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.



What China sourcing and building a house have in common

The other day I received an email from a client I helped two years ago. I had found a vendor for this client and things were going well until recently when my client said that he was having some communication and other issues with the factory. This was a vendor I had met at the Canton Fair. All the pre-production samples and vendor communication had been great and the pricing was very good. As my involvement was winding down I advised my client to audit the factory before he gave them an order. Accordingly he had his Hong Kong inspection company go to the factory and they passed it with flying colors. The impression of the Hong Kong inspector – someone very experienced with factory inspections – was that this was a very good factory. The first couple of orders were fine. And then pricing started to go up, which of course is SOP in China ( especially with buyers who sell their products online where retail pricing is in full view of everyone, including vendors in China) And now my client has started to have some unfriendly exchanges with his factory contact, a lady I had met in Canton and who I had a very good impression of.

It is hard to know what is going on here because I no longer work with for this person. He now has a North American based agent with full-time local personnel in China manage his orders. One possibility is that there is a personality clash between the local employee of the agent’s company and the vendor and that this is impacting my former client’s relationship with the vendor. This does happen all the time in China and is one reason you really might not want to use a third-party in your China sourcing.

Another possibility is that the vendor feels slighted because my former client has never visited the factory, but just sends someone else. When you do production in China it is imperative that you show up occasionally, as a sign of respect to your vendor who, in fact, you are asking to help grow your business. Vendors take buyer visits very seriously and no expense is spared in welcoming overseas guests to China. It is not only a chance to show-off modern China to overseas guests, but historically Chinese have relished the opportunity to fete foreign visitors because they feel it can give them the upper hand in negotiations. They want to entertain you. The message you are sending to the vendor if you do not show up, but ask someone else to go for you, is that the vendor is not worthy of your time. It also sends the vendor the message that you do not really care about your business.

Once again I use my house analogy here. Let’s say someone comes to you, the contractor, and asks you to build a house for them. You start building the house but months go by and you never see the person who you are working for. You get emails from them occasionally and every so often someone, say a friend of the person, stops by to see how things are going. But the person himself, who asked you to build the house, never comes by. Are you going to feel an attachment to that person? Probably not.


In the China business a name is not just a name

I see a new trend with China vendors these days. Sales and account managers are taking western names. And I don’t mean just western first names but last names as well ! I realized this the other day when a vendor came to visit me here in Tokyo. He came with two people from his sales group one of whom I had been told beforehand was a guy by the name of “Bob Smith.” I was told this person spoke English so I just assumed that he was from the US or Canada or another English speaking country. But lo and behold, when they showed up there was the Chinese “Bob Smith.” Of course I wanted to ask him why he chose this name but I didn’t want to embarrass him. And then yesterday I got an email from a furniture vendor in China signed by “Tom Mead.” But when I read the email – a sales email – it was obviously written by a Chinese national ( I read enough of them so I can tell). And yet another email today. Same thing. Chinese vendor. Non-Chinese name.

I guess business is so slow for some vendors now they will go to any lengths to get business. Silly as it seems it is effective. I had actually seen Bob Smiths name copied on many emails before I actually met him the other day. Subliminally it always lent an air of credibility to the vendor’s emails seeing that they had in their company someone who was probably a western national.

Chinese vendors with western names. All the more reason why you need to visit your vendor before you give them an order.