China is known as the world’s factory, and we absolutely love the advantages we can get by sourcing products from China. In fact, we have built our entire business model around products Made In China!
When done correctly, we see not only pricing benefits, which increase our profits, but also a big variety of products and excellent quality. Yes, I said excellent quality, but only when you know what you are doing, which most people don’t.
In fact, I have identified 11 very costly mistakes most people make when sourcing from China, and how to solve them. Here’s the list:
- Buying from a middleman or trading company verses a real factory. You should know the difference and how to detect a real factory who will support your needs rather than a trading company who is only interested in his own profits.
- Sending too much money in advance or paying 100% before you receive the product. You should NEVER have to pay the total cost of your order before you receive the product into the US. This is way too risky.
- Not being specific on the purchase order and leaving out things like color, size, packaging, labeling, and payment terms. Your supplier should have a clear picture of what your needs are from their raw materials purchasing to the finished product arriving at your doorstep.
- Not seeing the product before it ships or having it inspected. You should see at least one round of samples or have an inspection agency for quality control inspections.
- Paying too much for your product as a result of ineffective negotiations and not knowing how the Chinese do business. The Chinese business culture is very different than what we are used to, and you should approach your dealings in the way your suppliers are comfortable with.
- Being forced to meet large MOQs (minimum order requirements) thereby investing too much money into one product before it’s proven viable. Your supplier will work with you on MOQs if you know how to properly approach the subject and present your case.
- Not having eyes and ears on the ground in China to take care of the necessary “busy work” that pops up. Having an agent you can call on when a problem manifests itself 12,000 miles from your office is paramount.
- Getting illegal or illegally packaged product accidentally shipped through US Customs and getting your product confiscated, getting fined, and possibly jailed. You need to have an experienced US Customs broker who can file all your documents electronically before your shipment arrives and advise you on proper packaging, certification, and taxing based on experience.
- Having your product take way to long to move and arrive to the US because your logistics companies and brokers are not communicating and using the slowest possible means in order to earn larger profits. You should have a good relationship with a well-established ocean freight company who knows your customs broker.
- Paying for your order in US dollars. If your supplier is doing business in USD then you are paying too much and likely NOT buying from a real factory. You cant know for sure unless you meet your supplier face to face or have an agent you can trust. Paying too much for product does not allow you to compete with the “big dogs”.
- Depending too much on Alibaba and taking what you find on Alibaba at face value. Alibaba is like a Chinese version of Amazon.com and anyone with an internet connection can use it for simple arbitrage. Its easy to collect an order from the USA on Alibaba and then go buy the product as cheap as possible to make a good profit. If you insist on NOT going to China and NOT setting up a support system on the ground there then you need to know about other Chinese sourcing websites where the Chinese businessmen source products from other Chinese factories in a B2B platform.
These are just a few of the many mistakes to avoid, and if you are careful, you will be way ahead of most people who source from China already.
However, if you want true competitive advantages you can watch an exclusive free online training video I just finished recording. It’s my way of contributing to your success the way my mentors contributed to my own success in the past. Stay tuned for more details coming soon!
– Jason Fladlien – Co-Founder & Chief Strategy Officer at Rapid Crush
