Recognise the Media Bias
How many of us have seen news articles complaining about cheap Chinese crap flooding Western countries? I’m sure we are familiar with inflammatory articles published by journalists that ultimately failed to show the whole picture in an accurate manner. Sensationalist articles of this nature are of course very popular but few of them identify the actual problem, preferring to point the finger at Chinese companies that operate on very small profit margins or large companies that are subsidised by local Chinese government initiatives. Who am I to argue with the conclusions drawn when this article is in no way meant to promote a book by the same authors? As a writer myself, I must admit it is a good marketing tactic, given the readership of the Huffington Post.
However, everyone is entitled to their opinion and while there may be some truth to the examples outlined in the article, the fact remains that importing and exporting is a two-way street. Why are importers in Europe and the US interested in sourcing from China? Could it have something to do with the cost involved or perhaps due to the way regionalised distributor arrangements prevent many retailers from competing effectively with rivals? Why are the importers not held equally responsible for the decline of economies in other countries?
Some even suggest that my expertise is less valuable because of my location in Asia… Those ex-clients can consider this article an information resource.
Different Levels of Buyers
In the last few years, I have received several enquiries from European retailers seeking a variety of items but most of them fail to provide the required information for sample creation in China or are simply unwilling to research the required quality standards for importing into their own respective countries. Some even suggest that my expertise is less valuable because of my location in Asia… Those ex-clients can consider this article an information resource.
So, you want to buy from China?
Chinese companies deal in small volumes. This is not the case, as many demand a MOQ (minimum order quantity) that is impossible for smaller companies. Expect to order by the container or partial container in some cases. For smaller volumes, expect a higher unit cost and you will be dealing with someone further down the logistics chain or even a reseller.
Chinese companies provide credit to established companies. Just like in China, some Western companies seek to defraud and common terms in these situations are 50% prior to production and the balance on production of the Bill of Lading.
It is the responsibility of the Chinese company to ensure compliance with international quality or health and safety standards. It is in fact the responsibility of the buyer or sourcing professional to ensure that the required standards are possible when initial contact is made. Otherwise, cheap Chinese crap is produced…
Chinese companies should pre-certify products for applicable standards. This rarely happens, as it is impossible for these companies to forecast where their enquiries will come from. If an Irish buyer requires certification for an Irish/European standard, expect to pay half of these certification costs. There is a risk involved, as some materials in the domestic market will fail these tests. Few Chinese companies will bear these costs alone unless high volumes are indicated.
NOTE: The Chinese domestic quality standards are not an equivalent for international standards, as in most cases, different testing criteria are applied. The costs for testing and certification will vary per the standard involved.
It is feasible to find reputable suppliers without either visiting China, receiving samples, or requesting an onsite audit to be carried out. Anyone that takes this approach might as well just send money to my account. For convenience, place ‘lucky lottery approach’ as a reference on the transaction.
Sourcing professionals use the internet to find potential suppliers. Sure, we do but this is supplemented by personal contacts and industry knowledge. Many excellent suppliers do not have a website, even one in Chinese.
I will tell the Chinese company owner that future volumes will increase to reduce unit pricing on initial order. This is rarely successful as this ‘trick’ is often attempted. Practical success rates involve no more than 5% reduction. Those that achieve substantial reductions may find later that materials have been swapped to meet the new unit price. If you tell a Chinese executive that you are prepared to pay one dollar for a toaster (outlandish example but will suffice), you may achieve this goal but do not expect it to compete favourably with known brands. However, if you are willing to pay for quality materials, it will perform as well if not better than name brands.
I will hire local people at local rates to source on my behalf, as they will know more about the local market. This may be true in some cases but few will have practical knowledge of international requirements. Verify this knowledge before hiring.
The Western way of doing business is better. You may well think so but guanxi or gift giving is not about bribery but more about relationships and mutual trust. Failure to treat Chinese contacts well makes them lose face in the eyes of their peers and will present obstacles in future business dealings. it doesn’t take much, some small gifts from your home country are displayed proudly by Chinese contacts.
What is the correct approach that avoids ‘ Cheap Chinese Crap ‘ ?
- Identify your product requirement
- Determine the quality standards necessary for your location
- Identify possible shipping costs and import duties, as most transactions will involve FOB terms.
- Decide on a sourcing method i.e. visit China in person, visit trade shows or retain a remote partner to act on your behalf. NOTE: Trade shows can be unreliable as anyone can arrange professional catalogs and brochures. A site visit is the only reliable follow-up. Professional companies will extend an invite without being asked.
The Western way of doing business is better. You may well think so but guanxi or gift giving is not about bribery but more about relationships and mutual trust.
- Identify a list of possible suppliers in China
- Respect Chinese culture and way of doing business. The buyer-seller relationship is not as we assume in the West and standard aggressive bargaining from purchasing departments can have mixed results. Successful companies in China achieve their success by forming a personal relationship with suppliers and entertainment budgets (meal and drinks) should be allowed for. A personal gift from the buyer country is often treasured.
- Make sure that the goods involved are certified to required standards. If they are not, check a sample in your own country or select a supplier that has taken the time and expense to certify their products.
- Perform an audit of the supplier’s process and a final inspection before shipment.
- Check goods on arrival to port.
Obviously, all of this is just an overview but outlines some of the reasons why imported goods are often considered substandard.
Therefore, if you buy a Chinese product and are dissatisfied, you should not blame the Chinese supplier for producing crap, especially if the buyer has not taken the time to QA the products, ensure applicable standards are met or has insisted on a ridiculously low purchase price.
The fact remains that a lot of this cheap Chinese crap is provided by dropshippers, sold on eBay by sellers that have never even seen these products, or simply sold on at a 3-400% markup by retailers seeking a quick profit in a sluggish economy.
If your importer, distributor, or wholesaler is professional, they will have verified the quality in China. If not, you cannot blame the Chinese companies, as they are supplying their goods based on what the buyer is prepared to pay. They operate on small margins and will sacrifice certain product features and/or materials to meet the price expected by the buyer. This is not to maintain a high margin but simply enough to pay staff and make a living. For corporate greed, we can look much closer to home… and perhaps evaluate the pricing strategies of Western companies when it comes to goods made and sold in China and compare them against the resulting pricing in Western countries. Future articles will discuss some examples of this practice, where pricing strategies seem illogical to say the least.
In the meantime, if you wish to avoid cheap Chinese crap, contact us for recommendations.