Caveat Emptor When Sourcing from China

Attention Attention Exercise Due Diligence When Sourcing from China!

Caveat Emptor—Make Sure You Do Due Diligence

When sourcing prices in China, beware of very low prices.  Never get just one quote from one vendor unless you know them very well for a long time.  Always get at least 3 quotes so you can gauge the average price of the product.  If you get a price that is way below the price of the other vendors—beware, and investigate why.  There a few reasons for why the price can be that low:

• inferior materials that still makes the product look good but which will make it fall apart very soon,
• inferior work quality that you find out only after the product is finished and you have lost time and money,
• or plain old fraud,

among many others. 

Pay a Little Bit More for Peace of Mind

If you do not have a person on the ground to investigate the reason why the price is so low you can end up with a huge loss.  Also do not count on the sample they send you as proof that all will go well as many times factories buy samples from better factories and show those as their work but they cannot actually make it with that quality.  Finally there is the issue of compliance as cheaper factories can be cheaper because of using terrible work practices that can end up embarrassing you and or your client.  This is one of the reasons why large businesses are increasingly using third party inspections. Alternatively they also end up paying a bit more to use a reliable buying agent that do their own inspection and avoid a financial disaster in the end.

Takeaway

There are great bargains to be had but do your due diligence if you are handling the purchase on your own because in China what seem too good to be true usually is and it takes an expert on the ground to be absolutely sure it is real.

If you have purchased more than three times from China from different Vendors, what has been your experience?

Rey Tamayo
Easy China Sourcing My Personal Site

China Sourcing Myth—Everything is Cheaper in China

China Buying Myth--There are plenty of Dollar Items in China

 

The Buying from China Myth

There is a huge myth in the populace and even amongst major businesses that everything is cheaper in China.  Nothing could be further from the truth, in fact some things are significantly more expensive in China. You can source most products much cheaper from China, with a few rare exceptions you cannot source a brand name product cheaper from China.  Also you can buy a good amount of products cheaper from China but some major products you would expect to be cheaper from China are indeed more expensive in China.  You can be left dumbfounded by some low prices in China but you can be equally dumbfounded by the high price for some items, particularly branded products.

Sourcing from China is not Always Cheaper

It is amazing what you cannot buy cheaper in China, it makes no sense that some items are actually way higher priced than in the US.  Wal-Mart China is more expensive generally than US Wal-Marts.  All computers and major electronics  are much more expensive.  You can get a laptop in the US for about $400 and you would be pressed to get a really low end laptop in China for that price.  I have compared prices across a variety of electronic categories and invariably the  US has vastly cheaper prices than China in electronics. 

What is More Expensive in China?

You say, how could products be more expensive in China since if it is made there?  Well for one thing the brands control the prices for their products, for another the high taxes increase the price incredibly.  If you add a brand name, even a Chinese brand the price goes higher than the price in the US in most cases.  If the electronics require parts from outside China because China cannot make the most technologically advanced parts, it will cost more.  Anything that is highly dependent on commodity prices such as iron, cotton, gold, etc. will be very expensive because the greatest cost of the product will be the material.  Now with the mandated higher worker wages and the strengthening of the 

Chinese currency, things are getting even more expensive. Prices will rise more in the US but in China they will go even higher.  We have so many customers that ask for brand name products and we do not even try to fulfill these requests because without having a strong connection with the sales departments of these brands you cannot get them cheaper than their distributors will get it even if you are in their factory because they control their own pricing and work through distributors mostly.

Takeaways

·        Even if things are not branded, not everything is cheaper in China and some things are more expensive so buying in small quantities will not save you much or it may even be more expensive!

·        For brand name products, it is highly unlikely you can cheaper prices in China, in fact in some cases, it may even be more expensive.

·        If the product depends on expensive materials, the products may be cheaper from other countries, for example cotton t-shirts may be cheaper in Vietnam because they grow cotton and their labour is much cheaper.  When the prices for the materials are controlled, since labour is less in other countries, it may be cheaper to buy from other countries.  Our Vietnam operation is there for this very reason!

Can you easily find useful dollar items in China?

Rey Tamayo
Easy China Sourcing My Personal Site

The Extinction of Dollar Stores—China Dollar Items are Dying Out

Dollar items from China are slowly dying out

Dollar Stores are still alive but increasingly they are losing customers as the number of valuable truly one dollar items are dwindling. The market forces in China are raising prices by a great deal.  Between, the rising cost of materials, the government mandated wage raises, and the strengthening of the RMB, the cost of products are going through the roof.

Dollar Items are Fewer and Fewer Each Day as China Manufacturer Prices Rise

With everything conspiring against low prices, qualifying dollar items are becoming rare.  The costs of items are rising rapidly to levels that make former valuable dollar items no longer viable as dollar items.  Let’s face it when stores buy dollar items in order to sell them for just one dollar, they must cost significantly less at the manufacturing level and still sell for less than one dollar at wholesale levels.  The wholesalers have to risk buying higher and higher quantities of an item in order to lower their manufacturing costs.  However, the China manufacturing costs are rising faster than even increasing quantities can diminish and the dollar items are disappearing fast.

Buying Direct From China

One way to maintain the products qualifying as dollar item for longer is to buy directly from China. Luckily China is responding to the market better and its secret is Yiwu.  In this commodity city smaller factories will work to provide cheaper priced products at lower prices—allowing merchants to go factory direct in China without having to risk on high volume purchases.  However, these factories are notoriously fleeting and there are many scams happening.  Even if the cost of the product increases when using a buying office, it is recommended short of establishing a buying office in Yiwu, that a China Sourcing Company be used when buying from Yiwu.  When you can go factory direct a buying agent is mostly needed for negotiation and finding the real factory not their agent as well assuring the quality of the product prior to shipping.

TakeAways

• ·        One way to keep valuable dollar items is to go factory direct in China.
• ·        The best kept secret for cheap items at low minimum costs is Yiwu in China
• ·        While it might cost more to use a good reputable buying agent, they protect the complete buying chain and guard against lost that can easily occur when buying direct from China.

There are many useless items you can buy for under $1 but do you have many useful ones for under $1?

Rey Tamayo
Easy China Sourcing My Personal Site

Do You Need to Know Chinese to Source from China?

Knowing Chinese is Good, Knowing the Culture is Better Finding a Trusted Buying Office is Best

Many people ask if you need to know Chinese to effectively source from China.  What they should be asking and most do not realize is do they need to know the Chinese culture and how they operate which carries more danger for china sourcing than the language.  In short, you do not need to know Chinese, and unless you knew a great deal of Chinese and understood the culture, knowing some Chinese would not help anyway.  It might help you buy things in the tourist markets, get around the city and order in restaurants, but without knowing the business culture it will help very little.  If you were in Yiwu and had an independent translator or low commission agent it would definitely help to know numbers for prices and to be able to negotiate prices, but negotiating with Chinese requires more than just knowing the language.  It will not help you much unless you also know that these agents and translators are likely getting a kickback on you and how to understand the white lies built into the language to catch when things are going wrong.

Knowing Chinese Culture is More Important than Knowing the Chinese Language When Sourcing from China

I had two interesting conversations with two different Chinese.  One told me something I often repeat.  He told the Chinese have a proverb that “the true cost of the product is known only after you sign the contract for it”.  How could this be? Well, unless you are great at catching all the little details, they will start jacking up the price on labels, licenses, certifications, anything they can use to jack up the price.  In fact I knew a merchant who wanted to try Vietnam because they did this to them all the time.  

The other conversation dealt with the Chinese language where a businessman told me that Chinese know when they are telling a lie to save face because it is built into the language and can involve mannerisms but you really have to know the Chinese well to get those subtleties.  So the most valuable thing you need to understand is Chinese culture to do effective sourcing from China; it helps a lot more than knowing the language.

Choosing the Right Buying Agent is Your Best China Sourcing Solution

I know you say it is just self-promotion when I say that choosing the right buying office is your best solution, but it is not, you can read this and choose someone else—but just choose someone you can trust please!  If you do not know the culture, have not lived in China for a good amount of time, and do not know the language either—your only viable solution is choosing the right sourcing agent.  Really doing it on your own is so risky I do not recommend it.  Sooooh many things can go wrong.  Also, I say choosing the right one because as I say in cities like Yiwu, you can get a translator what should not have a commission and if you actually get correct translations (another sensitive subject for another blog) they are likely getting kickbacks and translating a higher price with their commissions built in.  Same thing can happen with low commission sourcing agents.  Choose someone you have vetted well and trust because China can save you and your customers a great deal but it can cost you more than it can save if you are not super careful!  

Knowing the language will always help, but knowing the culture will help much much more and choosing the right sourcing agent is ultimately the best solution because even if you were an expert on the Chinese Language and Chinese Culture, if you did not live here to oversee the complete supply chain process things can still go wrong!  The best reason to learn the Chinese language is enjoy the wonderful people and culture in China, it helps in business, but it cannot get you around the potential problems that will come your way.

Do you think I am right about this?  Do you have a story that affirms or counters this view?

Rey Tamayo
Easy China Sourcing My Personal Site

Choice—A Big Problem with Sourcing From China

The Often Unseen China Sourcing Problem

Sourcing from China as per my many other posts is fraught with huge problems.  Most of those problems can be alleviated by hiring a competent and honest buying office; however, one that most people including many buying offices do not see is the problem of choices.  Focusing purchases on the best products without being distracted with great cheap products that look amazing and end up being a disaster is a huge problem.

A good China Buying Agent does not Play the Short Straw Game with Product  Selection

What Makes a Good Sourcing Company

A good buying office will send you periodic product offerings that might be of interest to you, but often these are general offerings to all the customers in your business space. The danger here is that they can make you lose focus on the core products that you need to buy and waste your attention and more often than not your money buying products that will at best be marginal winners but can be dead losers for you.  China makes almost everything and the choices are staggering.  The problems are two:

1)      There are so many choices you often end up choosing more product than you want for your inventory such as too many colors, sizes, and styles

2)      You often take chances with new products that look great but that were not properly researched and lose money or make very little on them

Both of these problems abound in the glut of product choices.  Choosing a sourcing company that pays individual attention to your needs and sends you well thought of product suggestions individually tailored to your needs is the best solution to address these problems.  Having a customer service representative that knows your field and your needs and recommends the best solutions for you is crucial. Having them consider things like your past issues with inventory (under buying and worse over buying), your market and what forces are affecting, researching trends to give you the latest product news and work with you to figure out if they will fit you or not, and many more personalized attention to your needs is what makes the difference for you.  Your buying office should be like a part of your R&D and a part of your purchasing department as well, looking out both for your future needs and thinking ahead to new products that are right for you and looking out for your bottom line making sure you purchase the right amount as well!

What Makes a Great Buying Office

The biggest danger of having too many choices and not individualized care in sourcing from China is not having a sourcing agent that looks after your individual business needs and instead just sells sells sells to meet their bottom line. A good China sourcing company does not let you play the straw game and let you end up with the short straw at times. Find a sourcing agent that gives you the attention and expertise throughout your entire supply chain you need so you stay focused and maximize your investment in China products.

What stories can you share about yourself or friends that have just simply bought too much or the wrong products from China?

Rey Tamayo
Easy China Sourcing
My Personal Site

China Sourcing—Can you really Buy Factory Direct Without Someone on the Ground in China?

The truth is 99% of the time a resounding no.  If you are lucky you can find a super honest efficient factory, but the odds of that are 100 to 1—and I do not believe I am exaggerating.  Of course if the factory is owned by a foreign company as many are now here, that changes everything because they usually have western practices, but this too is not guarantee.  First of all short of paying a private detective for investigating who you are dealing with the factory itself, an agent of a factory and agent of an agent of an agent of a factory, is nearly impossible without someone here that can inspect the factory and check the representative.  Second, even if the factory is legit and efficient, when it comes down to shipping the product if you do not have a good trustworthy quality assurance person inspecting the shipment and actually the production along the way, you can go very wrong.  It is actually at this stage if you have not been paying attention that all hell breaks loose.

It happens to experienced sourcing company.  Many many times something goes wrong with an order at several stages along the way and if you do not have someone on top of it, you will likely end up losing money.  Huge hundred million plus trading companies have problems with orders all the time even with years and years on the ground.  It can be little things like they ran out of the approved hue of red and their supplier did not have the same hue but something very very close but definitely different and they substituted as if it was the same so half your order ends up in a colour that they was approved and the other in a close but definitely visibly different and the factory did not inform you nor sees anything wrong with what they did.  Things like this happen all the time.  If you do not have someone on the ground following the order things can go very wrong and the money you can lose is much larger.  It happens when experienced sourcing offices are tracking the order, it just gets caught early enough where the loss is none or minimal.  Reputable and experienced sourcing company are a must for dealing with Chinese factories 99% of the time.

Can you luck out and get a great Chinese company that understands 100% the Western mentality and can give you 100% satisfaction 99% of the time?  Yes, of course.  Are they rare and defy many odds, yes!  Ordering from China saves you great money and your customers will be happy with the lower costs but without someone to manage everything on the ground in China, so many things can go wrong that you should consider a large reputable buying office to manage your china sourcing.

Do you agree that you need someone trustworthy on the ground in China to have effective trade?

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Please let us know how you like these beauties below and ask us for a quote if you are seriously interested in buying at Chinese manufacturing quantities!