How to schedule new vendor visits when in China

I got an email the other day from someone who was headed over to China to inspect an order and wanted to find out how they could perhaps meet some new vendors while they were over there. They were not leaving themselves much time as they were set to leave in 24 hrs when they emailed me. I told them that the best thing to do was to line up these visits well before their trip but as that did not happen this time, there were still two things they could do as follows:

1.) Do a vendor search by province and city on the Canton Fair website.  The website allows you to do this and it is very helpful if you want to locate vendors in a specific city, as this person wanted to do.  You can then type in the keyword for your product and you will get some results.  For example, when I typed in “toys” for Dongguan City in Guangdong Province I got 14 results. I think you can do the same on Alibaba.

2.) Work through the concierge at the local hotel. Depending on which hotel you are staying at in China concierges will do everything for you and this would include looking up factories that might be of interest to you. Of course they won’t be able to do much beyond giving you a name and number, but really that is all you need to begin. If the vendor has booked the hotel for you then you don’t want to ask the concierge for help with a project of this nature. The reason is that the hotel would most likely report to the vendor that you were looking for other vendors and your vendor would not be happy. I have seen this happen before. Vendors get possessive with their customers, especially if your orders are big, and they always want to keep an eye on you to make sure you are not running off to the competition on your off day. However, If you have booked the hotel yourself it is probably safe to ask the concierge to help you locate other vendors while you are in China. You can also perhaps ask someone in the hotel business center to do this for you but you would probably have to pay them for this.

Finally, it is a good idea if you are spending any length of time in a city or going back repeatedly to get to know some locals, perhaps a student who is looking for some translator work. This person can then help you on inquires of this nature and may be able to do things for you such as booking hotels and transportation. In fact when you go to the Canton Fair you will see hundreds of students outside the main hall looking for translator work during the fair. Knowing locals like this can be extremely helpful as you develop your business in China.  Just remember that if you do hire someone to help you out on a regular basis then you need to do so in accordance with the labor laws in China.

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5 assumptions NOT to make when you do business in China

There was an interview in the China Daily recently with the President of the American Chamber of commerce in China, Ken Jarrett. Jarrett was discussing the need for American companies that sell into China to adapt their product to local tastes. In Jarrett’s words “My advice for forthcoming US companies is to be aware of what is different about consumers here. You can’t assume that the product you have in the US has the same attraction here, so you need to adjust it,” There is a lot of wisdom in this statement and it should be applicable to companies that source in China as well. In other words, when you source in China you have to respect Chinese business customs and you need to be careful not to make the same assumptions about behavior that you make in your own country. Here are five assumptions that I have seen US companies make in China that just lead to problems.

  1. My production will be every bit as good as my sample. Not so. A sample should simply be regarded as an example of the vendor’s capabilities and nothing more.  If the vendor can do a sample to your liking that is big step forward. But there is a long way to go to ensure that your entire production looks like that sample.
  2. My vendor will implement my design changes. Although a vendor may tell you they will make the changes you suggest, they may not if these changes involve too much cost. It is very important to try to maintain a dialogue with your vendor about the cost of the project and reassure them if they see added costs.
  3. My vendor will inspect my order. Vendors put very little into inspections. They can sometimes be remarkably short-sighted in terms of making sure they deliver a good product to their customer.  Often, they want to ship the product ASAP and get paid, not caring if a subsequent order will materialize or not. The burden is on the buyer to inspect their own product, whether they do that on their own or through a third party inspection firm in China.
  4. My order will ship according to the date on the PO.  ALWAYS be prepared for the likelihood that your order will ship late.
  5. My vendor will do what they have promised.  A promise in China sometimes means very little. When a vendor promises you something don’t believe it. Instead keep talking about it and make sure they do it.

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How to choose a Trade Fair in China

This morning I received an email from an American, “Jake” living in Krygstan, a small Central Asia country bordering Kazakhstan and Uzbekistan . He and his wife have a business there selling women’s apparel. He has been buying product from China from a middleman there in Krygstan but he finds prices are too high and that he would be much better off going to China directly. I think he has the right idea. When I lived in China in the 1980s-90s the Silk Road was thriving. Whenever we would go to the wholesale markets in Shanghai we would see we would see traders from all over Central Asia including many of the Soviet Bloc countries (In those days the USSR was intact). And this is still the case today.

Jake told me he is going to Shanghai next month to attend a trade fair and that this will be his first time in China. He was asking me what advice I could give him. The name of the trade show he will be attending was not familiar to me and so my first piece of advice to him was that he should make sure he picks the right trade show, because there are a lot of shows in China, some good but many probably not worth attending. There are shows in China that are full of 3rd tier vendors, usually small cottage industry vendors, and these are probably not the kinds of vendors you want to deal with if you have a design driven product. Yet these shows are well-publicized and you can easily be led to believe you are attending one of the biggest shows in China. You show up in China to find a massive exhibition hall with just a couple hundred trade show booths and no foreign customers in sight. I have seen these shows many times. It is like seeing a watercolor exhibition in the Georgia Dome. So the first thing is to carefully research the fair you are thinking about attending. There are ways to research the fair, reading online reviews of trade fairs in China, asking about the fair in a Linked In Group specific to your industry, and sometimes just asking a handful of Alibaba vendors which shows they attend and see if the show you are interested comes up. It is also a good idea to call a local company that sources overseas and ask them which shows they attend. As long as you have a non-competitive product they should be perfectly willing to share their insights with you. A general rule is this, if you cannot find anyone who has been to the show you are thinking about attending, then don’t think about attending yourself.

I told Jake that he made a good decision to focus on Shanghai as Jiangsu Province, bordering Shanghai, is where so much textile production takes place. But he probably should have waited to attend Intertextile Shanghai, the biggest textile fair in China. The bigger and more established the show, the better vendors you will have a chance to meet, and the more likely it is that you are going to meet someone who can help you build your business. And this is the virtue of the Canton and Hong Kong sourcing fairs as well. These shows are well known in all corners of the world and although there are plenty of vendors you probably do not want to do business with, and although they may not be the best fairs if you have a high end product, you can usually find someone who can teach you a different way to look at your product and thereby help you grow your business.

In short going to a trade fair in China is a good first step. But research the show carefully and find the show that is best for your needs. Or as they say in China 量体裁衣. Cut the garment so that you can wear it.

Here are some more posts on Trade Fairs in China

Canton Fair 2012

Preparing for the Canton Fair

Don’t go unprepared to Trade Fairs in China

Canton Fair 2011

The McDonalds of China sourcing

A start up apparel company was running a project by me this week. They have their designs and want to start sourcing in China. Needless to say, they want to order in very small QTYs and they wondered if sourcing on Alibaba was a good way to go. In general I do not advise sourcing on Alibaba because you just never know who you are dealing with and I have never met anyone who sourced on Alibaba who was not looking for a new vendor after six months. I like to think of Alibaba as the McDonalds of China procurement, in other words good for a quick order but not a healthy solution over the long-term.

The value of Alibaba as I see it is that it can give you a general idea about cost, MOQs and vendor location. I use it sometimes as just that, a research tool. If for example I want to find out where denim vendors are in numbers then I can easily do so with an advanced search on Alibaba.

And when giving it some more thought this week, as I prepared my reply to the startup that had emailed me, I realized that Alibaba is good for this: if you want to bring a design to fruition and get an idea of costs you can always find someone on Alibaba to do some samples for you. In other words, if your goal is simply to get started Alibaba is OK. And that is what I advised this company. I wrote to them as follows:

“….if you are just starting out and don’t have the budget and simply want to take a product from rough sketch to prototype then Alibaba is a good place I think.  You can at least get some samples made and perhaps a small production lot that will shed new light on your product and or design and give you a good idea of how much it will cost you to make your product. And you may be able to fulfill a small number of customer orders. But I would not go into any Alibaba sourcing project thinking you are going to find a vendor who is going to fulfill large orders with exacting QC standards for you. When you know that you really have a business, and are selling to specialty stores, if not big retailers, then that is when you really need to hit target costs, get product delivered on time and keep QC issues to a minimum. And that is when you need to look beyond Alibaba to more long-term partners.”

Here are some other posts on Alibaba

Sourcing on Alibaba

Alibaba as research tool

Four Maxims that will help you succeed in China

Sometimes I have found that I come up with catch phrases when giving advice to people who want to source in China so I thought I would publish a few of these here today. They are easy to remember and reflect some valuable wisdom acquired over the past 25 years.

1.) The best way to work with a problem supplier is to avoid them altogether. I get emails from people all the time who are having problems with their suppliers and it usually comes out that the person did not really research the supplier fully before giving them an order. In many cases the supplier is just someone the person met on Alibaba or another internet site. I often think the best way to find a good supplier is to eliminate as many bad suppliers as you can. You do this by doing your Due Diligence (DD).

2.) Work with your vendor, not against them. Too often people who source in China have a mindset that their Chinese suppliers are there to serve them and that they (as the buyer) can dictate the terms of the relationship. Wrong. Mutual respect is the basis for any successful relationship in China and you have to show your vendors respect at all times. When you have problems don’t look for blame. Look for solutions (this reads like another good maxim in and of itself).

3.) When doing business in China you need to be patient. And when you think you cannot be patient any longer, you still have to be patient. Patience is the one virtue you need more than any other when you source in China. When you rush your orders, rush your vendors that is when problems happen. So give yourself plenty of time on your orders. And, more importantly, give your vendors time.

4.) Be Calm, Be Clear, Be Polite, Be There. I had a customer once who had a lot of experience in China, having sourced there for years, but she found that this rhyme really summed best what it takes to succeed in China so she printed it out and put it over her desk. If you are sourcing in China, you should do the same.

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The risks of sourcing on alibaba

As much as I like Jack Ma I really have to question sometimes how effective it is to source product on alibaba. A case in point: a company in Vienna asked me recently to help them locate a supplier in China. The company has bought some health products from someone they met on alibaba but the orders have not gone too well and the Viennese company now realizes that it has been dealing with an agent and not the manufacturer itself. So they have asked me to help.

And this is one of the risks in using alibaba, namely that you really have no idea who you are dealing with. Many agents in China set up on alibaba and use the names of the companies whose products they are selling but in fact they have no association with the company. So you think you are buying direct from the factory in China when in fact you are not. For this particular project, I looked up the Chinese company in question and I found 5-6 alibaba sites for them all with different contact people listed. It looks like agents or individuals in China are selling the Chinese company’s products on alibaba simply using the company name. It is very confusing to say the least and I can understand how the company in Vienna could have been misled. But this is SOP in China so you have to be careful.

One clue that the Viennese company has not been dealing with the original manufacturer was that they had been making payments to an individual and not a company. This does not necessarily mean that one is not dealing with the vendor itself for small companies may sometimes have payment arrangements like this. I had another project recently where I was asked to pay a sample fee to an individual’s Western Union account in China which I thought was strange. But the vendor explained to me that if paying a sample fee to the bank, the service charge really offsets the sample charge. It made plenty of sense and it was not worth worrying about for a sample fee. But if you are asked to make a sizeable payment for an order to an individual you should at least try to obtain proof that the person is affiliated with the company you think are buying from. You can do this by running a credit check on the company in question and then using the contact info on the credit check to contact the company to verify who you have been dealing with. A credit check on a Chinese company will cost you a few hundred dollars but you have to see it as doing your due diligence. And in China sourcing you have to do your due diligence. Make no mistake about it.

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The paradox of China sourcing

When people who want to source in China come to me I always have to give them some contradictory advice.

1.) When starting out with a new vendor, make your orders as small as possible. China production is so tricky and you can easily run your business into the ground on one bad order so you need to test vendors before you give them a substantial part of your business. Think of the process of first time sourcing in China as dating. You start out small, say, a pizza and then maybe a little nicer, say, three star restaurant on the second date and finally if all is looking positive you can set your sights on a Michelin restaurant ( if you can afford one. I can’t ). Nothing but pure common sense here.

2.) Make your orders attractive for your vendors so they want to do them. I always tell people that they should not do business with vendors who do not show enthusiasm for their customer’s business. The first thing a vendor will look at is your order QTYs. So you need to look at your business and make the order as large as possible to satisfy vendors while not assuming substantial and unnecessary risk on your side. And this is the paradox: You have to think small and large at the same time.

So how can you think big and small at the same time ? Here are some useful hints:

1.) To make up for what might be perceived as small QTYs from your vendor you should limit your QC points to only the most critical ones. Vendors do not want small QTY, low-margin orders with a lot of QC points. Orders like this are a headache for vendors. Think of yourself as selling your business to your prospective vendors and not just approaching them, as some overseas buyers are wont to do, with the mindset that China vendors always want your business.

2.) If you meet face-to-face with your prospective vendors they will be more inclined to accept a small order from you and work to deliver it to your satisfaction. This involves going to a trade show in China or putting together a list of several vendors you have met online and going to visit them in one fell swoop. Once again you need to understand that China sourcing in 2013 is unlike China sourcing 20 or 30 years ago. Vendors nowadays will turn away as many orders as they accept. If you make an effort to meet with vendors, and tell them that you have a growing business and want to start out small with them they will probably react in a positive way. After all your visit in itself is as good an indication as any of your seriousness of purpose. Compare this method of courtship ( that is really how you have to see China sourcing nowadays) with that of someone who simply sends a vendor an email inquiry about a small order. One of you will get a date while the other will not.

3.)As best as you can try to avoid a scenario where you have to give an untested vendor an important order. Your important orders should be given to vendors who have already been tested so to speak. Try and have several vendors in place before your business gets too big.

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