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A Beginner's Guide to Buying Directly from China Suppliers

A Beginner's Guide to Buying Directly from China Suppliers

by Chris Malta
Last updated 7/20/2018

When it comes to low prices and high profits, China imports are hard-to-beat. Many retailers understand the benefits of sourcing products directly from China suppliers, but have no idea how to begin. Incorporating importing into your product sourcing can pay off in cutting-edge products at deeply discounted prices, but it's important to start slowly and take time to learn the ropes. You'll want to focus first on a few key steps in the process:

Finding Suppliers
Online directories offer a simple, straight-forward channel for locating overseas suppliers, but not all online directories are created equal. Advises Peter Zapf, vice president of community development for GlobalSources.com, "When looking at online directories, try to understand how much work they put into qualifying their suppliers to ensure that they're legitimate companies and can supply the products they claim. Some online marketplaces allow suppliers to post their own content without any verification."

A second option is attending a Hong Kong or mainland China trade show, where thousands of suppliers display their product lines. While such a trip requires more effort and a higher upfront cost than an online directory, it also provides an opportunity to meet potential suppliers face-to-face. Particularly in Chinese business culture, this direct, personal interaction is very significant in developing business relationships. Additionally, you're able to examine merchandise close-up and see innovative products that manufacturers are introducing for the first time.

Selecting and Working with Suppliers
If you buy primarily in small quantities, you'll most likely have to begin importing through a trading company or distributor. To get a manufacturer's attention, you'll have to demonstrate a track record of selling high volumes, and show potential as a long-term business partner. Recommends Zapf, "Start by explaining your business, and then request samples of the products you're interested in. You'll have to pay for the samples, but you need to see what kind of product and service quality a supplier can deliver before you commit to working with them."

What else should you look for when considering a manufacturer? Besides inspecting the quality of the product samples, don't forget to review the packaging and instructions, to ensure they meet your specifications. Also remember that, as the importer, you're legally responsible for ensuring all relevant U.S. regulations for that product are met:

. Find out if your prospective suppliers have exported
to the U.S. before and if they have the
certifications required for you to carry their
. Visit your local retail store and study the
certifications that similar products carry, as you
research what certifications your product requires.
. Never buy from a supplier who cannot provide proof
of their required certifications.

Once you've selected your supplier and placed your order, it's important to frequently communicate about all details of the transaction. This includes, not only product details, but also lead times and manufacturing completion dates.

Paying Suppliers
The most common payment terms are 30-70, meaning 30% is due upfront and the remaining 70% is due when the goods ship. Experienced importers can sometimes negotiate a 30-40-30 arrangement, although it's less common. Under 30-40-30 terms, the buyer puts 30% down, and pays 40% at shipping and the final 30% upon receipt and inspection.

Collecting partial payment upfront provides your supplier the funds they need to purchase raw materials to manufacture your order. Most suppliers require the remainder at shipping to mitigate their risk of not getting paid. Wire transfer is the most typical payment method. Since international wire transfer fees vary quite a bit from bank to bank, it may be worth your time to shop around. Never use Western Union! You can't get your money back if something happens!

Quality Control
You have three choices for checking product quality: trust the supplier, do it yourself, or hire a third party. On a small order, you may choose to trust the supplier. Or if you have in-country resources, they can inspect the products on your behalf. If you're placing a larger order, you may consider hiring a third-party inspection company. The cost can range from $200-up, depending on the size and complexity of the shipment and inspection process.

Shipping and Logistics
For small-volume, high-value products, air shipping may make sense - particularly if you need them quickly. Air shipping may also prove to be the most cost-effective option for moving relatively small orders (less than two cubic meters).

Depending on the port of entry, shipping via ocean vessel can take twenty days or more. Add time for customs clearance and inland transportation, and your ocean shipping time may be well over thirty days. But the cost savings over air shipping (particularly for larger orders) can be substantial.

Zapf discourages importers from taking on shipping logistics alone, stating, "On average, there are typically twelve to fifteen parties involved in getting product from the factory to the buyers' warehouse." In other words, a third-party logistics service provider (3PL) or customs broker, that has experience working with your origin and destination ports, will be absolutely invaluable to you, providing you with estimates of end-to-end shipping times and costs, and managing the entire process for you.

When you're getting started importing, it's best to take small steps. Study your options; choose a supplier; place a small order. Go through the process and get a feel for how it works. No article, seminar or training video can substitute for the lessons you'll learn when actually working through the importing process.