The new buyer-supplier relationship in China

Since China opened its doors to the West in 1978, overseas buyers have come to demand and expect perfection from their Chinese suppliers, even for low value-handicraft product.  Up until very recently this mindset was tolerated by Chinese vendors because over the years orders from overseas accounted for most, if not all, of their sales revenue.  There was very little demand coming from within China itself and Chinese suppliers had no choice but to defer to their overseas customers.  But this is  no longer the case as domestic demand – not orders from abroad – is driving a myriad of Chinese industries nowadays.  A case in point : during my visit to the Canton Fair last month I saw more mainland buyers than I had ever seen at the fair previously and I overheard conversations in Mandarin in which vendors were negotiating with domestic, not overseas, customers.

In fact, if given the choice Chinese vendors would probably prefer to manufacture for the domestic market for several reasons:

1.)  Chinese customers present very few, if any, language or cultural barriers. When communicating with overseas customers, on the other hand,  China vendors must pay for skilled staff who can speak English, and they must entertain overseas customers, often at their own expense.

2.) There are significant incidental costs when dealing with overseas customers.  For example vendors may be asked to pay hefty air freight charges for late or incorrect samples and/or production.  Orders are also subject to lengthy delays because of design requirements, and there are frequent lags in international communication and logistics. I don’t know if I have ever been in a Chinese factory where a worker or management has not complained about an overseas customer’s product specifications or lead-time requirements.

3.) The market in China for consumer goods is not sophisticated vis-a-vis markets in the west.  There are no extensive product testing protocols in China that rival CPSIA in the US or EN-71 in Europe. One vendor recently told me that most of the PU his factory used had not been tested for Phthalates and that if my customer wanted Phthalates free PU they would have to order a special grade at a much higher cost.  In other words, Phthalates is not something Chinese factories have to worry about when they manufacture for their own markets.

The result is that many Chinese vendors now seem to have a take it or leave it attitude with overseas customers. I have been surprised how many companies I have contacted this year have not sought to follow-up on samples sent to me or who have expressed little or no interest in doing business with certain of my customers. They have failed to do so either because the MOQs I have provided them with are not large when compared to those of other overseas buyers, or there is plenty of domestic demand with equal, if not larger, QTYs. 

Overseas buyers need to exercise some sensitivity about these changes in China manufacturing, all the more so if they do not have large order QTYs. Sampling demands should be kept to a minimum and product design should be well thought out on the buyer end so that little is left to the vendor to solve on his/her own. Vendors do not want to spend valuable time re-designing your products.   Buyers should not rush vendors or work under the assumption that their order is the most important order the vendor has on their production schedule.  Most often it is not.  The point is this:  China vendors still want your orders.  But  they are no longer  desperate for them.


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