Global Sources China Sourcing Show Questions and Notes, April 23, 2008
More questions from buyers at the Global Sources China Sourcing Fair in Hong Kong. This was the last day of the show so I'll be back to more of the usual fare starting next week. But I think that the questions poised were helpful in illuminating some of the common misconceptions and concerns about sourcing and purchasing in China.1. Buyer Question: My quantity’s are small, how do I get good prices from Chinese suppliers?You don’t. There are reasons for being in China, and small qttys is not one of them. If you are not buying in quantities as large as your current domestic distributor (or will soon be buying these qtty) you are probably not ready to be in China.Just because you know you can get things cheap still doesn’t mean that China's right for you. China is best for millions of the same thing. Not thousands of hundreds of things. Or, as one buyer talked with me about, a couple of 10-15 things. Even if your product items are large dollar value item (hundreds of US dollars per piece) you are probably still better off buying from a domestic distributor than from a China supplier.Further, because you are getting lower cost you need to understand that there is a trade off in a lack of oversight/QC as well as logistics and importing responsibility. If you are buying small quantities and you can’t afford to do some of the QC and shipping/importing yourself then you shouldn’t be buying in China.If you are just starting out your own retail business and you are going to be buying stock items in quantity’s that are appropriate for a small retail you will most likely find China a bit beyond what you can realistically manage or afford.Chinese suppliers want to run large lots, one time, for confirmed orders. Typically suppliers’ margins are small and within the environment of changing exchange rates and domestic inflation suppliers lose money to product goods and then wait for a buyer. They do not like to carry any stock and so buying in small quantities is tough.2. Wow. I can’t believe how good the prices are here. I should have come sooner.(Yea, I know it’s not a question, but everyone says this and so I wanted to respond a bit.)First, yes, the prices are better than what you get from your home distributors, but what’s missing? Quality? Shipping? Duties? QC? All of these important things are what you’re cutting out by going direct.Second, don’t be too excited. Play it cool or you’ll never get any better pricing (and you should). I prep all my clients coming to China that they should act disappointed and a bit frustrated when visiting factories. It’s almost impossible to negotiate prices with a factory who knows that the client is already thrilled about prices.Third, what are the quantities that are required to get this great pricing? Often at the show you’re expected to order “a full container” as an MOQ. I've never bought "a full container" as a qtty of anything. Ever. But at the show (with costs for int'l travel, shipping, booth registration) they want to get as many big orders as possible. Once the show is over the MOQ will be more manageable, but it's still not going to be small (see above) so don't get you're hope up for 100's of a few pieces and don't get mad if they don't want an order for a retail shop.3. I’m working in a very price sensitive market—how do I get the best prices and still keep the quality I need to have?You can have two of the following qualities in your production: good quality, low prices or very fast delivery times. You don’t get all three. Ever. So if low price is your priority, you need to be a bit flexible on times or quality. This means that the farther out you can prepare and the longer that you can wait for delivery the better quality and lower prices you can get.Another way to get better pricing is to order larger quantities. Larger quantities with good lead times can help you save significant amounts of money per piece.For example. Last year we made some Christmas ribbon for two different clients. One client had 4 SKU’s with 3 different ribbons in each SKU. Each SKU had more than 10,000 yards per ribbon. The second client had 12 SKU’s of ribbon with 6 ribbons per each SKU. Each SKU had 5000 yards per ribbon. For both client, each SKU had a total of 30,000 yards. But the cost and time per SKU for the first client was ½ of the other. Because of the smaller number of pieces within each SKU, the first client had lower costs per yard as well. Sure the second client had 4x the total quantity. But because of the high number of SKU’s and the higher number of different pieces per SKU the order was seen as much more difficult and much less per ribbon-production-run than the first client’s order. Chinese suppliers want orders that are large total quantity’s and a small number of SKU’s and small number of pieces per SKU.My experience has been that negotiations in Chinese (i.e. hiring a Chinese rep) gets you better prices. A foreigner walking into a show booth in Asia to buy says a couple of things. First, I’m not local. This implies (to the Chinese supplier) that you have more money than the locals. Second, it says I’m only here for a week so I need to get this done ASAP. Suppliers know that you don’t have a lot of time to negotiate and have money to spend. Third, I’m used to prices that are much higher than what I’m seeing here so I’m only going to bargain half heartedly and maybe for only a very small percentage off of the offered prices.If price is really the motivator in your market then you need to invest in some time--come to the show and then go the factories and spend weeks, not hours, here in China bargaining and negotiating prices and quantities.4. Best advice at the show for saving money and time NOW: Don’t waste time trying to manage your own shipping. Just give it to a 3PL like Schenker from the very beginning. Negotiate rates up front, but once you’ve done that let the 3PL do all the rest. Focus you time and energies on your own job and let the 3PL manage all the customs, logistics and international paperwork.