Sharing my lifetime experience in export/import. Product sourcing specialist.

[Walter Hay]

Have you ever tried reach out to a manufacturer and ask for a tour of the factory? I find that's a relatively easy way to find out if they're the real deal or not

Yes that is a good way to sort them out, at least to establish that they are not a manufacturer if they can't/won't allow a tour of their factory.

However, as I will outline in more detail in my forthcoming post on "Traveling to source supplies. Visiting manufacturers.", even if they do agree to take you on a tour that is no guarantee that the factory they take you to is theirs.

 

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[Walter Hay]

Walter,

Thanks for contributing some great value to this forum.

When you source a technical product from a supplier, for examples sake let's say I source colour changing LED flood lights, do you try to get the suppliers 1 year warranty in writing?

How would you go about this to ensure you have the best chance of receiving a replacement item if your customers item turns faulty?

Or alternately do you just stand no chance getting a replacement? I realise it will vary greatly depending on the manufacturer as well as other points to consider, but I just wanted your opinion on the matter.

Thanks.

Unfortunately there is not much point in getting such a warranty in writing, although as a formality it may have some value. Contracts (and a warranty is a contract) are extremely difficult to enforce in China.

Even if a business in China were to agree to a contract with a clause making it enforceable in a court of law in your local jurisdiction, there is no way you could force an unwilling party to abide by such a clause.

Your best warranty is a good relationship. Chinese people put a lot of value on their word and if you have established a good relationship so that they will also be satisfied that they can rely on your word, you will find that warranty issues will be handled without any problem.

It is worth telling any prospective supplier at the beginning of your communication with them that quality is important to you. This will not necessarily result in you paying more, although sometimes it will, but it will often weed out those suppliers who do not stand by their products.

There are many factories that manufacture to two different quality standards. I have been in factories where one production line puts out trash quality to satisfy the extremely low cost demanded by some customers, (often big retailers,) and high quality for those who want repeat customers. It would surprise most people to know how small the price difference can be, but if a big retailer is buying a million items that they are paying maybe $2 for, 10c = $100,000.

During the time I ran my importing business I developed those good relationships that I recommend building, and before long, warranty issues were resolved by my word about a problem, sometimes backed up with photographs. Rarely did I or my franchisees have to return any items to China.

Until you have built that relationship, and indeed as part of that building process, you wear the problem, but you do mention it politely. If you don't adopt a demanding attitude a supplier may well volunteer some compensation, usually by way of a small discount on the next order. If they can see that you are not trying to take advantage of them, they will chalk that up as a point in your favor.

It is easier for you to accept some losses due to warranty issues if you buy at the right price, but that is another story.

Finally, don't forget that trust works two ways.

Walter

 

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[Walter Hay]

Sourcing From Countries Other Than China. Is it Worth It?

Rising living standards in China are making Chinese products less competitive.

I have a friend who imports vinyl fencing products and has built a big business out of it, although he now finds local manufacturers are giving him some stiff competition. This is one reason I recommend that would-be importers consider countries other than China. Government labor regulations there are increasing costs and as a result many Chinese companies are moving offshore!

Does that sound familiar? It is part of the cycle of chasing low labor costs. Japan was once the cheap source, then Korea, then Taiwan, then mainland China, and now Chinese companies are setting up in lower cost Asian and African countries.

I am a retired importer but I still maintain my contacts. One of my long time contacts in China reports that his factories are now compelled to provide ever increasing perks to his 6,000 employees as well as higher wages and shorter hours. He says his labor costs have risen 40% in the past 3 years and he is planning on expanding offshore, although he won’t close his factories in China.

As evidence of this changing scene, a number of US companies are now returning their manufacturing to the US.

So where does this leave people looking for cheap products to resell? Well there are still plenty of them available in China.

Those looking to source products there should be aware that many factories turn out two quality standards of the same product. One is made to meet a price demand and the other is made to meet a quality demand. The interesting thing is that the price difference is often very small.

I have directed many people to other countries where they have been able to obtain better quality at the same price as in China, or sometimes they have bought similar quality but at a lower price. In some cases they have found unique products not produced in China.

Sourcing from China is easy, although many people get burnt for that very reason. They think it is so easy that they can be careless about sourcing. They treat it as casually as buying from their local store and they blindly accept everything they read on B2B sourcing sites.

Sourcing from other countries will require greater expertise, but I have taught many people how to do it. Those who do begin sourcing in other countries may well be one step ahead of the competition in a few years’ time.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Traveling to China to visit factories.
■ Do your suppliers use child labor or slave labor?
■ Q & A 1
■ Alibaba and the 2236 thieves.

 

[Walter Hay]

@Walter Hay

This is a questions more about your personal opinions. It seems that one of the prevailing business models on the forum is to start importing. The typical route seems to be through Amazon FBA etc. There are several members on the forum that appear to be extremely successful with this model. However, do to copycats on the forum, I have noticed that most importers are reluctant to reveal their business idea where as other members that are creating a brand share pretty openly. Does this not expose the major pitfall of importing? If you can get your hands on it, someone else can to. From what I know, although you were technically importing, you were also overseeing the manufacturer and licensing of your product, thus protecting yourself from almost all angles.

If you were just starting out today, would you even bother with the importing model that is so popular here (find a new product, market it on Amazon, get a site setup, work on SEO, etc)? Or rather create a new product and control the entire process? Unless you own the product or the license of the product, it seems unlikely that you could sell your business as readily as someone who has created a brand. Then again, I guess any potential suitors of an importation company would see the value in your contacts and network and that is essentially your "brand."

Is Importing and Selling Physical Products a Good Business Model? (I like headings)

I have strong opinions on this very important subject. The whole internet marketing world seems to be full of copycats. I regard this as a manifestation of laziness and lack of courage. For budding millionaires on the Fastlane forum that seems highly inappropriate.

That does not mean that it is inappropriate to join an industry that has a successful business model, but first it is important to be sure that the model really is successful. One of the most popular business models in the online selling of physical products is in my opinion not successful. I refer to dropshipping.

I know there are people who make a good living out of reselling products obtained from dropship wholesalers, but the really successful people in that area are the wholesalers, not the resellers. The industry is littered with unhappy failures, and I am planning on writing a critique of dropshipping at some stage.

As for importing and selling via Amazon FBA, that can be very successful, but without a doubt those who do best at it are the ones doing private labeling. Unfortunately though, there are many copycats in that area too, with supplements being the flavour of the month. A private label does little to maintain profitability if the only difference between you and your competitors is the brand name, and there are hundreds of competitors.

I left a comment in Vigilante’s INSIDERS thread and I hope he does not mind me disclosing what I said. It was that I found a diamond among all his gold, and that gem was Vigilante’s practice in looking for products that have not already been sold on the US market.

You are quite right in thinking that reluctance to reveal import project details exposes the major pitfall of importing. As you say “If you can get your hands on it, someone else can too.” And indeed they do, so the importers who have been importing and selling run of the mill products like everyone else just find themselves on a product selection and sourcing treadmill.

I have previously written about sourcing unique products in countries other than China and the pitfalls of selling Hot Selling products. Even suppliers in China have unique products, but it requires persistence and some extra work. HERE IS A RED HOT TIP: When searching B2B sites, go past the first few hundred suppliers and find ones that have no bells and whistles such as Gold, Verified, 5Star, Premium etc. symbols next to their name. I know this is contrary to what I write in my book, but I am there writing for people with absolutely no idea where to start. This advice will appear in my next revision, so those who read this are getting a pre-release bonus just for being Fastlane members.

Those suppliers you will find by this method are generally the smaller manufacturers, some with little money to spend on advertising or buying status badges, some with little or no experience in exporting, and others just dipping their toe in the water to see if it is worthwhile. They are more likely to be the ones who have products not yet sold outside China. The more difficult it is for you to find suitable products and suppliers the more difficult it will be for potential competitors. (Barrier to Entry.)

But here is a suggestion that might save you some pain: Learn something about safe sourcing before you contact them. I am not just talking about the usual due diligence.

You ask: “If you were just starting out today….” Yes I would definitely be an importer, but not B2C. I would stick with B2B. It may be harder to get those customers, but provided you choose consumable products you can get long term customers who will buy the same product over and over. I would private label everything I offered for sale, even if it only amounted to having my brand on every item just to show that I am a serious businessman, here to stay.

Once established, such a business is very saleable. If you can do it once, you can do it again, so you could make big capital gains by rinsing and repeating.

 

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[Brentnal]

I am finaly done with reading the whole thread, i have put all the important things in a word document and then in google docs.
Here is the link for anybody who is intrested : https://docs.google.com/document/d/1In7m0QzBYuufcjJgJfuBMQrTS1QelrSZIlXRCq6TpZk/edit?usp=sharing

Walter Hay this thread is one of the most helpful threads on import i must say. I am definitly going to buy your book. As a matter of fact i am going to do it right now.

 

[Walter Hay]

Is this just for certain types of products or all products?

It is not all products, but there can be many surprises. If labor is not a huge factor, the product may be competitive with China in many other countries.

Just look at retail stores and see what types of manufactured products made in Germany, Italy, USA, Australia etc, are retailing at prices equal to or even lower than similar products from China.

I recently purchased batteries for small electrical devices and they were made in Germany. Quality is great and the prices matched those from China.

The lowest prices I ever saw for souvenir decals were from a manufacturer in Italy.

I have seen stunning original design jewelry in the Czech Republic that you would never see in most western countries and the prices were amazingly low.

Low wages are not the only factor. I know of one labor intensive factory in Boston MA, where the business is booming and believe it or not, the average age of the workers is over 70! They are paid regular wages, but the company says they provide better productivity than younger workers, and as a result this long established business remains competitive and sales continue to grow.

The moral of the story is - think outside the square.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
Introduction. Dealing with myths and misinformation.
Some things you should know or do before you start product sourcing.
Traveling to source supplies. Do you need to visit China? Trade Fairs.
The difference between Alibaba and Aliexpress.
Traveling to China to visit factories.

 

[Walter Hay]

In my experience, I've never been scammed by anyone. Most suppliers are also really friendly with awesome support.

My biggest issue is quality. I've tested dozens of different products and plenty of different suppliers. It doesn't matter what the product is, the industry, whether it's electronics or furniture, I've always had issues with the quality control. It does get frustrating, especially when blowing cash on samples with 7-8 suppliers per line of products and all are junk. These are also Gold members on Alibaba with onsite checked and assessed, all the certs are there, some 7-10 year members. There are no clear indicators prior to sampling which would lead me to believe that the products would not be of good quality.

The support is good though. If there's a mistake, they will fix it immediately, but it's not enough. I recently was testing a product and the 2 samples which came in, 1 was faulty. The other worked great and the price was bang on (cheaper than everyone else). So I ordered 8 more samples. 6/8 were defective. They fixed 5 of them and the 6th is still trying to be fixed. It's a waste of my time to be fixing products as they arrive. If I had shipped them out to customers without testing or had a fulfillment center handle my orders, I would have a pretty pissed off customer base. This doesn't work for me, even though they had the product I wanted at the price I wanted. They promise the next order will be fully inspected each and every one of them but I've lost trust in them.

That's my small rant...I find it takes time and money to find a good supplier, regardless of what badges, certs, yrs of experience they have under their belt.

Walter, if you have a better strategy in terms of quality is concerned when looking for a supplier which saves me time and money, would love to hear it

Your experience is probably close to average, but there are ways to minimize the QC problem.

The most effective way is not cheap, and is not viable for samples. It involves paying for a good inspection service, so that is really only suitable if your order value is at least $2,000. An alternative is to require that they accept payment by escrow, but beware of the time limits and intricate rules of Alibaba's escrow system.

In the case of samples, I believe it is important to let every supplier know at a very early stage that quality is important to you. That may result in them just carefully testing the samples, but that leaves the risk that they will not do the same for a larger order quantity.

To minimize that risk you speak plainly but very politely when preparing to place your larger order. Tell them that provided their QC continues to be as good as it was with the sample order they can expect long term repeat business. As your experience shows, the support is usually good, so most suppliers will make that extra effort to keep you happy.

Although you may have escaped being scammed I would still avoid using Alibaba because of the verification system's deficiencies. Gold membership is worthless as an indicator of reliability or capability. Onsite Checked likewise. I just now did a random search for bicycles, limiting the search to Assessed Suppliers. Here is what I found:

• The business is a 9 year Gold Supplier.
• The business has two Assessed Supplier reports, both are out of date.
• The reports identify the supplier as a trading company, with premises being 130 m. sq. but in their own profile the company claims to be a manufacturer, with premises between 10,000 and 30,000 m.sq.
• On their website they claim that they have been manufacturing for 24 years, but on the same site they say the business was established in the year 2000.
• In their Alibaba profile they claim sales 20 times greater than the figure they claim on their website.
• Their .cn website does not display an ICP number, and that is illegal.

I assure you this search was truly random. I have never before heard of this company. When a supplier has such conflicting claims and reports on a 9 year Gold Supplier who has had Onsite Checking and is an Assessed Supplier, it gives little reason to be confident in the verification system used by Alibaba.

Regardless of how you locate your suppliers it is vital to build a good relationship with them. For the benefit of all who read this post, don't miss out on sending "Season's" greetings, Western New Year greetings and later, Chinese New Year greetings to your suppliers, as part of the relationship building and maintaining process.

A good relationship is often the best QC you can get.

 

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[Walter Hay]

Dragon Boat Festival

This festival starts on June 20 and is for 3 days. It is also known as Tuen Yang or Tuen Ng Festival. When sending greetings or just a note wishing your suppliers a happy holiday, use the Chinese name Tuen Yang (Manadarin) or Tuen Ng (Cantonese) and that will impress them. Most business in China is carried on in Mandarin. If your supplier is in Hong Kong or Southern China use the Cantonese version.

This calendar month is considered unlucky by Chinese people, so you might like to add some comment wishing them good luck.

Don't miss any possible occasion to exchange greetings with your suppliers. Building a good relationship has great value.

 

[maleek]

This is kind of an afterthought, but still relevant:

Something that saved me extreme heartache was that I found a customs broker that was familiar with Chinese customs, and spoke the language! Quick horror story: I once did a bulk order from a Chinese supplier who forgot to include the original BoL (Bill of Lading) with the shipment. For those who aren't familiar, it's one of the most important documents. IT HAS to be the original, customs won't accept anything but the original document. Anyhow, my broker got on the phone with the supplier at 3AM, and had them mail out the BoL by express post. Had I not had a savvy broker, my shipment would have been stuck at the port, causing a logistical nightmare, among other potential fees.

 

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[Walter Hay]

Before I respond, I just want to say I'm not trying to steal the AMA, just simply trying to help:

1)Here's a general guideline that I follow for people just starting out: Electronics. Electronics have a high probability of failure, somewhere around 60%. Generally, if you think in terms of shipping, the best items are light, easy to pick up, and 'impossible to screw up'. Liquids, are another bad item to import, in terms of shipping. Things that are fragile as well (coffee mugs) and defense items (swiss army knife, brass knuckles, you get the idea). Defense items are more so difficult with the customs side of things, from my understanding.

With that being said, you have to be very specific in dealing with suppliers. Never assume they understand what you mean. You have to remember that their culture is different, and you are dealing with a language barrier, that sometimes make things hard to effectively communicate. If you are having a car manufactured, tell them it has to come with an engine. Don't be surprised, if it shows up at your door engine-less, if you never mentioned the car must come with one in the first place. I hope that analogy made sense.

2) Depending on where you source from, a supplier's company page will generally say how much supply they can handle on a monthly basis. This is why I always tell people to deal with manufacturers if possible. There is nothing dealing with a trading company, just be aware that, if for some reason the trade company and manufacturer of your product no longer do business together, you're hooped. The last thing you want is to have all demand, but no supply, it's a great way to lose customers.

To add to the first point, if you insist on doing something complicated like electronics, use a third party inspection company. These companies come in, and inspect all of your product for any flaws, before it leaves the manufacturing plant. I mean from major defects (like a non functioning item), to a spec of dust only visible under a microscope. These companies can become costly however. Generally, you have to pay them per man hour, and have to pay for their travel to your suppliers manufacturing facility, and hotel. Alternatively, you can hire a sourcing agent who will go out a find a reputable manufacturer from the get-go. They typically require some fee upfront for their services. Or they will judge it on case by case basis. If it's too small of a project they won't get involved typically, unless they think the particular project is cool (and yes I have seen this happen)

In your specific case, that is exactly why it is imperative to always order samples. And from at least 3 different suppliers. That ensures you can judge quality for yourself, and are never stuck with just one option. If for some reason you only ordered from one supplier, and were not satisfied, but still want to work with them I would:

Tell them that after reviewing the product, you think these slight improvements can increase the quality rather inexpensively. You want to go at this from a win-win stance. I guarantee, if you make them lose face (blame them for their sub par quality product) you will ensure that you get screwed over, and or have them stop dealing with you entirely.

1. Thanks for this post too. I like your analogy about specifying that a car must have an engine. One area of misunderstanding is in the English alphabet. Check and double check anything that requires lettering or numbers incorporated. To a Chinese person with limited or no English, a C can look like a G. There are also many words in the English language that have multiple meanings and it pays to avoid them when specifying. Defense items are more or less of a problem depending on which country you are importing into, but usually in the US the "normal" ones like a Swiss army knife will not alarm Customs inspectors.
2. I recommend that if you want to use a third party inspection service you use one of the big European companies such as Intertek Group PLC, a a UK based organization with impeccable credentials, established 130 years. or SGS, a Swiss organization about as old. Sinotrust in China is a reliable service as is the US based KRT Audit Corporation. The cost will vary, but for a small shipment that happens to be located in a city where the inspectors are also located, expect to pay $250 to $300. It can be much more, so get a written quote. I don't recommend sourcing agents because they are just as likely to be working for themselves as for you.

Walter

 

[Walter Hay]

Great info you have given us here, this post is especially helpful as it allowed me to find out the supplier im working with is a trading company after all, although i dont mind because their communication with me through email is very fast and english is pretty good as well. Sometimes i deal with suppliers that take a few days to answer which really slows down the process and will not deal with anyone that takes that long to reply again.

I got a question though @Walter Hay

-what is the red tick with blue circle and where can this be found on alibaba? I cant seem to find it anywhere when i search for suppliers.

-Also generally how much more do the traders mark the item up as opposed to the actualy manufacturers?

When you search by product you will find a line near the top inviting you to sort by Gold Supplier, Onsite Check, Assessed Supplier, Escrow, and e-Credit Line. The red tick in a blue circle is next to the Assessed Supplier.

Regarding the wholesalers' markup, it will vary substantially, but I have seen the manufacturer's price doubled. I think more often you will find that you are paying 25% to 30% more if you buy through a trader. This can be difficult to establish in some cases, because a very small number of manufacturers cooperate with traders and operate something like the US MAP pricing system and will not undercut their trader partners.

The simple way to deal with that is to find another manufacturer who does not work through traders. They are the ones who will give you the best prices. You will only find them by getting quotes from multiple suppliers.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
Introduction. Dealing with myths and misinformation.
Some things you should know or do before you start product sourcing.
Traveling to source supplies. Do you need to visit China? Trade Fairs.
The difference between Alibaba and Aliexpress.

 

[Walter Hay]

Q & A 3.

This Q & A is very fresh, being from the thread “Caught in Alibaba Hell” but I include it because it shows the consequences of limiting your search to the one B2B site, and I think more people will benefit from my answer if I put it in my thread. I hope there is no rule against this.

Q. I have spent countless hours on Alibaba, searching, posting buying requests and responding to quotes. I think am being very clear in what I am sourcing and even including pictures and I still get replys for things which don't meet my needs or questions, that were already answered in the request. And then when I do find something I think will work, the cost for a sample is 2000% higher than the actual item. i.e a ball that cost 0.30, is 60.00 for a sample. Aliexpress hasn't proven much better.

I am sourcing SOLID (hollow is everywhere) rubber balls with a 1/2 hole in the middle, the size of a tennis ball, but smaller or larger will be needed in the future.

Right now, I am really not trying to purchase 500+ balls

A. I got a notice about a reply on this thread, so I came back to look. When I saw that you did not appear to have made much progress, I decided to do a quick search of one of my favorite B2B sourcing sites.

Within 3 minutes I found hard rubber balls, complete with hole, various sizes, can be made to your specs, with no mold charge, any Pantone color, MOQ 100 pcs. Unlike most manufacturers they will accept payment via PayPal.

Prices quoted are way below many of the prices you will find on Alibaba, and half the best price. Also on Alibaba the MOQ is 1,000 - 5,000. I suggest it would pay you to buy 100 @ 15c each, because the freight on them will be not a lot more than you have been quoted for a single sample.

If you like to start a conversation with me I will give you a link to the factory's website. They meet all my requirements for a safe business to deal with.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Traveling to China to visit factories.
■ Do your suppliers use child labor or slave labor?
■ Q & A 1,2,3

 

[Walter Hay]

As promised I checked them out, and without any doubt your supplier is not the manufacturer. See our conversation to find the real manufacturer's identity.

For the benefit of others, but without disclosing anything that will identify your niche I will just make a few points.

Some suppliers sell a range of products that are all closely related and the whole range is needed in order to provide a complete package. These suppliers can't possibly manufacture the whole range, although they might have started off manufacturing one category within their range.

For the convenience of sourcing a package from one supplier you can expect to pay more. If you only want to buy a product that is just a part, and not the whole package, it would pay to do some more searching to find the actual manufacturer of that product.

This is what I have done for you now. As you know it only took me a few minutes.

This leads me to provide a hint on how to search B2B platforms. Explore different keywords and different combinations of keywords. For example you may want to buy a combination bath and shower made of acrylic.

Search possibilities are:
Acrylic tubs.
Acrylic baths.
Acrylic showers.
Acrylic combination bath and shower.
Bath tubs.
Shower tubs.
Tubs.
Showers.

There are actually a whole lot more possibilities and your success can depend on how persistent you are.

It is also worth noting that some B2B sites will not recognize (American spelling) a word if it is spelt using American English and others won't recognise (British spelling) a word if it is spelt in British English.

 

[Walter Hay]

Sourcing Agents and Quality Control

There are quite a few importing information sites operated by people wanting to sell their services as sourcing agents, sometimes including quality control inspections. Some of the big B2B websites have advertisers offering those services.

The information provided on those information sites is heavily skewed to worry intending importers so that they will believe that unless they use the services of a reliable sourcing agent they are courting disaster. The things that generate income for them are fear and ignorance.

The pitch is that if you go it alone in product sourcing you won’t know who is a reliable supplier and you may finish up paying for faulty goods.

However if you employ someone such as (here insert the name of the sourcing agent operating the site or affiliated with it) you can sleep soundly, knowing that they will eliminate every risk for you.

It sounds good in theory, but who polices the policeman? Are they really working for you, or are they secretly working for the supplier?

This is not theory. Don’t forget that I have been importing since 1987 and I know it happens. Sourcing agents sometimes work on commission from the suppliers, and sometimes they charge you a commission. In reality, sometimes they get both, but they will never tell you that. Sometimes the great supplier they find is a relative or friend.

Straight out quality control services do exist and some of them, particularly those based in Europe have a fine reputation. In my post “Inspection Services” yesterday I listed a number of utterly reliable independent inspection services.

The problem is that for small businesses their charges can soak up too much of the possible profit. A small shipment inspection will cost about $250 to $350 provided the inspection service is located in the city where the manufacturer is located. Most of the big European inspection services do have branches in the main manufacturing centers throughout China, so most are covered.

Once you get to the point of ordering in the five figure or more range, inspection services may be well worthwhile. Some of those companies will also provide sourcing services, but I believe that doing it yourself can be a very safe process and can save you hundreds and even thousands of dollars.

Since retiring due to a botched operation, I have taught hundreds of people how to source safely. Prior to that, I ran my importing and marketing business for 22 years. I appointed franchisees in 4 countries and my franchise was an unusual system. I did not supply products to any franchisee. Instead I taught them how to find the products they wanted to sell.

A large part of the royalties they paid me was my reward for the successful B2B marketing system I taught them, but without safe product sourcing direct from manufacturers who would give them incredibly low prices, they could not have afforded those royalties.

None of those franchisees ever used a sourcing agent, even with orders as large as $50,000. None of them ever reported being scammed. All of them enjoyed huge profits. In other words, use of a sourcing agent was totally unnecessary because they knew all about safe sourcing practice and safe sourcing sites.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Alibaba and the 2236 Thieves.
■ Part2. Traveling to source supplies. Visiting factories in China.
■ Do your suppliers use child labor or slave labor?
■ Inspection Services.
■ Q & A 1,2,3,4,5,6,7

 

[Walter Hay]

Just In Time

I have often been asked is it possible to start importing on a low budget, and strangely enough the figure most often mentioned is $300. Possibly this is because a lot of newbies consider paying $300 to join Worldwide Brands so that they can start a dropship business.

I have had numerous people succeed at this, although as I wrote in a recent post on another thread, that is a slowlane project. Here is how I see it working and it involves my adaptation of big business's Just In Time system.

The small entrepreneur can use my "just in time" ordering system which works better than dropshipping and gives massively better profits.
.
This is how it works:
1. You buy a small inventory from China or another overseas country and start selling.
2. You have happy customers because you can dispatch the same day.
3. Once you are certain you are on a winner you place another order and it is delivered door to door for you via air courier.
4. The huge profit margins include the cost of the air courier.
5. You can increase inventory size or product range using some of the profits.

The key to this system is finding real manufacturers, not the thousands of them posing as manufacturers on popular B2B sourcing portals. In reality they are traders, wholesalers, or resellers who would eat into your profits if you fall for it.

Today I received an email from one such newbie. Here it is without comment from me:

"Ok. From extremely skeptical to successful completion. Credit given where credit is due. I followed the book instructions you laid out. Took my time to double check everything and was able to successfully import an order from China. Not only that but it was also a “sample order” for less than 300.00. A 300% mark up has allowed to get initial investment back and I have 70% of my inventory left. Stop promoting your book. Your encouraging competition for me Many thanks."

 

[Vigilante]

Sidebar to say I am not sure where on the internet you can find contributors and content that rivals what the Fast Lane Forum has to offer.

I am also glad to see that you guys are buying his book. It's OK to pepper him with questions (he initiated the AMA) but I also like the fact that your questions have been educated questions for taking concepts deeper than what has already been outlined for you here and in the book. There haven't been too many stupid questions (and contrary to what your Mom might have told you, not every question by definition is a good question.)

There's been a ton of learning in this thread, including people doing their OWN research, buying books for continuing education (including Walter's) and THEN asking questions. Somewhat refreshing from some threads where people ask questions that could be easily answered on Google.

The reason this thread was marked gold was a combination of your great questions, and Walter's great and knowledgeable answers.

Carry on.

 

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[Phones]

In European Union you pay VAT/Duty over the Total Value of the Shipment (Value of goods + Shipment). And I think this is the standard in most other countries (unfortunately).

It's all about building a relationship. I started dealing with my freight forwarder (and middleman for some products) and wiring them 2 to low 3 digits (for samples and small shipments). Now (after almost a year and many transactions) I don't have a problem wiring them 4 or 5 digits. And I've also gained trust from them, I'm owing them 80$ from the last shipment and they said that I could pay on a latter bigger wire to avoid fees.

For more serious stuff, there's no reason not to go there personally 2 or 3 times and check everything, I think the advantages outweigh the cost.

 

[Walter Hay]

Hey Walter,

can you help me figure this part out. I have read the whole thread and saw this part of what you wrote:

"Some websites list suppliers with "Audit" reports that are no more than the near worthless verification inspection that almost all of them carry out.
If the Audit report has been performed by Intertek, SGS, Sinotrust, or KRT Audit Corporation you can trust it but you must read the entire report. You may have to pay to view the report in some cases. A shortcut on Alibaba is to filter for suppliers displaying a red tick in a blue circle."

Now, when i got alibaba`s certain manufacturer i see on their company overview these two things most of the time:
- Supplier Assessment Report
- Main Product Lines Verification Report(s)

these two documents are most of the time audited by TÜV Rheinland or Bureau Veritas.

The second thing i go to look is under their industrial certification where it also states that third-party verification company confirmed the legal existence of the supplier which is usually done by China Credit Information Service (P.R.C.) or Hangzhou Zhongde Information and Technology Services Co. Ltd.

Basicly, my question is, are these reliable at all? or should i perform some other step aswell, i did check on TUV site directly for example, to check if the report exists. Hope it makes sense what i wrote.

Thank you.

The Supplier Assessment reports provided by TUV and Bureau Veritas are in my opinion, reliable. It would be extremely difficult for a supplier to forge one of these reports so I would not be concerned about that.

It is more important to read right through the report to see whether they are a manufacturer or trader and to see what their capacity is.

The third party verification reports provided by China Credit Information Service (P.R.C.) or Hangzhou Zhongde Information and Technology Services Co. Ltd. provide small comfort in my opinion. I do not doubt the veracity of reports by those companies, but to simply identify them as a business that actually exists serves very little purpose. Scammers do register their businesses in many cases, but they also have a supply of registered businesses under other names, ready to use when they have fouled the reputation of the first one.

The only reports on Alibaba I would rely on are the Supplier Assessment reports identified by a red tick in a blue circle. Always bear in mind that without reading that report you will not know if they really are manufacturers.

Walter

Walter

 

[Walter Hay]

+Rep Amazing answer. Thank you so much. I will look for other manufacturers now, and also see if I can get a shipping quote. I'm curious though, what would you suggest as a good price? I think the high price is because this product includes different parts, they also have patents on their components. So, they would be the only ones with this specific product but ill look for similar items of the same quality.

P.S. I forgot to mention the price of the other model. It's 21$ and 12.8$ for the replacement parts.

You are probably right. A patented product can usually command a high price even if there are similar items on the market. With the advantage of a patent to enhance saleability for you, if not a higher price at your end, you may be happy to work on what I would regard as a low margin.

Without knowing package dimensions, weight etc, it is impossible for me to anything but guess. If I guess freight at $3, I would have to buy at $4 to provide the margin that I always expected. Believe me, that is not necessarily an impossibility, but I would not haggle with the seller. I know that most "experts" recommend it, but haggling will damage the seller's respect for you. The best margin I ever achieved was landed cost X 700%, but one of my franchisees did slightly better. He wrote to me once and said "...It's nice to make that occasional $50,000 for half a day's work." His landed cost was $7,000, and he sold at $57,000 so his mark up was landed cost X 814%.

I taught my franchisees to sell at what the market would bear whenever possible.

Let me know when you have a freight quote.

Walter

 

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[Walter Hay]

Hey @Walter Hay i got a question for you. Could you offer any advice for an importer who wants to import into another country and sell there? Im from Canada and as @ddzc mentioned taxes and shipping here are through the roof, any input is greatly appreciated.

CANADA; It is very difficult to be specific unless the product is known, so I have to work on averages to answer you. The average (most common) duty is 8.56%, but it ranges from 0% to 35%. Regarding Sales Tax, for commercial importing into Canada you will pay only GST and not HST.

USA. The average (most common) duty rate is 5.63%, but it ranges for 0% to 37.5%. Sales tax is not automatically collected, but state authorities get the import value information from USCBP and may choose to collect at some time subsequent to the import. You will have probably sold the goods by the time they hit you with a bill.

With a duty difference of only around 3% duty is possibly less of a consideration than other factors such as inland freight costs and cross border freight costs. Canadian postage charges seem out of all proportion, but private courier services should be able to do a better price for you. Remember that freight costs are among the most highly negotiable items in trade. NEVER pay schedule rates. They are just published for newbies and dummies. Negotiate! Think 50% as a minimum discount.

If you choose to have your overseas supplier ship direct to a fulfillment center such as Amazon FBA, that can be done. There are private fulfillment centers that will be easier to deal with than FBA, but you lose the potential benefits of selling via that Amazon system. If your items are prepacked and labeled to suit Amazon, you can ship direct to them but I don't like the idea of overseas suppliers knowing the system. In my opinion it is better to ship to a prepping service who will receive the goods, check for damage, pack and label as necessary and forward on to FBA. Some will even store part of your shipment for you at much lower rates than Amazon charge, and send them to Amazon in smaller quantities to save you paying big storage fees.

TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Traveling to China to visit factories.
■ Do your suppliers use child labor or slave labor?
■ Q & A 1,2,3

 

[Walter Hay]

Q & A 4.


Q. Do you know if many of these manufacturers will do Private Labeling? Did you ever do this? Once I find the right product, I would like for them to be able to place a logo without greatly increasing cost. Any thoughts?

A. Internet marketers seem to have found private labeling as the best new thing since sliced bread, but it has been around for many years. Yes, most manufacturers will do private labeling although some are easier than others to deal with. Find one that is cooperative and does not charge excessively.

When I was manufacturing industrial products that I exported to China and other Asia Pacific countries, all my exports had my own label, but I also did private labeling for numerous local customers.

There I am introducing a mild warning…… I invented an industrial product that also had a big potential market to consumers. I did not promote it, but resellers came to me for the product and they wanted it private labeled. I sold it to any who asked but I did not promise exclusivity to anyone. It went out under at least 18 different labels (from memory), and they were all competing with one another with the identical product.

The same could happen to you. Only 3 of those businesses succeeded, but they all went on to develop big markets and knowing their retail prices and their purchase volume I can tell you that it was a lucrative business for all of them.

When I began importing in 1987, all of my products carried our own label. There were many different products in our range and they came from different factories, so over the years we spent at least $100,000 on set up costs. All our sales direct to business end users wore my brand, but we also produced (in our suppliers’ factories) products bearing our customers’ logos because we knew how to source them and they did not.

Private labeling can take many forms, from printed stick on labels, through hot foil stamped logos, screen printing, woven labels, molded silicone labels, stamped and plated metal labels etc……

Set up cost can vary from $20 for a simple one color print, to $300 for a jacquard needed for a woven label, up to $5,000 or more for an injection mold for debossing or embossing your logo in a generic molded plastic product. As a general rule the label cost or the printing or embossing cost is only a few cents, but a stamped metal logo to attach to your wooden furniture may cost as much as $1 - $5.

For those interested I suggest that one of the lowest cost private labeling methods is hot foil stamping. It can be used on a wide variety of substrates, but definitely not on metal or cloth. If you want a classy look that will last it needs to be debossed, not embossed, and preferably not have large solid areas of foil print.

 

[Walter Hay]

Globalsources.com

Because Alibaba get such a huge amount of attention, I tend to publish comments about them and this leads some to think that I am biased.

For this reason I decided to write about Globalsources for a change. According to an article by Bloomberg, 35% of registered vendors on Globalsources don’t renew after their first year. It is worth noting that is almost exactly the same as the number who quit Alibaba.

This high attrition rate highlights the fact that it is critically important to be able to have confidence in the verification and rating system used.

I began using Global Sources for product sourcing long before the advent of the internet. They published numerous printed product sourcing magazines, and I was a registered subscriber. There was no verification system then. If an advertiser could afford to pay, their advertisement would appear in the magazines.

Has anything changed? NO….. I had allowed my vendor registration on Globalsources to lapse so I set out to register again recently in order to update my knowledge of their system. The process was too easy. Without any verification procedure I was immediately awarded a 3 STAR rating, about which they say “Start as a 3-star advertiser to win buyers' trust fast.”

Strictly speaking there might be a verification procedure. They say they will send a contracted person to my address to collect a check. At least that would prove that I exist. They say they will visit my premises 3 times to verify, but instead they sent me an email telling me that their representative (in another country) would phone me. I am certain that he is not going to take a flight 5 hours each way on one occasion let alone three.

Here are quotes from a couple of complaints lodged online referring to the “verification” and rating system that the two complainants relied on to find suppliers they could trust:

“I have direct experience with GlobalSources.com and have proof in writing from senior executives in a series of emails where GlobalSources.com admitted the ‘rating’ system they call ‘verified supplier’ is based entirely upon how much money they collect from the supplier and nothing more.”

“I have $6,000 worth of fake cards sitting at home. The reason I went with Global Sources is that they are supposed to be more reliable than Alibaba. Based on my experience, they are as bad. The ratings on there, from my experience, are a joke and people should be very, very wary.”

Recently one of my book readers asked if it was safe to use an unverified supplier. The real fact is that on almost every popular B2B site there is near enough to zero benefit in dealing only with a “verified” supplier, and no greater benefit in dealing with a Gold, Premium, 4 Star etc…… supplier, because the security offered by the rating systems they use is mainly an illusion.


TOPIC HEADINGS PREVIOUSLY POSTED IN THIS THREAD:
■ Introduction. Dealing with myths and misinformation.
■ Some things you should know or do before you start product sourcing.
■ Part 1. Traveling to source supplies. Do you need to visit China? Trade Fairs.
■ The difference between Alibaba and Aliexpress.
■ Alibaba and the 2236 Thieves.
■ Sourcing from countries other than China. Is it worth it?
■ Part 2. Traveling to source supplies. Visiting factories in China.
■ Parallel Imports USA.
■ Do your suppliers use child labor or slave labor?
■ Inspection Services.
■ Sourcing Agents and Quality Control.
■ Q & A 1,2,3,4,5,6,7

 

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[Walter Hay]

Just wanted to chime in, I really believe that most businesses do place a good deal on relationship and trust, as they know its really an effort to get a good client/customer and manufacturer/supplier now a days.

One of the potential manufacturer/supplier I have actually sent me a card (message written personally) in the samples that they sent. Personally, for me I know that its a mix of relationship building and business strategy but in the end, if I have to choose between them and another manufacturer with the same price, i'd pick them for sure. For now, they do this to win my business, once they do, roles might reverse and I'd have be the one courting them for discounts or asking favors hopefully to avoid it, better for me to start now (do relationship building and business strategy).

Thanks for your contribution to this very important subject. I would like to add a couple of comments:

There are cultural differences in English speaking countries, and I have found in 2 of them that relationship building has a very low priority, evident in the poor customer service. I exploited this when setting up my franchise network in those countries. Obliging my franchisees to give old fashioned, friendly personal service contributed to seeing them rapidly build market share. In the other 2 countries where I franchised my business, other things appealed more, but that is part of a marketing story that I may write about one day.

Trust. This point that you raised is of such great importance that I wanted to expand on it. While it is true that the Chinese businessmen are trying to win your business, what I wrote in my reply to miked-d is relevant. Those men feasting me were also building up trust. Our mutual respect grew as time went by so that they and I knew that a handshake was at least as good as a signed agreement.

Substantial orders were made by them and delivered by me over a period of nine years without any signed contract. On occasion I delivered a shipment that was only part paid for in advance, but the money was forthcoming. Some might say I was foolish, but trust and mutual respect works exceptionally well in dealing with Chinese businesses. So much so that demanding a signed agreement or some other formality could sometimes be detrimental to business.

I extended this approach to trust in relationships so effectively that I was able to obtain a monthly account with most suppliers when I was running my importing business. My franchisees all enjoyed the same privilege, based solely on me vouching for them. No credit references needed! I have had seasoned importers ridicule me, saying that monthly accounts are impossible, but if you develop a great relationship with trust as a major factor, it can be done.

 

[MJ DeMarco]

Sidebar to say I am not sure where on the internet you can find contributors and content that rivals what the Fast Lane Forum has to offer.

I am also glad to see that you guys are buying his book. It's OK to pepper him with questions (he initiated the AMA) but I also like the fact that your questions have been educated questions for taking concepts deeper than what has already been outlined for you here and in the book. There haven't been too many stupid questions (and contrary to what your Mom might have told you, not every question by definition is a good question.)

There's been a ton of learning in this thread, including people doing their OWN research, buying books for continuing education (including Walter's) and THEN asking questions. Somewhat refreshing from some threads where people ask questions that could be easily answered on Google.

The reason this thread was marked gold was a combination of your great questions, and Walter's great and knowledgeable answers.

Carry on.

Yea, Walter has been here for months, 20+pages of Q and A. The value he's provided is immense: Buy his book.

http://provenchinasourcing.com/

 

[Walter Hay]

In European Union you pay VAT/Duty over the Total Value of the Shipment (Value of goods + Shipment). And I think this is the standard in most other countries (unfortunately).

It's all about building a relationship. I started dealing with my freight forwarder (and middleman for some products) and wiring them 2 to low 3 digits (for samples and small shipments). Now (after almost a year and many transactions) I don't have a problem wiring them 4 or 5 digits. And I've also gained trust from them, I'm owing them 80$ from the last shipment and they said that I could pay on a latter bigger wire to avoid fees.

For more serious stuff, there's no reason not to go there personally 2 or 3 times and check everything, I think the advantages outweigh the cost.

Yes as you have experienced that is the practice in the EU, but it is also the practice in all developed countries.

As you rightly say it is all about building relationships. You mention a very important point, and that is the two way nature of the trust building.

Regarding traveling to China to visit suppliers, I will soon add another post dealing specifically with that subject. Not many have the time or money to be able to do it, but for those who do, it is very worthwhile, but preparation is the key.

Walter

 

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[Walter Hay]

Glad you decided to do this thread. My questions are:

1. What types of items should absolutely be avoided? I know Will Mitchell over at Startup Bros says anything technically complex should be avoided, but there's obviously more to it. I recently got one of my sample products, a unique piece of clothing, and the buttons were cheaply attached, and the zipper was already defective and doing that thing where it splits open while trying to zip it up. How do you avoid wasting your time with manufacturers like this?

2. Is there a way to avoid manufacturers who simply "disappear"? I recently had another product come in which I was very pleased with. It sold within hours of me listing it for 5x what I paid. I immediately went to order several more, and found the item was no longer available for sale. Of course I tried contacting the manufacturing, but I don't actually expect them getting back to me.

1. The main product type to absolutely avoid would be electronics. Ordinary electrical products can also be a worry, but if they have genuine certification certificates that will usually mean they will be relatively trouble free. It is important to know that certificates of any kind can be forged and often are. Unless they are certified online by a reliable inspection service you should check them yourself. To do this you email the certifying authority a copy, telling them you have doubts regarding the authenticity and asking them to confirm if it is genuine. Clothing is a troublesome product area also. mainly because so much of it is labor intensive. and the labor is not consistent. My approach would be to emphasize your expectation of quality in your first contact and mention it again whenever appropriate. That will often sort out those who find QC too hard and they will stop communicating with you before you order.
2. I suspect you may have been dealing with a trader who has obtained an end of line run. That is often the case if you buy through Aliexpress which is a B2C site and not B2B, but it does happen on other sites. Never believe that someone is a manufacturer without doing due diligence.

Walter

 

[biggeemac]

Since no one is asking the big question....I will do it. Lets say, hypothetically, that I want to locate and contact a manufacturer of toolboxes or something. What is your method of getting past the wholesalers and getting straight to a manufacturer?

 

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[Walter Hay]

Hi walter,
I need only the empty cans.
thanks

OK, The first thing you must do is to ask the supplier to tell you package dimensions, number of cans per package, weight per package, and the total number of packages.

Also ask which port will they ship from. In other words FOB port.

Then contact a local freight forwarder in your country, give them all those details and tell them what the goods are. Ask them for a quote for the shipment from that port delivered to your door. Specify that the quote must include all charges including clearance through Customs. Remember you will still have to pay duty and sales tax if sales tax applies. Get the quote in writing.

Then you take the total cost of the product ex China, add the freight, multiply the total by whatever duty rate the freight forwarder has told you and you will have your landed cost. Add sales tax if it applies in your case. You then divide the total by the number of cans and you will know whether or not it will pay you to import them. I have my doubts unless it is a very large quantity sufficient to fill a 20' container.

The % of faulty or damaged goods in a shipment will depend on the nature of the product and the quality of the packaging. Cans are semi-fragile, so I would expect as high as 10% unless they are in wooden crates. I carton dropped on its corner could damage quite a few cans.

You might consider having your cans made locally. Let me know if you need help with that,

Walter

 

[Walter Hay]

Thank you very much for that info! Yeah, I gotta dig in a little deeper I guess. To get down to the actual manufacturer, is there a path I could take? I think I ran across some info a while ago, but I can't quite remember.... I think it had to do with asking/learning if they have an actual factory???

edit: And something else if I remember correctly, I think I'd need to also check to see if their items sold are all n the same basic niche. Like a company that sells knives and rubber duckies is probably a red flag?

Yes if the product range is too diverse that is a red flag. It can be a complicated process identifying a real manufacturer.
Maleek posted a good comment on Friday when he wrote:
"Have you ever tried reach out to a manufacturer and ask for a tour of the factory? I find that's a relatively easy way to find out if they're the real deal or not" I would add that if they say No, then you know they are not manufacturers, but if they say Yes, that does not prove that they are. In fact even if you visit, you cannot be sure that they actually own the factory you are visiting. It may belong to a "cousin." (Everyone in business in China has "cousins" also in business.)

Please see my more complete answer to this question that I posted on Friday at 1:45 PM

 

[Walter Hay]

This is an amazing read. My issue is actually finding legitimate suppliers on Alibaba. One of the things that I've read, is to read their company profile and go for those who have your desired product in their name, and are listed as manufacture in the business profile. Like " Hengxing Speakers Aung Co., Ltd. "

1.Do you find that this holds true?

2. Another thing is, I've found many suppliers who are listed as a "Manufacturer, Trading Company" Which leads me to believe they don't make the products they claim to say they do. I'd assume that real manufacturers would just be listed as "Manufacturer"

3. Also someone once said that if they claim to make other types products then they are not a manufacturer. Example) you look for a company to produce portable speakers, and you see that they make tablets, cell phone cases, key chains, and usb cords.
--
4. I feel like I may have been dealing with traders this entire time..their MOQ is usually pretty high, around 100-200. Their response " Due to high demand, we are not able to provide less than our MOQ" One said they accept an moq as low as 24, which is extremely doable. Any thoughts on this?

5. So far it seems like to make sure that they are a legit Manufacturer is to
1) make sure they have the Supplier Assessment icon next to their name
2) Forget about the gold status and just read the assessment reports
Any key traits or points of interest we should be looking into on the assessment report. I've read it, but part of me doesn't fully understand what am I looking for.

6. As of right now, I've narrowed down the list to a few companies that Im planning on doing business with, but in the back of my head I still can't shake the feeling that im dealing with a trader. Whats a B2B source you'd recommend besides Alibaba? I've found a site called www.hktdc.com whats your take on that?

I know it s a lot but thanks a ton for this useful information. Its gonna help save us time, and a whole lot of $$ in the long run.

I have numbered the points you raise so that it is easier to follow my answers.

1. No. The fact that they are listed as manufacturers means nothing. Almost all suppliers on Alibaba are listed as manufacturers, but in the majority of cases that is false.

2. Some manufacturers are also trading companies, and that applies in particular to state owned businesses, but as a general rule if they have the word trading in their name, or if they identify themselves as traders, I would not bother with them.

3. That is true. Genuine manufacturers tend to specialize. That is part of the Chinese culture, where certain cites are almost entirely devoted to manufacturing one type of product.

4. Traders and wholesalers tend to require large MOQs and they are usually inflexible about reducing the number. One reason is that they want to make a killing on the first order because people often find that they can buy cheaper elsewhere. Another reason is that they often do not have a formal agreement with the actual manufacturer. They use images from the manufacturer's website or catalog, make a sale, take a deposit, and then hope to get the manufacturer to supply them at a price that will give them a profit. The bigger the order, the better chance they have of getting the manufacturer to supply them. If they won't, they will usually refund your deposit but that often takes a long time.

5. 1) Yes, but you must read the report, because not all who have supplier assessments are manufacturers and that will be stated in the report. The reports can be 10 - 15 pages, but if they are manufacturers their capacity will be stated, so it is worth reading.
2) Gold status is worth almost nothing in relation to their capability, reliability, or trustworthiness.

6. I recommend a small number of safe sites, including HKTDC, which is a relatively small site, but you also need to follow safe sourcing practice. It takes me 83 pages to teach that. That is why I don't just publish my recommended sites.

Walter