Sourcing & Import from China Tips and Guide

Why does online auctioneer must do their sourcing from
China?
By David C W Foo

 

With many Taiwanese/Japanese companies shifted part if not all of the production facilities to China;
China had the necessary low labor cost and well trained professionals to run the operation effectively and efficiently.

Many Chinese Manufacturers had by-passed the middle man, like Hong-Kong and so on to deal with the foreign buyers to maximize their profit margins and minimizing the overheads. Many times, volume is the key factors to determine the cost and margins

It was not uncommon to have a manufacturer establish a production site in
China with in house cafeteria and dormitory to house the cheaper labor from poorer provinces. The wages are kept to the minimum and productivity at the maximum. The workers work shift and overtimes to earn as much as possible as they put in long hours and spend minimum expenses on accommodation and meals as there are provided as part of the packages.

Big corporation like Wall-mart, Toyota, Pepsi, Motorola cola just to name a few all had operation set up in China to provide cheapest source of products/service to produce goods to retail at their Predetermined market segments like in US. Due to the massive scale, many things such as production control, logistic flow are customized of which most other smaller players could not compete against with.

These companies basically deal with the full range of products/services, from textiles, footwear, electronics, heavy machinery, consumer products, dairy products, watches. Basically all the products that present in the modern day lifestyle.

The key to this low cost high margin products sourcing from china is actually the volume and connections networks. Big guys establish their own chain of supplies and therefore they manage to bring in products to US for example, at cheaper cost price as compare as you were go to china yourself to get them.

The way the merchandise getting change of hands to certain degree follow the theory of “the greater fool theory”, sometimes it does not  matter how much is your cost price even if it was on the high side, as long as there are someone else willing to pay for more you will make profits out of it,

Everyone had to spend money to buy the things he or she needed in life, it ranges from the basic fundamentals to luxuries items, it was nonstop at the moment we were brought to life until we meet our creators, the whole cycle was In principal making money and spending money.

In the world of merchandise getting change of hands, there are certain items which fetches higher premium due to the perceptions comes with it. The manufacturers spend billion of dollars on marketing and branding of which for those who needs such psychological fulfillment and satisfaction from getting the branded goods finds their desires being met.

We all to certain extend fell prey into this, we wear only Seiko watch, put on Gap shirts and Levi Jeans, walk with Timberland shoes, put on Ray ban sunglasses, drive only Toyota cars, snap pictures with only Nikon Camera and print them on the HP printers. So, what am I trying to say is we are heavily influenced by the peers and advertisements from all sort of media. TV, billboards, signboards, radio, magazine, this information somehow registered in our subconscious minds and will influence our buying pattern.

So, how did
China come into Pictures?
China closed itself to external world in 1960s; people were relocated against their wills. However, for the past 10 years things had dramatically changed where it opened its gate to the world. All of a sudden, many companies setup operation and manufacturing plant there to make use of the low cost of doing business. Many brands were created there and its domestic market was surely absorbing the goods and services before they are exported out to the rest of the world.

If you follow me, you can easily foresee there the next branded goods might be just being created from
China, actually it’s already happening, like Lenova and Haier. There are hundreds of thousands of small Original Design Manufacturers bringing out their newly innovative products into the domestic markets, and people like you and me who wanted to source from China directly but not committing to the volume and did not have the vast resources will definitely able to locate the items/services you have in mind in China.

Language barrier is always an obstacle for effective sales enquiries and negotiation, the enforcements of good quality plan in manufacturing are critical to ensure goods are meeting the quality requirements. There are many agent in
China can help to overcome this problems. Agent who had already established networks and logistics flow can help you to minimize the unnecessary works in dealing with the suppliers at a flat fee.

Bearing in mind that in
China, it is not the products that determine the cost but the price one willing to pay which will set the pricing, for example, one can procure MP3 players with the lowest cost with minimum features or pay a premium for MP3 players with all the fanciful functions.
China manufacturers can service you with the products that meet your requirements in terms of cost and quality.

Not too long ago, a decent DVD players fetch a hefty price at the retails are now facing fierce competition from low range of DVD players of no-names which compete at 50% or even 20% lower on their selling price, Of course technologies advancement play an important part in the cost reduction but also consumer psychology which did not have as strong a rejection as before in buying no-name brands as long as the product meet their basic requirements.

In
China, once you command a reasonable volume, you can have your own branding dealing with the OEM or ODM, where at the same time producing branded goods for their Tier-1 customers are willing to offer their excess capacity to manufacture your orders at much lower cost.

Sourcing in China is like dealing with a piece of artwork, what determines the fetching price of the artwork is a complicated dynamic formulas, the asking price is depended on the customer’s interest level, urgency and spending power, the negotiation skills and the competitions surroundings. With some basic networking which can be instantly establish with a reputable agent one can skillfully negotiate for the lowest cost price directly with the manufacturers which will ensure maximum profitability when one exchange hands to others.

Just imagine that, on tourist attraction location which I am sure you experienced before, the same piece of hardware will cost you different price when enquire at different stores, the further away the stores located, the lowest the cost, the merchant deals with tourists like me and you everyday, they know when to strike a best deal out of you, basically there were no any fix pricing on the merchandise, it’s up to you to bargain. The bold one will often find themselves a great bargain if they know how to negotiate. But more often than not, the profits are remarkable by having an open pricing concepts rather than fix pricing. So long they got their merchandize at the lowest cost from the main distributors or manufacturers.

Sourcing from
China effectively will guarantee you are having the maximum margin to sell your products using the same concepts as the merchant located at the tourist attraction areas around the world, so long you have the right products at the right time, people just wanted your stuff no matter how much you ask. It’s like the budget airlines, 2 people flying at the same plane sit next to each other might had paid different airfares. One who book 6 months ago on early bird promotion could be paying as little as 10% of what his neighbor had paid who just booked the flight the day before due to an urgent business trip. If the sitting capacity is around 75% or more, the airlines had already make profits by selling their tickets by bidding and by demands. You on the other hand can use the same strategy to maximize your profits margins so long you get your merchandize at the lowest cost price which can only be achieved thru sourcing them in
China with the right network.

Author is the founding member of the of the “ http://www.china-import-guide.com

david@china-import-guide.com

David is a professional engineer working in an American multinational corporation located in
Singapore. He studied bachelor of science in Electrical engineering in Canada and received his Master of Science from National

university of
Singapore in 2002. He is in charge of the WLAN and power management module business of the company and work extensively with counterparts from USA, Taiwan and
China. He has diversified proven working skills in Process, testing, product, project and quality engineering. He travels frequently to US, China and
Taiwan to resolve technical, planning issues with the suppliers.

He has this golden opportunity to extract the practical hands on experiences with proven track records from Kelvin and together with his unique experiences, put up this e-guide to bring you one level deeper into the effective sourcing techniques and approaches in
China.

Contacts: david@china-import-guide.com