How to Find a Supplier for Your Products in China
The past few years have seen a huge surge of interest towards China. Foreign businesses are taking advantage of the country’s lower manufacturing and labor costs, as well as the huge market potential the country offers.
If you’re thinking about finding a supplier in China for your products, this guide will help you navigate through the process smoothly. It’ll explain you the benefits and risks associated with contracting a Chinese supplier and provide you tips on how to find suitable suppliers from the endless sea of options. You’ll also be provided guidance on how to test your potential suppliers and follow up on your deal.
WHAT TO CONSIDER BEFORE LOOKING FOR A CHINESE SUPPLIER
Before you start searching for a supplier, it’s important to understand the benefits and risks involved in the process of finding a supplier in China. There’s plenty to think about whenever you are dealing with businesses in a different country. It’s not only the logistics, the whole business culture can differ from what you are used to.
Whilst China has been a popular country to find cheap suppliers in recent years, it has had its fair share of success stories and disasters. That’s why you should consider the following points carefully before you venture into China.
China is a great location if you want to enter the Asian market, but lower production costs are not a compelling argument anymore
What’s your main motivation for working with Chinese suppliers? Is it the cheaper prices or are you also considering launching your products in the Chinese market? If you are only thinking about China in order to cut costs, you should also look at other countries.
Whilst China has certainly been known for its cheaper manufacturing and labour costs in recent years, the prices in China have increased significantly. Additionally, cheaper electricity has driven down costs in countries such as the US, making it less attractive to manufacture overseas.
A Fortune article from 2015 highlights research by the Boston Consulting Group, which estimates that manufacturing will be around 2% cheaper in the US than in China in the coming years. Therefore, if costs are your only reason to outsource to China, think twice.
On the other hand, if you are aiming to expand your business operations to China or in general the Asian market, China is a viable option. Shipping costs will be lower and China’s proximity to growing markets such as India and South Korea can help your business to create valuable networks in the region.
Intellectual property is not well-protected – if business secrets are critical to your success, China might not be the right place for you
The legal landscape in China can be complex to navigate. In addition, intellectual property issues are commonplace in China, with government’s and companies accusing Chinese firms for outright spying and stealing. Therefore, you want to carefully consider how much information you are willing to share with a Chinese supplier. Depending on the type of supplier you are angling for, you need to understand the risk management procedures and contractual frameworks. It is definitely worth considering to hire a qualified and experienced lawyer for guidance.
Quality will most likely not be on par with European or American suppliers?
You naturally need to consider the quality of the products and services. Counterfeit products are an issue in China so you need to be careful if you are dealing with branded products. Moreover, most Chinese suppliers will not be able to produce the same level of quality as European or American suppliers. While the quality might be sufficient for some products, it will create problems in sectors like high-tech.
Differences in business culture might cause confusion
China’s business culture can differ significantly from the western model. If you’re not familiar with the Chinese culture, you should read about their way of communicating and doing business.
For example, watch the below video on the challenges of doing business in China:
There is plenty of guidance available to overcome some of these barriers. As more foreign companies are operating in the country, the communication between Chinese suppliers and their foreign counterparts has improved. Gather information about the local business culture and ask for advice from other businesses operating in the country. Contacting an intercultural consultant may help as well.
UNDERSTAND YOUR NEEDS – WHAT DO YOU EXPECT FROM A SUPPLIER?
If you have your mind set on China, you can begin searching for the supplier. Since there are a variety of options available, you need to first define the kind of supplier you are looking for. You should consider the following questions beforehand:
- Do you want a manufacturer or a third party supplier?
You should discern whether you are hoping to find a manufacturer or a third party supplier, as the process can be different depending on your needs.
- Do you wish to deal with a small company or a big corporation?
There’s a wealth of availability in China when it comes to suppliers. Depending on your business needs, you might prefer to deal with a large corporation, which has gained experience with foreign businesses. Large corporations could also have a better resource pool at their hands, which might be important for your business. On the other hand, a small business can provide a closer relationship and be able to respond to your individual needs better.
- What is your budget?
The budget definitely plays a big part in finding the supplier. You should have a clear idea how much you are able and willing to pay, so you don’t waste your time talking to suppliers with expensive costs.
- What product/service features are essential? What do you consider a bonus?
It’s essential to outline the product or service features beforehand. If you don’t know what you expect when talking to suppliers, you can easily end up paying for more than you wanted, or end up with a product that doesn’t fit your needs. Be clear about the essentials you need to have and which are features you don’t mind having, but can live without.
Defining your supplier needs with the above questions can help you understand the type of supplier you want. This will help you save time and money, as you can quickly pick up the suppliers that fit the description.
Furthermore, if you end up asking for external help with your search, you’ll need to provide these information to the sourcing agency. This will make their job easier and ensures you don’t pay more than necessary.
BEGIN YOUR SEARCH – USE ONLINE AND OFFLINE RESOURCES TO IDENTIFY POTENTIAL SUPPLIERS
Finding a supplier in China won’t be as difficult as you might think, since there are a number of channels to start searching in. Although the amount of options might seem overwhelming, you can take a strategic approach to your search. You’ve already narrowed down your search by defining what you need and now you can identify the appropriate channel for finding the perfect match.
You should create a file for monitoring suitable supplier options during your research. If you come across a genuine resource site or a possible supplier, enter basic information about the company into your file. This could simply include information such as name, contact details, website address and a few quick notes on why you prefer a certain supplier.
This way, you will create a database of options which will enable you to compare different suppliers during the process. You also don’t want to spend too much time at the start focusing on individual suppliers. Once you have a selection of suppliers available, you can begin contacting your preferred options.
Conduct preliminary research on the Internet
Unsurprisingly, the Internet is the perfect place to begin your search. You should use it to conduct preliminary research and get an overview of what kind of supplier options are available.
You can do a quick Google search with keywords such as “suppliers in China”. Remember to narrow down the keywords with any specific types of suppliers you need. For example, “clothing suppliers in China”.
In addition, social media can help you to identify Chinese suppliers. Platforms such as LinkedIn have professional groups, that can be valuable in finding suppliers, as well as receiving help with the process. Check out groups such as China Sourcing and China Trade Group.
Browse B2B websites
Popular B2B websites and business directories provide plenty of supplier options. You should visit websites such as:
The key is to remember there are a number of B2B websites and business directories out there, but not all of them are legitimate. Deal only with trustworthy and credited websites. In addition, you should ensure the suppliers are verified.
Talk to trade organizations and business chambers
Another great source for finding suppliers and additional information are your country’s trade organizations and business chambers. These organizations can provide you contact details and establish first contacts in the country. You can find them by searching for “[country] business chamber China” or “[country] trade organization China”.
Remember that you don’t necessarily need to deal with your country’s organizations. Smaller countries, for example, might not have their own business chambers in China, but you can deal with other countries’ organisations as well. Furthermore, the European Union has a business chamber in China, which might be worth contacting.
Different trade associations and trade shows should also be on your research list. Not only are trade shows perfect for meeting suppliers face-to-face, but they also provide plenty of hands-on information about dealing with Chinese suppliers.
Note that you can find Chinese suppliers often in large industry specific trade shows outside of China. If you know a trade show is taking place nearby, check with the organizers whether Chinese suppliers have a presence at the fair.
Additionally, you could visit trade shows in China. The Canton Fair is a large trade show, which represents a number of industries. It is held twice a year and you can find out more about it at the official website (in English).
Network with other companies
You should talk to other companies within or outside of your industry, which are already doing business in China. You could first focus on your competitors. Search information relating to your product or service. Examine the companies that pop up and check whether they use Chinese suppliers. If so, which companies are they operating with?
Talk with fellow businesses you know and ask whether they are using Chinese suppliers. You can use social media, local business and industry organizations, and other such channels to find companies already operating with Chinese suppliers.
Consider hiring a sourcing agent
If you find the above overwhelming or you don’t have time to start examining different supplier options, you could consider hiring a sourcing agent. This will naturally cost more, but it can help you to find a suitable supplier more quickly.
However, you also need to be careful when finding an agent, as different sourcing agents use different fee structures. Hence, make sure you understand the costs upfront to avoid an expensive bill.
Furthermore, just as with B2B websites, there are a number of unprofessional specialists out there. You want to check the sourcing agent’s licence and credibility. Check with other companies and the business chambers whether they can recommend a company or an individual to you.
CONTACT YOUR SUPPLIER CHOICES; BUT UNDERSTAND THE BUSINESS CULTURE FIRST
The above steps should provide you with a list of potential suppliers. You should conduct further research into the potential companies and start contacting the ones that seem promising.
Notice that Chinese companies often have representatives in other countries, especially the larger corporations. It’s an excellent idea to arrange a meeting with these business representatives to develop a better understanding of the organization’s structure and approach to business.
You could also visit China yourself. Arrange the meetings with different representatives before you book your trip, to guarantee that you meet as many suppliers as possible without having to extend your visit.
You could also use your local contacts to help you arrange meetings or start communicating. Local foreign business chambers and industry organizations are especially valuable help at this point.
Furthermore, ensure you are well versed in the business etiquette in China. You don’t want to “get into business” too early, as you want to build a proper working relationship with your supplier.
Finally, remember to hire a legal adviser to help you with paperwork and conduct due diligence on potential suppliers. Pick an expert with experience in dealing with Chinese suppliers.
CHECK THE PRODUCT QUALITY AND CUSTOMER SERVICE
Instead of drafting a full contract at this point, test the quality of the supplier by ordering a sample product first. You don’t want to order hundreds of products, only to find out they aren’t quite the quality you were expecting.
Pick a few suppliers and sample their products not only for quality of the product, but for the quality of the service you receive as well. You want to ensure the customer service, the pace of the product’s production and shipping, and other such matters are in line with the standard you were expecting.
Once you receive the samples from your suppliers, ask for other people’s opinion. This could be your potential customers at an industry fair or your friends and family. Bigger companies probably have their own product specialists, which should examine the product.
If you aren’t satisfied with the product or the way the order was handled, don’t hesitate to walk away. You don’t want to end up dealing with a supplier that is only causing problems for your business in the long-term.
FOLLOW UP, FINALIZE THE DEAL AND ESTABLISH A LONG-TERM BUSINESS RELATIONSHIP
Finally, when you find a supplier that matches your expectations and needs, you should continue communicating with the company. You want to develop the relationship over time, to get to know them and make yourself a valuable business partner.
Order another patch of samples and continue monitoring the quality of the product. The first batch could be of a superior quality, as the suppliers want to impress you, but you’ll need quality consistently. Therefore, you should establish efficient quality control procedures.
Moreover, negotiating the payment process with your Chinese suppliers requires you to conduct proper due diligence. You need to mitigate risks and ensure the payment is done through secure channels.
Furthermore, the payment procedure in China differs from other countries and suppliers often prefer to use methods such as Western Union transfers for payment. Whilst these come with high costs, in China there aren’t always a number of other options available. Remember to also consider payment methods such as Escrow and Paypal for smaller payments and International Wire Transfer for larger payments. Keep an eye on the costs though, they can add up quite quickly.
It’s definitely an excellent idea to hire an experienced legal expert to help you with the process. This might increase the initial costs, but in the long-term will prove to save you money. It can also ensure you don’t end up with a legal battle on your hands.
Overall, finding a supplier in China requires plenty of research. The benefits of using Chinese suppliers remain fruitful and the available options are vast. If you’ve not worked with Chinese businesses before, you should learn about the business culture and the process of using foreign suppliers in general. Keep in mind that you should fully understand what you are expecting from the supplier before you rush into China. There are other options available as well and you can’t be too cautious about limiting risks.
In Palo Alto (CA), we talked with venture capitalist Andrew Ogawa from Quest Venture Partners …
In this article, you will learn about 1) the product development model, 2) the customer …
A keyword is normally a word or phrase that highlights a topic or passage of significance within …