A buying Guide - From the Chinese Suppliers perspective

Discussion in 'New to import/export? Read these before posting' started by Import Expert, Sep 20, 2012.

Thread Status:
Not open for further replies.
  1. Import Expert

    Import Expert UKBF Regular Free Member

    Posts: 232 Likes: 112
    I thought I would highlight some of the main issues the suppliers face and cover some of the common questions that I’ve seen in the past.

    Types of supplier
    In China as with the rest of the world, this can vary hugely. One supplier might be a factory with thousands of staff and at the other end of the scale you might have a mother of one working from home to try and pay the bills, along with many middle men in between. The difference in China is that it might not always be that clear exactly who you are dealing with. The mother is as likely to tell you that she is a factory as the factory itself.

    The truth is that they could all offer as good a service as the other. The crucial thing as far as the buyer is concerned is that this will affect what you can buy and at what prices.

    Types of product
    This will also have a bearing on who you can buy from and at what unit prices. There are obviously thousands of various permutations, but to keep it simple I see that there are three main product ‘types’ if you like.

    1) Off the shelf. These are made in quantity to the same design and as such reasonably easy to source.

    2) Off the shelf with own branding. Also made in quantity, these products might require specific branding to be added to the basic model, so will involve extra printing, design, etc.

    3) Bespoke products. These are manufactured to a specific design of the buyer and as such can be harder to obtain.

    Why do I need to consider this?
    Put in very simple black and white terms (I will cover in more detail below). If you ask a large scale factory to make you 250 small widgets, they simply won’t deal with you as it’s not worth their while. Yes they want to make money, but they won’t make much from that order.

    Should you ask the mother of one to get these for you, chances are she will have the necessary contacts, perhaps on the back of another larger order of say 5000 widgets that she sells on in smaller batches.
    Obviously once it comes down to own brand and bespoke products, there is additional design and manufacturing involved which will have a bearing on who you can buy from.

    Below I have highlighted some of the common questions I come across and helps explain the answers to these from the suppliers point of view:

    Paying for samples
    Q. I have asked a supplier to send me some samples so I can then make a larger order, but they want me to pay for them. Why are they not trying harder to get my business?

    A. If they sent samples free of charge to everyone that asked for them and then subsequently did not make an order, they would be out of business. Even if they stock the samples so have no excessive production costs, they are still essentially throwing away money.
    If a buyer agrees to pay for samples, the supplier will view them as being more serious about placing a future order. Money talks as they say.

    There will be some suppliers that will send out free samples, and perhaps just ask for the shipping cost to be covered by the buyer, but especially for higher value items these are becoming less common (Unless you happen to be a buyer for a company the size of Tesco’s, in which case they are more likely to hand deliver them).

    MOQ is too high
    Q. I want to buy 50 of these items but the supplier has a minimum order requirement of 1000 and won’t budge – Why?

    A. If it is not an off the shelf item they will more than likely need to make or buy moulds, create specific designs and suchlike. The factories also have to purchase materials and even if the order is small, chances are their own supplier of the base materials might have MOQ’s themselves. All of this can be a very costly investment for a small order. The materials themselves might be difficult for them to source if they need to meet your design specifications.
    Production of a specific product also takes time. They will need to schedule staffing and delivery of components even for a small order. The manufacturing process will mean they will be taking resources away from potentially larger orders with more profit in them.

    Why would they want to do all this for a low quantity order with a very slim end margin?.

    Unit price too expensive
    Q. Price I am being quoted is too high. China is supposed to be cheap?

    A. When smaller orders are involved, buyers will often discover that prices are not what they expected from China and when they factor in shipping and Duty/VAT that they realise that they could probably source from the UK cheaper.

    All of the base costs mentioned in the MOQ section will need to be factored into any unit price they provide you with and they will also need to consider the possibility of not being able to take on larger orders whilst your items are being manufactured.

    A factory will ideally want large regular orders, so they might even be trying to put you off by quoting over the top if they see you as a small one off importer. They might refuse to quote you altogether unless you can prove your potential to them.

    Deposit required
    Q. I have ordered some goods from a manufacturer, but they want part of the payment up front. Is this a scam?

    A. No not at all. If a supplier is manufacturing a product for you, they will want part payment up front. Firstly, to show you are serious (it is a non-refundable deposit after all), and secondly to pay for materials.

    More than often the deposit will be 30% with the remainder due on completion of the order or prior to delivery/release of bill of lading, etc.

    Manufacturing process taking too long
    Q. I ordered my goods three weeks ago and I’ve paid the deposit – Why have they not been shipped yet?

    A. Very few suppliers will hold large quantities of stock, or indeed if they are factory they will not have surplus materials just laying around waiting for a potential order. One of the reasons is that the factories need to move quickly with the times, so a big selling product right now could be out of favour in a months time. In addition to this, any stock held is essentially invested money that is going nowhere until the goods are sold.

    Some products such as the bespoke ones mentioned will take longer to manufacture, as there is more work involved and designs need to be finalised and materials sourced.

    A factory production line is not just a few dozen staff sitting round waiting for someone to press a green button on a conveyor belt once an order is received. They will often have a full schedule, some working 24 hours a day. They need to find a slot in their schedule to work on your product.

    Often this can panic buyers, as they see any delays such as this a potential stalling tactic that they think will develop into a scam. It’s simply not the case.

    Always ask for the lead time before you make an order, but be aware that things can sometimes change.

    In summary
    A supplier will only be desperate to sell to you if they feel it is worth their while doing so.

    If you haggle on price so much that the base line profit they are making is very poor, it’s likely that both the product quality and the level of customer service will suffer too. If you were trying to sell regular orders to two customers, one you were making £10 an item and the other £40, who would you want to impress more?

    Finally, most buyers are wary of being scammed. Don’t forget this works both ways. More than likely the supplier themselves will have been scammed in the past or suffered at the hands of time wasters. Treat them as if you would treat your own customers, create a business relationship and reap the benefits of a successful long-term partnership.

    If you would like advice on this subject please do feel free to drop me a PM or post a reply directly on here.

    Kind regards,
    Darren.
     
    Posted: Sep 20, 2012 By: Import Expert Member since: Feb 1, 2012
    #1
    • Thanks Thanks x 20
    • Useful Useful x 2
    • List
  2. GraemeL

    GraemeL Pain in the neck? Full Member - Verified Business

    Posts: 4,798 Likes: 1,014
    Well done Darren. A lot of thought has gone into this.

    G
     
    Posted: Sep 21, 2012 By: GraemeL Member since: Sep 7, 2011
    #2
  3. njoo

    njoo UKBF Newcomer Free Member

    Posts: 16 Likes: 1
    Lots of good info here. Especially the deposit part. One thing though is that I feel that one should definitely still keep their guard up.
     
    Posted: Sep 22, 2012 By: njoo Member since: Dec 8, 2011
    #3
  4. gelelighting

    gelelighting UKBF Newcomer Free Member

    Posts: 4 Likes: 0
    Thank you Darren. You helped us a lot! I hope my customers can have a good read of this page.
     
    Posted: Sep 22, 2012 By: gelelighting Member since: Aug 31, 2012
    #4
  5. Food King

    Food King UKBF Newcomer Free Member

    Posts: 51 Likes: 2
    I an regular importer from China, I feel am seasoned, but always find myself in new situation when dealing with China. I appreciate Darren's Post, its very informative.

    Further, there are many points which needs highlighting depending on what you intend to import from China, because the rule book differs from product to product. In majority of the cases, I would suggest go with a third party agency who can do a inspection for you, you need your eyes in China before your goods get loaded to a container, unless you know the supply source very well. Further, I would prefer to suggest to open a Bank LC for payments rather than TT transfers. The incoterms can be agreed mutually.

    Though lower value transaction are not worth opening LC payments, but paying advance through TT payment's are highly risky. You may get away 9 out of 10 cases by TT payments, but if you are struck or cheated on that 1 out of 10 consignments, you efforts on trading 10 consignments are vanished. Believe me its hard to recover lost or conned money from China, hence you need intermediate agency for inspection and a bank to protect you on a rainy day.

    Its not new to EU/ UK customs who seize so many containers with contrabands, imitation goods, crap and junk filled in the containers for which one has paid in TT advance payments, to that matter Bank LC's has its own loopholes, but better than other options when importing.

    Good Luck to UK Importers.
     
    Posted: Sep 26, 2012 By: Food King Member since: Jan 24, 2009
    #5
    • Thanks Thanks x 2
    • Useful Useful x 1
    • List
  6. yr-monica

    yr-monica Guest

    Posts: 1 Likes: 1
    great..the wisdom essay. i love it
     
    Posted: Sep 26, 2012 By: yr-monica Member since: Sep 25, 2012
    #6
  7. peru99

    peru99 UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    I have recently had a bad experience with a Chinese company called Lightinthebox.com. Nowhere on there pre order or purchase site does it state that the buyer is responsible for Customs Duty. I bought two security cameras from them to try out.

    I then had a call from DHL Express asking me for the duty before I could have the goods so let this be a warning to check the shipping terms more thoroughly. I could in the event have purchased these in the UK for not much more without the hastle.
    All becuase I believed I was being offered a delivered price.:mad:
     
    Last edited: Sep 26, 2012
    Posted: Sep 26, 2012 By: peru99 Member since: Sep 26, 2012
    #7
  8. Import Expert

    Import Expert UKBF Regular Free Member

    Posts: 232 Likes: 112
    It does mention Duties/taxes as per below:

    http://www.lightinthebox.com/knowledge-base/c1229/a3021.html
     
    Posted: Sep 27, 2012 By: Import Expert Member since: Feb 1, 2012
    #8
  9. deniser

    deniser UKBF Legend Free Member

    Posts: 7,831 Likes: 1,655
    You are always responsible for paying customs duty and VAT if you import something from outside the EU. This is hardly the Chinese seller's fault.
     
    Posted: Sep 27, 2012 By: deniser Member since: Jun 3, 2008
    #9
  10. Multi-store

    Multi-store UKBF Enthusiast Free Member

    Posts: 529 Likes: 96
    This is true. The terms of sales most likely state DDU as the delivery terms

    Delivery
    Duty
    Unpaid
     
    Posted: Oct 5, 2012 By: Multi-store Member since: Sep 19, 2011
    #10
  11. AndyRG&&

    AndyRG&& UKBF Newcomer Free Member

    Posts: 10 Likes: 1
    Hi

    I have been trying to start importing from China since about march, and the more research I do the more wary I get.

    having read Darrens posts, I have decided on using Woodland Global to hand the freight side of things but need a China import agent, as I would prefer expert help in terms of quality and prices for my initial orders. could anyone recommend a uk based import agent to deal with Chinese suppliers

    Regards
    Andy
     
    Posted: Oct 6, 2012 By: AndyRG&& Member since: Mar 24, 2012
    #11
  12. Frankngai

    Frankngai UKBF Contributor Free Member

    Posts: 97 Likes: 7
    Hello Andy,

    Don't worry about it. Most of the suppliers in China are serious and honest.

    If you need any help, feel free to contact us, although we're not UK based agent. I believe we can provide the high quality products with competitive price and best service.

    B. rgds,
    Frank
     
    Posted: Oct 7, 2012 By: Frankngai Member since: Mar 9, 2012
    #12
  13. GraemeL

    GraemeL Pain in the neck? Full Member - Verified Business

    Posts: 4,798 Likes: 1,014
    Hello Andy,

    No need to have a UK based agent. But you do need to be very clear about expectations, objectives and payments with whoever you use.

    G

    (PS _ Also suggest you should have started a new thread as your post will not be read by many on this one.)
     
    Posted: Oct 7, 2012 By: GraemeL Member since: Sep 7, 2011
    #13
  14. daniel ward

    daniel ward UKBF Newcomer Free Member

    Posts: 4 Likes: 4
    Practical guide I ever read.
    By the way, there are so many non-english manufacturers in China eager to export their price-friendly and high quality products to worldwide. But language causes the biggest barricade. In this case, export brokers play the international trade role and inadvertently increase the exporting pirce.
    I am Chinese and currently live in south of China, hundreds of miles from Guangzhou. Feel free to contact me if anybody need assist relevant to China. Best luck to everyone.
     
    Posted: Oct 11, 2012 By: daniel ward Member since: Oct 11, 2012
    #14
  15. Fredrik_Gronkvist

    Fredrik_Gronkvist UKBF Newcomer Free Member

    Posts: 9 Likes: 3
    Many importers are puzzled when so few suppliers respond to their enquiries. A while back I was reading on the Alibaba forum and came across a few suppliers explaining why they don't respond to so many emails;

    “I am a supplier too. You should inform some professional questions about your products such as your ingredient, you're packing, your country regulation, whether OEM or not.”

    “As a supplier myself, I only reply to a specific request. When your questions are very broad, it is very difficult for supplier to understand and follow up with you. Be specific about the products that you are interested”

    Most Chinese suppliers manufacture products based on the buyer requirements. Importing from China is NOT like going down to a local market and pick a little bit of this and that. Without a clearly detailed product specification the supplier cannot quote you a price, and you make yourself look like an opportunist that knows nothing about the product. The suppliers in China don’t have time to respond to people who are just “doing some research”.

    Different products have different sets of product specification and customization options. Below I show how a wristwatch of the same design can be made in two completely different ways with very different quality and price tags;

    Low Quality Watch

    ● Case Material: Zinc alloy
    ● Movement: No name (Made in China)
    ● Case Thickness: 10 mm
    ● Waterproof: No
    ● Certified: No (illegal in UK / Europe)
    ● EXW Price: US$3.85

    High Quality Watch

    ● Case Material: Stainless steel
    ● Movement: Citizen IL22 (Made in Japan)
    ● Case Thickness: 6 mm
    ● Waterproof: Yes (5 ATM)
    ● Certified: Yes (RoHS)
    ● EXW Price: US$17.5

    As you can see clearly above, you cannot simply ask a supplier to “quote a price for a watch”. You have to more specific! The only suppliers that like an enquiry like this are those who can benefit from from your lack of product knowledge and understanding of what makes a quality product a quality product.

    Without product specifications;

    ● The supplier cannot quote you an accurate price

    ● The supplier assumes that you’re not a serious buyer since serious buyers tend to know a little bit about their product

    ● You cannot judge whether or not you’ve been quoted a “good price” (what's the price of watch? Depends on the quality of course)

    ● You can be almost certain that there will be misunderstandings to some extent. You can just hope that these misunderstandings does not result in complete disaster.

    ● The supplier can use whatever (cheap and substandard) component and material they wish since you didn't specify what you wanted.

    One more thing, never refer to “good quality”. There is no universal definition of “good quality” and what a Chinese supplier may consider to be good quality could be the opposite in your customers' opinion. Don’t take any chances when importing from China.

    Where you can find product specifications

    Even if you have no previous experience working with a certain products it’s not an excuse for sending overly general and non-specific inquiries to a supplier. You can find a lot of product specifications by browsing Alibaba.com and even your competitors' websites. You don't need to cover a product to 100% before you get started, but NEVER leave your supplier guessing what you want!
     
    Posted: Jun 14, 2013 By: Fredrik_Gronkvist Member since: Jun 10, 2013
    #15
    • Thanks Thanks x 2
    • Useful Useful x 1
    • List
  16. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    Posts: 3,639 Likes: 718
    Good and valid points.

    Totally agree with the above issues and generally a good supplier will sift the genuine enquiries from just a general enquiry seeking information and not knowing what to do with it.
     
    Posted: Jun 15, 2013 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #16
  17. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    Posts: 3,639 Likes: 718
    The Chinese companies that are honest and professional are OK.

    Unfortunately, there seems to be a growing number of dishonest and unprofessional Chinese companies that prey on the first time importer who has little knowledge of what to look out for when buying from China for the first time.
     
    Posted: Jul 29, 2013 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #17
  18. liston financial group

    liston financial group UKBF Newcomer Free Member

    Posts: 3 Likes: 0
    Let me add something to this particular thread. Chinese suppliers (especially small ones) sometimes tend to be rather tricky in negotiation process. Our long-term partnership with China market shows that Chinese suppliers are ready to consider letter of credit form of payment even with post financing due to a huge amount of competitors. Surely the upfront payment is not obligatory a scam but do not forget that you are taking a great risk all the same. It's much more safer to use insurance means the banks and other financial institutions provide, such as letters of credit, export insurance and structured trade finance solutions. One must also have a good trustworthy agent or lawyer in China who is capable of providing due diligence procedure concerning your possible supplier.


    Alex Bukovski,
    Overseas department finance manager,
    Liston Financial Group, Inc.
     
    Posted: Sep 4, 2013 By: liston financial group Member since: Sep 4, 2013
    #18
  19. figurewizard

    figurewizard UKBF Newcomer Free Member

    Posts: 22 Likes: 1
    One way to avoid problems when buying from China or other South-East Asian countries is to use the services of an established agent. Some agents can be found in the UK but most serious such manufacturers will have a Europe-wide agency operation based in Germany.

    The best way to make contact with reputable manufacturers or freelance agents is in the principal European trade fair for your trade; for example Frankfurt for giftware and stationery, Nuremberg for toys or both Frankfurt and Dusseldorf for textiles. If you are into large quantities for UK distribution, the fairs in Hong Kong, Shanghai and Canton should be considered.

    In the case of freelance agents it is always a good idea to favour those who are exhibiting at these fairs, rather than individuals who are roaming the aisles looking for prospective clients. The benefits from a good freelance agent will be that they have access to smaller producers with new products. Such agents will also liaise with their factories on your behalf and should undertake inspection of consignments before giving the OK for them to be shipped.
     
    Last edited: Sep 16, 2013
    Posted: Sep 16, 2013 By: figurewizard Member since: Jan 14, 2008
    #19
  20. rendy78f9b194

    rendy78f9b194 UKBF Newcomer Free Member

    Posts: 1 Likes: 1
    I was very impressed and agreed. I actually wanted to open it but it turned out opinions on my find. explanations are very detailed and reasonable. I am usually a lazy person to read long posts, but not with your writing. I want to copy your writing if it's allowed :D
     
    Posted: Oct 13, 2013 By: rendy78f9b194 Member since: Sep 27, 2013
    #20
Thread Status:
Not open for further replies.