate to contact me.

Thanks and best regards,

E) TIPS WHEN CONTACTING SUPPLIERS:
Do this step with multiple suppliers, because it’s never good when you start

to rely on just one supplier.

Don’t let the suppliers on Alibaba know this is your first import. If they know you are new, they usually try to take you for as much as possible on the first order and assume you will not be back.

For easier reference and keeping track of your offers and suppliers I recommend making yourself a folder on your desktop. Name it “Alibaba” or “Sourcing” or anything that you can relate to easily. Create subfolders for each supplier. In each subfolder create folders such as: “quotation,” “supplier profile,” “certificates,” and so on.

Within this course we will provide simple offer sheets and supplier profile forms that you can include in your email when sending to the supplier for the first time.

Also, I have found that some suppliers don’t read your full email. So point out the model number that you are interested in and ask them to quote specifically.
Sometimes you will receive a simple email back with a PDF catalogue asking which item you are interested in. It can be exasperating but that’s the way it is sometimes. Politely reply back that you are “looking for a specific quote on model number…”

You don’t necessarily have to use these forms for contacting the supplier for the first time. Many will actually not fill it in because it obviously takes time to do so.

HOWEVER, I recommend if you have narrowed down your suppliers you should ask them to fill it in for your records. Keeping clean records is crucial to your follow-up.

F) Ask questions and follow up

As you begin narrowing down suppliers make sure to ask a lot of questions about their business and their products:

Ask for a copy of their business license and company and factory standards (for example ISO-9001)

Ask which laboratories/third party companies they work with. If they only work with Chinese test or inspection companies be cautious.

Ask for photos of the factory or company presentation (PDF/PowerPoint) and sample products.

Feel free to ask for whatever makes you feel more comfortable doing business with them. Ask who their customers are and where they are located. If they don’t have any customers in your country be careful, as they might have no experience dealing with your country’s regulations and standards. Ask about them. If they already work with a competitor of yours or with an industry similar to yours it’s a good sign that they can fulfill your requirements.

Send a vendor profile so they can fill in their details. They should cover production capability, how many workers/staff/engineers, main customers, certifications, company turnover, etc. (we provide a blank format here: http://importdojo.com/docs/supporting_docs.zip

G) Get samples

It should go without saying that before you invest any significant amount of money into inventory you need to get samples to check and verify quality. We explain the sample process in Chapter 10.

H). Sounds fishy!

Finally, if something is too good to be true, it usually is. Be aware of prices, suspicious payments, or communication that doesn’t seem right. It’s never too late to simply cease communication and look for another supplier.

Tip: When asking your questions and formatting your emails to suppliers it’s best to work with paragraphs or bullet lists of requests so that it is easy for them to understand your requirements and needs. Make the supplier answer each of your “bullet-questions.”

I) Requesting a quotation

Requesting a quotation/price, also referred to as a RFQ (request for quote) is a relatively simple process. However, taking a few extra minutes to plan your email can make a significant difference in the number and quality of replies you receive.

Here again is a simple form for a RFQ:

Dear…,

My name is ….. and I am the ….(Manager/President/Buyer etc.) of …. Limited/Inc.

We are a (fill in your company’s business, e.g., Importer/Buying Office/Whole seller/Online shop) and are operating in (fill in your country).
You can also check out our website under: www. …..

I am writing to you today to inquire about the product I saw on your website/catalogue/exhibition.

The model number is….

Could you please give me the following information: You can fill in the details in the attached quotation format or send me your quotation in the first step.

Unit price based on …. Pieces
Minimum Order Quantity
Available certification (CE, RoHS, FCC, GS, etc.) Production lead time
Available colors
Payment terms

I would then evaluate and get back to you as soon as possible. If you have any questions please don’t hesitate to contact me.

Thanks and best regards

J) Negotiating

Once you have begun conversations with multiple suppliers and have a good idea about their prices, MOQ’s, and payment terms, you can begin negotiating with them.

Here are some tips on negotiating:

It is a given that once you place your order you negotiate the price, whether you are below the supplier’s MOQ or not.

Use the price that you were originally quoted and decrease it by 20%. Give this target price to the factory and let them know you would like to order with your (20% reduced) price. In most cases, the supplier will not agree to your new target price but he may reduce it by another 5%.

In 80% of cases he will give you a further reduction on his original quoted price, unless your quantity is really very low.

Also, mention to him that this will be the first trial order and that if it is successful larger orders will follow.

K) Weighing Your Options

Once you’ve narrowed it down to a select few suppliers, you’ll want to weigh all your options. Bear in mind it’s not always about the price and MOQ. It’s also a gut feeling that you should get when communicating with a supplier. Did he reply eagerly and quickly? Did he follow up in detail or just send fragments to your questions? If you have the feeling it’s difficult now to communicate, imagine how it would be to work with him once the order is placed. Make sure you eliminate the suppliers with the least potential and the most issues now!

Conclusion for ALIBABA

Sourcing a reliable supplier for your product from Alibaba can be a great experience. Following the above steps and tips should get you working with a reliable and good supplier. Don’t just settle on your first supplier or only one supplier. Keep your options open and order multiple quotations and perhaps samples.

GLOBALSOURCES

Global Sources is very similar to Alibaba. It’s just a bit smaller and less known.

Sometimes when I don’t find a product on Alibaba I go to Global Sources, or vice versa. What I like about Global Sources is that their customer follow up is usually better than Alibaba’s. I guess that’s because they are located in Hong

Kong, while Alibaba is based in Hangzhou (China), so their customer support is usually in a better English.

Start by registering and creating a profile as a buyer. It’s the same process you followed with Alibaba.

Once you have completed your registration you can start looking for products and suppliers.

Once you have input your product search you will see suppliers and products. On the right they have a nice tool that is similar to those in Alibaba. You can see if the supplier has been verified, which customers he has, does he exhibit, and so on.

You can also filter by “manufacturer,” “locations,” and much more. Again, it’s very similar to Alibaba.

Check out all their features such as Magazines, Tradeshows, Marketplace and more. There is a LOT of free information on there. I personally really love their e-magazines. There are a lot of suppliers in there with great photos, contact information, and much more. This is only available as a registered user though.

Start your product search as under Section 1 on Alibaba in the previous chapter.

Also check out my blog post & video screencast I made for Alibaba here:

http://importdojo.com/alibaba-hacks/

 

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looking for products at an exhibition

Ways to product sourcing

I think there are generally three effective ways to source your product:

  • Internet (Alibaba, Globalsources, Aliexpress, HKTDC)
  • Exhibitions / Conventions
  • Contacts

Internet:

The Internet is probably the fastest way to source for products.
There are hundreds of providers on the Internet to source for products. The most reliable and efficient ones would be:

ALIBABA (B2B-Business to Business for larger quantities)
ALIEXPRESS (B2C Business to Consumer for small order and drop shipment)
GLOBALSOURCES (B2B and Marketplace) Alibaba’s competitor in Hong Kong
HKDTC.COM (B2B with small order and drop shipment) from Hong Kong

I mainly use Alibaba or Globalsources since they have been around the longest and are the safest to use.
There are many other websites within China similar to those two but they are not as user friendly and safe. For some of them, including TAOBAO or BAIDU, you would need to speak Chinese or hire a translator.

I go into details about Alibaba & Globalsources here.

Exhibitions/Conventions

I would say exhibitions are the most effective way to find suppliers and products since you meet face to face and can also see the products.
As a first step Internet sourcing is fine, but maybe try to arrange your next China trip around an exhibition.

I learned, after many disappointments, that you don’t want to place a large order (more than 100 pieces) without knowing what you will get. You wouldn’t want to place an order with someone you never met and transfer a lot of money to him. So going to exhibitions helps a lot.

Insider tip:

Even if you can’t go to an exhibition you can still find out about all the suppliers exhibiting there. How? Simply go onto the exhibition’s website. For example, this lighting fair in Hong Kong: http://www.hktdc.com/fair/hklightingfairae-en/HKTDC-Hong-Kong- International-Lighting-Fair-Autumn-Edition.html.

Then click on “Full Exhibitor List” and there you go. You have all exhibitors exhibiting at this fair. It’s a bit of a lengthy process but you can check all websites of the suppliers, look at their products, and contact them directly without even going to the exhibition.

As I mentioned already, in this section we focus on the exhibitions in Asia. I would say there are three major organizers and hosts that cover EVERYTHING that you need. You need to preregister with all three organizers and it’s FREE of CHARGE.

Main Exhibition Organizers in China/Hong Kong:

HKTDC

www.hktdc.com

HKTDC covers most of the fairs held in Hong Kong. All exhibitions are held at the Wan Chai convention center on Hong Kong Island. Hong Kong exhibitions will also be the most important ones for you (apart from Canton Fair). They cover everything from jewelry to food to electronics, gifts, optical, maritime, and much more. Click on the link and see all the upcoming events. HKTDC’s events usually have the big names exhibiting. That’s a good way to spot trends and innovative products. But eventually you want to buy from the factories with lower prices.

GLOBALSOURCES

www.globalsources.com

Globalsources is the second organizer in Hong Kong. They exhibit at the Asia World Expo Hall at the Hong Kong International Airport. But they also hold other events around Asia (Korea, China, Thailand, India), which are usually a lot smaller and deal mostly with local industries.

They also cover the most product categories (electronics, jewelry, textiles, and more). The events are usually smaller in size and the exhibiting suppliers are mostly cheaper than at HKTDC. This can be positive and negative, as in lower prices but less innovative products.

CANTON FAIR

http://www.cantonfair.org.cn/en/

The Canton Fair is the holy grail of exhibitions. This event is so large that it is held twice a year and each time runs over a span of 31⁄2 weeks in three different phases. Each phase comes with different product categories. As of 2014 there were over 22,000 exhibitors. This exhibition is a must for me and it should be for you too. You will find a lot of innovations, big brands, small factories, or the product you have been looking for for so long.

Plan at least 2, or better 3, days for your product category/phase. Sign up once and get a badge that will be valid forever.

Don’t throw away your badge. You can use it for your next visit without paying 100 Yuan for a replacement card.

CONTACTS:

Last but not least, contacts that you already have can be very helpful. Ask around in your friend circle, relatives, and so on. You never know, your sister’s cousin might have a contact that you didn’t know about.

Sign up on business networks such as www.linkedin.com or www.xing.com if you haven’t already. You can find a lot on there and can ask around if anyone has any contacts to suppliers for your products.

There are also professional groups on those two websites with lots of suppliers offering their services. Simply search for a group that could meet your needs (e.g., consumer electronics suppliers / textile suppliers, etc.) and post your inquiry to this specific group.

If you aren’t on any business networks or have no contacts, I recommend that you start with Alibaba/Aliexpress.

Usually, government agencies in your country will also provide you with supplier contacts. But be aware, most of these contacts will likely be importers themselves. You will want to cut them out and go to the source. Remember, that’s what this course is all about.

 

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IMG_2548

Validate your product idea

You’ve found your product, GREAT! But careful, don’t get over excited about a product that you just found or had an idea for. You need to evaluate first if your product fits the market and its consumers.

We call this “product-to-market-fit,” meaning you have something that the market really needs.

To evaluate your product you should go through the following steps:

COSTS: 

  • Cost of manufacturing
  • Cost of transport.
  • This can be crucial to your margin if the transport cost is very high.
  • Cost of duties and taxes
  • Possible profit before tax

COMPETITION:

  • Make sure no one or not many people carry your product.
  • Analyse the market, do your research. Look at social media hash tags: http://topsy.com/ (enter your product’s name or category, e.g., LED bulb)
  • Test the idea with a few forums (but don’t give away too much information) – Research trends on blog sites (such as Shopify.com)

More great tips available on Shopify:

http://www.shopify.com/blog/12932121-what-to-sell-online-8-strategies-for- finding-your-first-product

For Example, look at the picture of this post. Its a Projector that can stream movies, music, documents via WiFi / USB and more. I don’t remember exactly but when I saw it at the Exhibition I was really excited. I was eagerly waiting for the price from the supplier. Once I got it I was really disappointed as the price was so high I could never sell it to any of my Customers. Not even if I would have done a lot of Marketing etc.

So what went wrong? First the supplier probably hasn’t done enough research on the market if his product can actually sell and if there is a niche. Second, I was super excited and sent pictures to my Customers already and they were all giving great feedback asking for the price. So when I finally got the price and (embarrassed as I was) sent them the price I made a fool out of myself. Not one Customer was interested in such a high price item.

Remember, do your research and make sure you have a “product-to-market-fit”.

 

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developed a new product!

How to find the right product

As mentioned earlier this can be a very lengthy process or a very short one if you already have something in mind. We will give you a few ideas and guidelines if you don’t have a new product idea yet.

Unfortunately, China’s factories rely a lot on your product input. When it comes to innovative products from regular factories there is not much to be found. What is found a lot is copies or slightly modified products from the big names. Most of the time you can also request a little modification such as putting your company logo on the item, private label packaging, or changing the colors of the product.

We will cover custom products in the section OEM Products.

Other than that you will need to rely on factories for their input.
What you can give them without investing a lot of money for new products (that no one has yet) is a good pitch. Say you see some new cool gadget on websites like Engadget”, Wired, CNet, PCMag (to name a few in the technology sector). You could send this idea to your trusted supplier and ask them if they would be willing to invest in developing this product. Or perhaps he has something very similar already in his assortment.

Fortunately, what Chinese factories are very good at is producing standard items that you can find in your local Wal-Mart / Sears / Lowes / Bed, Bath, & Beyond, and many more. These items can be a bathroom accessory, TVs, garden furniture, and much more.

One of the best ways for me to find a new product is by scouting the Internet and looking at trendy websites.

For example, this link provides all the necessary company websites that you need: http://www.kadaza.com/.

Just click on any category and browse through the many major websites provided.

For example, click on “Computer & Tech” and you will find the top 24 websites where you can start your research on the product that you would like to import. It is time consuming but it’s also a great way to find ideas and scout your potential competitors.

What also helps me a lot are newsletters. I subscribe to at least 100 newsletters of companies that I think provide cool gadgets and items. This way you get weekly newsletters of trending products. Simply go onto a company’s website and subscribe, easy as that. It could be your local supermarket, a big brand name company, or some blog that always features the coolest and trendiest items. Perhaps you could create a new email address that you register with on these sites so that your main (work) email address doesn’t get overwhelmed with newsletters.

Another way to find new products is obviously when you are out in a shopping mall. To start your own import business means that you also work when you are out with friends/family at a shopping mall. Keep your eyes open and when you see something cool make a reminder for yourself on your smart phone to look up this product.

Travelling is also a great way to find ideas. When you are out of your country or state you will likely see items that your country/state does not have. There could be many reasons why they may not be available where you live, but it’s always worth it to check an idea out. I remember when my friend told me about 10 years ago about Bubble Tea & Fancy Green Tea drinks sold in Hong Kong and Asia. She was from Germany and she had never seen these drinks back home. She didn’t go on any further with that idea but a few years later back in Germany these drinks started to pop up and were a smashing hit! So even when you think at first that idea might be nothing, it could be worth millions! Share the idea with a few friends and brainstorm about it.

One of my favorite and an efficient way to find new products is at exhibitions. There are hundreds of exhibitions each year in many countries. You get to meet the supplier, see the products, and talk over details such as prices, models, and much more. On top of all of that I guarantee you that you will get inspired. To find exhibitions near you just Google the exhibition center near you and get your entry ticket. Most times you will need to provide name cards and contact details for that. You can order business cards for $5 these days. Going to an exhibition prepared and with a professional image gives the supplier a great impression of you. We will cover exhibitions and how to behave there in another chapter in Part 2 of this book.

Obviously, looking at competitors can help you find a product. But doing so means you need to be more price competitive and that gives you a disadvantage, unless you are selling at a different price level and providing additional services that your customers value.

Amazon, Ebay, and the likes can help you get started on basic product ideas. I don’t recommend starting by importing products that the majority of companies already have. But these websites give you great input on trends and items that sell very well.

 

Alibaba, Aliexpress, Global Sources, and Taobao are great ways to find products. You could search through millions of products from thousands of suppliers. But I don’t recommend this option, as you can quickly get lost in the products. These sites are a great way to find a supplier, however. We will cover these four sources later.

Now, having said all that, you might think, “but how do I figure out what product is right for me?” Again, all options above give you some ideas where to find products, but it is up to you to try and test them. You can start by importing small quantities via Aliexpress (drop-shipping) and testing them through your EbayEbay/Amazon or other sales channels.

Make sure that the product you want to import is not regulated or a restricted item in your country. Do your research! See the section The 6 Step Import Process.

 

We will also be a forum & community later on http://importdojo.com for product discussions where you can interact with other Buyers all over the world.

 

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