I am helping a small company in California now find suppliers in China and Bangladesh. Their current supplier in China doubled their prices after just one order and that is when this company came to me. I explained to them that it is SOP in China for vendors to drastically raise prices after one order and that they should not be surprised by this. In the west when a new supplier raises prices after a first order it is deemed not a good business practice. China vendors understand this but sometimes their only hope to get an order is to offer low prices, sometimes so low that all they can do is break even on a first order. Their hope is to do the order to the satisfaction of the customer so that the customer will tolerate a price increase on a second order. China vendors really have nothing to lose by doing this. If they only do one order they may make a slight profit. If the customer leaves after one order because of the price increase, the Chinese company can tell itself it would not have been able to do business with them anyway.
The company in California sells primarily online. Some Big Box retailers have expressed interest in this company’s products but the price points have to be much lower than they are currently. This is another reason they have come to me. Unfortunately with their QTYs there are not going to be a lot of China vendors that are interested in this order. Still a handful of vendors have told me they will do the order. I really don’t know much about some of these companies, save for a couple whom I have met and dealt with before. I did mention to the California company that at some point they need to get on a plane and go to China to vet their suppliers. Their reply was that this kind of trip was not in their budget. To that I said fine, no problem. I explained to them that there is a huge difference in sourcing a supplier for a major order for a big box retailer and sourcing a supplier for an online store. If you sell online and a China order goes bad then you will lose a few customers and probably some loyal ones. This is certainly not desirable but your business can recover from this. If, on the other hand, you are selling to a Big Box and a China order goes bad you will lose one customer, but that one customer may be ordering 20,000 pcs of your product. In other words, that is not a customer you can afford to lose. So for right now, budget constraints in all, sourcing online and doing one time only orders with a succession of vendors, though not desirable, is OK. But if this California company does get that big order they are going to have to make an equally big investment which includes going to meet and audit the people who they are asking to help put their business on the map.