How to get started in China sourcing

I had a call yesterday from an old client of mine, a company that sells a very popular line of kids bags ( I see them all around town here). The woman who started the company sent me to China several years ago to attend the Canton Fair on her behalf and now her husband, Richard, has joined the company. This company is typical of many small companies and start ups I have met over the years. They start their business with the aid of a China sourcing agent and the scope is small for the first few years. But then as the product starts to take off the company becomes more sensitive to quality and cost and they begin to outgrow their sourcing agent. And it sounds like this is what is happening with this company.

Richard will be in charge of sourcing and vendor management and he called to pick my brain on China. He said that that the company now uses just one supplier and although that supplier has been pretty good in terms of quality and pricing, there have been issues. One issue is they really know very little about the supplier as the orders are handled by a middleman. I sensed in listening to Richard that this was a typical scenario as I have outlined above; the company is growing and wants to have more control over pricing as their orders get bigger. Using a middleman, however, means they have less control. Still, I advised Richard not to bite the hand that feeds you. This middleman has helped grow the business to what it is now, a very successful company that is on the verge of national brand recognition. But, I said, if the frustrations are growing in the relationship it is time to start looking for other vendors. There is nothing wrong in doing this and, in fact, you never want to limit yourself to one supplier or one agent.

Richard asked me if it was a good idea to put together a list of vendors in China and to make a trip there. This sounds good but it would be hard to make such a list using alibaba and global sources. These sites really don’t tell you much about vendors and you really have no way of distinguishing who is a manufacturer and who is a trading company. I would add that unless you really know China I think it would be hard to draw up an itinerary for a sourcing trip where you are visiting vendors for the first time. One vendor might be in location A and another in Location B. The distance on the map may look close but in fact it may take a full day to get from A to B because of traffic and poor roads. I speak from experience. I used to make itineraries for China trips but they seldom went as planned. There was always the unexpected to deal with, a road that was under construction forcing you to take a lengthy detour, an un-scheduled power outage, the unannounced unavailability of a vendor you had gone to visit, inclement weather esp in the summer. When you travel to China to visit more than one vendor, you should give yourself plenty of time, building in at least 2-3 days per vendor visit, not including travel days. For a first trip to China putting together a list of potential vendors and attempting to visit them would not be the way to go.

Instead I told Richard that he should go to the Canton Fair or the Hong Kong Sourcing fair which are held concurrently twice a year, in April and October. These fairs are the best introduction to sourcing in China for small businesses. The value in attending the Canton Fair, for example, is that you don’t have to trapise all over China to meet vendors. They are all right there in Guangzhou for you. Of course there are many vendors to avoid at these fairs, vendors you just do not want to deal with. But there are good vendors as well. At the very least you get a lot of feedback on your product and you will arrive at a truer understanding of your product design and cost by virtue of talking to so many knowledgeable people about it. You will also be able to see many other products on display which will aid your company’s own product development.

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Is manufacturing really coming back to the US ?

I love reading the Wall St. Journal. In addition to great book reviews and the always interesting human interest stories at the bottom of page 1, there is a lot of China news, usually in the Marketplace section. This past week there was an article entitled “It’s No Fun Making Toys or Toasters in the USA.” As the headline suggests the article was about the challenge that small business in the US face when they try to manufacture here in the US. In fact if you are a toy company and want to get, say, a plastic toy made in the US, it is almost impossible to do so. The main reason is that US manufacturers are just not set up nowadays to handle large orders, most of those orders having gone to China over the past 20-30 years. So China now has the infrastructure and the US does not. This is nothing new, really, and I have written about this before here. Making dolls in the US But I like to see these stories now and then in the major news outlets because I think they offer a good dose of reality and offset the almost fantasy like stories about manufacturing returning to the US. Because you know, with very few exceptions you just can’t make low cost consumer goods in the US anymore and have a viable business. A case in point: I received an email from a vendor in China the other day and this vendor was offering a 3 pc breakfast set , a table and two chairs, made out of particle board and powder coated steel. The price $ 28.00. And I am sure if I went back to him and told him I wanted to place an order for 1000 pcs I could get it for under $20.00. And there are probably 1000 more vendors like him in China. Do you think there is any place in the US where you can buy a breakfast table and two chairs for $ 28.00 ? I seriously doubt it.

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An India vendor in the hand is worth two China vendors in the bush

I had a call a few weeks ago from a woman who runs a small home décor company here in the US. She has built her business sourcing in India and I guess has had some measure of success judging from what she told me about her business and her list of retail customers. But now she is growing weary of India. I asked her why and she replied that Indian vendors are raising prices all the time and have become difficult to deal with. I asked her why she expects things to be different in China, adding that she really should not expect a whole lot of difference between India and China, for both places present their own challenges when it comes to sourcing. She replied that she knows China is a difficult place to do business but that she wanted nevertheless to leave India and start sourcing in China. I really could not say much to that but my thinking has always been that if you have built your business with one vendor it is probably a good idea to stick with that vendor as long as you are still turning a profit. Only when things really start turning south should you start looking for another supplier. Similarly, if you have done well over the years in India my advice would be to stay in India and maybe just make some brief forays into China.

After telling me about her business the woman told me that she wanted to attend the Canton Fair this spring which at the time she called was only a few weeks away. That is not, I thought to myself, how one attends an international trade fair. I explained to her that attending the Canton Fair usually involves a few months of preparations e.g. emailing vendors you want to visit, ordering samples, scheduling visits not to mention flights and hotel reservations. If you do not do all that you are really just wasting your time and money because the fair is just too massive to go unprepared. And there are just so many bad vendors that an initial screening of vendors is really necessary.

Anyway, the call concluded and I did not hear from her again. Not even a note after I sent her a follow up email. For some reason people don’t like it when I discourage them. But as I see it if I don’t tell it like it is then I am not giving good advice.

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The importance of knowing your product’s safety and testing requirements

Most if not all consumer products sold in the US and Canada have some product safety, labeling or testing requirements. Requirements are especially numerous for Children’s product because of CPSIA (Consumer Product Safety Improvement Act of 2008 ) but in fact almost all products have some sort of consumer product safety requirement. If you are a first time importer from China, therefore, you need to do your homework as far as testing requirements for your product are concerned. This is very important not only for the obvious reason, that you want your customers to be sure they are getting a safe product, but more importantly you need to pass on your product safety and testing requirements to your vendors very early on. Factories in China have customers from all over the world and the product safety requirements generally vary from country to country. If you don’t have this conversation early on with your vendor you may find out that the product cost you were quoted in the early stages of your negotiation and on which you based your business was based on a vendor cost for raw materials that will not allow your product to pass product safety tests in your country. The difference in cost between environmentally friendly raw material and raw material that has not been filtered to remove dangerous levels of chemicals is sometimes great. So before you approach any vendor with a request make sure you know what you need in terms of product safety compliance.

The best place to begin to educate yourself about product safety requirements is the CPSC website. http://www.cpsc.gov/en/regulations-laws–standards/cpsia/the-consumer-product-safety-improvement-act/

Also it is a good idea to work with your shipping agent (if you have one ) because they may know about certain import restrictions in place. I remember I had a customer once who wanted to import a decorative product made with feathers from China. When I checked the CPSC website I saw that there had been an import restriction in place on any product made with bird feathers because of the avian flu in China. Fortunately for my customer the ban had been lifted. But this is the kind of problem you need to anticipate.

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