China has carved out a niche as the world’s manufacturing powerhouse. According to the United Nations, China accounted for 28 percent of global manufacturing output in 2018. The country achieved this status by rapidly developing its business ecosystem, offering low labor costs and taxes, and establishing less stringent regulations.
But in recent years, China has moved to high-end manufacturing, while also raising costs. The situation has been further exacerbated by the trade war between the United States and China, which has prompted many companies to seek cheaper manufacturing destinations such as Vietnam, Indonesia and India.
Despite the changing landscape, China remains the undisputed world’s leading manufacturer. Thanks to its well-established logistics network, experience in dealing with overseas customers, and diversified manufacturing base.
If you are a new wholesale yoga mat importer looking to do business with Chinese manufacturers, you may find the process daunting and even confusing at first. Here, we offer basic tips to help you navigate your way around Chinese suppliers.
When you identify a Chinese manufacturer, you may find that the biggest obstacle is communication. This is especially important if the supplier speaks limited English. Poor communication can lead to costly delays, wrong orders, wrong specifications, and even broken business relationships.
To avoid this, when you communicate via email, only use simple, direct language and avoid technical terms and slang. Ask only a few questions at a time to allow your vendor to give more targeted answers. Also, don’t send a lot of emails on the same subject, as this can get confusing.
When possible, follow up with emails over the phone, such as via Skype. Not only does this give you a chance to clarify any issues that arise, but Chinese culture values human interaction in business. The social messaging app WeChat is another useful form of communication that can help you reach suppliers faster than email. WeChat is hugely popular in China and widely accepted for business communication.
Get Your Pricing Right
If you want to run a successful online store or make a killing reselling Chinese imports, then pricing is one of your most important considerations. Chances are the initial offer you get from a supplier is negotiable, so don’t be afraid to discuss discounts.
In other words, what they say is “cheap is expensive” is true. “It is advisable not to haggle with suppliers as they may be forced to cut corners on product quality. They may use inferior materials or cheaper parts to meet your costs because they have to make money. You may also be affected by delivery times, as they push your order to the back of the line to deal with higher-paying customers.
When it comes to pricing, the best way to do this is to establish a benchmark price for your product, which can be done by getting quotes from several factories. This will give you an idea of what price you are looking for for specific product quality and quantity.
It’s also a good idea to negotiate as soon as you get an offer, rather than waiting until you have prototypes and product samples. By this time, you’ve invested time and money in the process, and your suppliers know this and have little incentive to lower costs.
Choose the Right Type of Supplier
Not all Chinese companies that advertise online are real factories. There will be factories — real places where things are made and assembled. But you also encounter trading companies that act as “brokers” or “middlemen” between the buyer and the factory.
As a new importer, you must decide what type of entity you want to deal with since each entity has its advantages and disadvantages. Initially, you may find it easier to deal with a trading company, as it may have staff who are more proficient in English, making things much easier.
Similarly, most factories have a minimum order quantity, and as an individual, you may not order enough to meet this threshold. In this case, your trading company may use its relationship with the factory to get them to produce your product.
Of course, in order to make money, trading companies will raise the prices of factories. That means you could end up paying more than if you were dealing directly with the factory. Before making your decision, weigh the benefits of choosing a trading company versus doing business directly with the factory.
Understand the Impact of Chinese Holidays
Chinese New Year is an important festival that takes place anywhere between the end of January and the end of February and lasts for three weeks. The holiday led to mass factory shutdowns as workers left the city to celebrate with their families in other parts of the country. Failing to consider the Chinese New Year could adversely affect your supply chain and end up costing you thousands of dollars in delayed shipments.
It’s hard to imagine a holiday that shuts down an entire country, but that’s what CNY does, so as importers, it’s best to plan around it. With everyone rushing to place orders before the shutdown, manufacturing prices are likely to rise, as are shipping costs.
To avoid these rising prices, do a thorough inventory before Spring Festival to know what you have in stock and what you need to order. If you can wait, now is not the time to make a large order. It may take up to a month for the factory to return to normal production after the celebrations, so plan ahead.
Besides the Spring Festival, there are several other festivals in China. It is best to keep in constant communication with your Chinese suppliers to understand any expected delays.
Build a Strong Relationship
You will conduct due diligence on your Chinese suppliers, such as confirming their physical addresses, obtaining references, and even samples of them. While this is an essential first step, it is highly recommended that you visit the vendor in person whenever possible.
Visiting the factory will give you an idea of how your products are made, whether everything is done in-house or if there is any outsourcing. This is also a good opportunity to discuss any custom products you might think of.
Chinese business culture places a high value on interpersonal communication. Sharing a meal with your vendor will build relationships and help build trust. Visiting in person can also lead to better prices or better payment terms.
Always visit the factory or get somebody trusted to do it
What you see on the websites of retail wholesale yoga mat suppliers may not be relevant. As lucky as you may be, these suppliers are often just intermediaries masquerading as manufacturers. More often than not, they don’t really have the ability to produce the product you want, but they will promise you – hopefully it will be done on time, or hopefully they can find someone to subcontract it to you.
The good news is that even if you don’t have anyone in China, there are still plenty of agencies and inspection companies that can do the work for you (find a good one though!). . It may cost you a few hundred dollars to do so, but it may save you a lot of money later.
Sign a well-drafted contract
What we are talking about here is not a purchase order, but a good contract that can be legally enforced and spells out all the obligations of both parties: price, payment terms, detailed product specifications, delivery times, quality control procedures, etc.
While a good contract won’t save you from headaches, it can certainly help you deal with any disputes that may arise. Without a contract, there’s nothing you can do. If there is a production delay, guess which customer they leave in the queue – the one with no bargaining power.
If they want to raise prices, guess who might be the victim, the answer is the same.
So if you want to reduce your chances of being on the losing side of a supplier dispute, make sure you have a good contract signed before you enter into a relationship.
The negotiation process never ends
I’m sorry to burst your bubble if you think the negotiations are over when the deal is signed: it doesn’t work for China. Your Chinese supplier sees this agreement as just the beginning of your relationship, especially if you’ve already got a low offer, you’re sure to hear the phrase “I need to raise my price” soon enough.
Understand your supplier’s cost structure and track commodity prices that are required to manufacture your product
You need to know the supplier’s costs (labor costs, material costs – individual costs for each material, markups, etc.).
You also need to keep track of commodity prices, which are a key component of product costs.
These two “precautionary measures” will help you deal with unexpected price increase demands because they will allow you to:
Assess whether there is a valid reason behind the request
Estimate the reasonable impact on costs
Objectively decide if you should give in (hopefully in future orders… Not for that!)
“Never relax! Quality control is key, even with good suppliers.
When it comes to sourcing from China, one of the best pieces of advice you can possibly get is “never relax… Even if there are good suppliers “.
Even with the most trusted suppliers, production monitoring and quality control are critical. Our understanding of “acceptable” is completely different from your supplier’s (I know you have specifications and approved samples, but still!). It’s common for vendors to approach buyers candidly and ask why they can’t accept a product that doesn’t meet specifications if it’s still useful.
Here, I’ll go back to tip #1 that I’ve already suggested. If you are not in China, you cannot do quality control directly, there are inspection companies and agents who will do this work for a very reasonable price.
I hope you find these suggestions useful. I’d like to hear about your experience working with Chinese suppliers.