China’s manufacturing advantages remain a solid and compelling draw despite growing competition from emerging low-cost supply chain destinations like Vietnam and Puerto Rico. Still, outsourcing production from China can seem complicated and exhausting for the novice importer. You’ll be confronted with choices that you must think thoroughly and with care to find the right outsourcing partner. Here are the most important considerations when exploring and qualifying Chinese suppliers.
1. Supplier’s true identity
You’ve found a supplier on Alibaba that makes the product you want to sell on Amazon. Conversations have begun and you’re thinking that if sales are good, you’ll continue importing from this company. The company’s representative is fluent in English and tells you that they work with many sellers in western countries.
You’re ready to order a sample and have discussed with your legal adviser about drawing up a contract. Everything seems to check out so why wait?
There’s one thing you haven’t yet confirmed: whether the supplier is a trading company or a manufacturer. Adding more layers to sourcing leads to increased costs. Middlemen do not have the ability to customize a product and many make their profit by marking up to the product. Their sole objective may be in matching you to a manufacturer who can increase their margin rather than finding a good price-to-quality deal for you.
How to spot a middleman
– You should ask the company directly about their identity or inquire if they’re providing a service for a cost and if this is separate from the production cost.
– The company may tell you that they have a close relationship with the factory. But will they disclose to you the factory’s address so you can contact the actual supplier? Also ask how the company makes their margins. Unconvincing responses and any resistance from the company’s side indicates that they’re simply matching your needs to a Chinese factory and offer nothing more by way of value.
– Trading companies have English websites and savvy marketing techniques. They generally struggle to answer technical questions pertaining to your product.
– It’s easier to get a lower MOQ from a trading company rather than a factory.
– Ask for the company’s ownership papers – as they may have other partners who get a cut of profits.
Middlemen can send you a fantastic sample and take you to a factory that looks great. But they may have got the sample off-the-shelf and once you’ve placed your order they shift to a different factory that makes your product at a lower cost. As a protection you should specify that the factory cannot be changed without your approval and make them accountable for terms that protect you. Unless you have strong reasons to try a middleman’s services, such as a lower MOQ or a test product in a niche you’re exploring, you’re better off partnering with a manufacturer.
2. Basic supplier information
Conduct a background check of the supplier and ask them for information that offers assurance about their reputation. Include these steps in your supplier vetting process:
– Compare the company’s profiles on Alibaba, Made in China, Global Sources and other directories to check if their location, address, phone number and other identifiable information are the same on all those websites.
– If the supplier has participated in trade shows, such as the Canton Fair, it is an encouraging sign. Search for the supplier’s name in the exhibitor’s list on the trade fair’s website.
– Read customer reviews of the supplier on online directories. Also check their reviews on Google and Baidu.
– Ask for basic information which should include the following:
o The number of employees at their factory
o Major product line
o What is made in-house and whether they sub-contract any process
o Sales numbers in domestic and export markets
o How many western importers do they work with, or are their buyers primarily in Asia, Africa and the Middle East?
o If they’re familiar with the safety and product regulations applicable to your product
An established supplier will give you satisfactory answers to these questions. If the supplier doesn’t answer plainly or you suspect they are just telling you what you want to hear, they may not be the partner you need.
