There are lots of buyers and importers make costly mistakes when they are doing China sourcing or getting products produced by Chinese manufacturers. These mistakes can cost a good amount of money or time.
You might be confident with your import practice. You might not notice that some little “mistakes” are stealing your precious time and money yet you are not aware of. We are covering this costly China sourcing mistake series in 3 posts.
<Note: it(buyers/importers) will be expressed as the second person(you)>
Category A: Inquiry
1.Poor first impression
Maybe you don’t think it necessary to prepare a presentation for an inquiry. You want a real quick quote from vendors so you throw the final question directly to the prospective Chinese suppliers without a brief introduction of the company and the requirement. It is typical – more haste, less speed.
I want to import xxx. Please give me a quote.
Can you send a price list for items on your catalog?
Do you manufacture xxx? I need to buy xxx. What’s the price?
What may the manufacturer feel like?
Who are you?
You may be a “just-ask” guy.
You don’t seem like a serious buyer.
Your program can take forever to proceed.
It doesn’t seem to be a promising business.
I don’t think it’s worth my time and effort.
Poor presentation of yourself and your company won’t bring you supportive suppliers or good quotations. Business is about exchanging things that each party is willing to. In order to get a better result, a roundabout way could be a better approach. What impression you present plays a vital role in vendor’s grading on you. In turn, it determines how supportive they will be.
2.No backup supplier options
You send your inquiry to 50+ suppliers. Only 2 suppliers replied. One of them didn’t send the quote in the end and the other one did quote a reasonable offer to you.
Sounds unbelievable? It happens! You don’t know what the problem is that only 2 of them respond to your request and why the rest of them don’t respond.
Yet, you finally get an offer that seems to be cool to go further. You decide to place your order directly with the supplier because you don’t have time to send the request for another 50 suppliers to get another quote.
Why not having a second prospective supplier is risky?
Struggling to best suppliers? You could take a look at this post: How to find best suppliers in China?
3.Assume that the manufacture understand you
ASSUME is a very dangerous practice especially when you are placing an order with your vendor. When you assume something to be OK, more often than not, it is not.
What are some of the situations that you might assume?
Chinese factory’s sales workers speak English but as a second language. Chances are that if a sales representative is not so sure of your request, he or she might not raise a question directly. Because they don’t like to be deemed unprofessional and lose your orders.
B.Too many details
You find it troublesome to figure out every detail and specification with them. You might become lax a bit.
When you become relaxed, who do you think will have the initiative to work out the best for you? The factory? Not at all. If there’s anything not clear, the factory has its “advantage”. Things related to various quality levels, shortcuts or price levels will surprise you in the end.
When you feel anything that you or the sales can be not 100% sure during the communication, confirm and verify with them about the particular point. Take a little time to make sure everything will go smoothly as you expected.
4.Not well presenting your “want” and “need”
What can the result be due to this mistake?
A.Few suppliers respond to your request – due to not well presenting
It happens because you don’t show your clear requests and manufacturers have no interests in your business. Although you do have an actual need and this need needs to be developed into a business, most factories won’t wait patiently and help you along the way if it doesn’t seem promising to them.
This is why we encourage clients to go groundwork before jumping into serious businesses with potential vendors.
B.Good suppliers who can well match your needs are kept outside – due to “want” and “need” dilemma
You tell many vendors that you WANT xxx, but most of them reply they can’t meet your request.
There are a couple of suppliers that can actually meet your needs. You don’t realize “what you want” and “what you need” can be two different things.
Want xxx – means you (or your engineer or people at your side) think xxx product/specification can solve the problem.
Need xxx – means the proposal that can solve the problem will work for you.
Instead of walking away directly, talk with your prospective supplier why you are asking some particular features/specifications. They may come up with some even better ideas to help you get the results you are straining. It’s worth taking some of your time.
Category B: Prices
It’s true that business is fundamentally to obtain profits(technically the more the better). To get there, the following practice is not suggested.
5.Drive a VERY VERY heavy bargain with the factory
If you have some prospective Chinese vendors that you want to work with, a too hard bargain can take away their interests to produce products for you.
Both parties are running a business for profits. Say the seller finds it barely profitable, I won’t think you will be deemed as the high-quality grade customer. Unrealistic target prices will scare away good supplier options. They might even give up starting a business relationship with you.
6.Negotiate with suppliers for lower prices too early
This is more about the relationship management for your existing suppliers. The suggestion is that never try to bargain with your existing supplier if you don’t have an order for them or you are not going to place an order with them.
When you bargain, your supplier tends to think there’s a coming order for them. They are working so hard during the negotiation and may compromise in prices and other terms in order to go further with you. Their efforts don’t get paid in the end. Next time when you do have the order to inquire, they won’t be as responsive as previously.
7.Overestimate your profit margins
Image from WikiHow
It’s easier to get quotes based on unit cost from lots of Chinese suppliers (most vendors quote by the term of FOB / CFR / CIF). This is surely not your total landed cost. Here are some more cost items:
Vat and other import taxes
Brokerage service fees
Transportation fees (from the seller to the buyer’s door including both party’s inland transportation )
Inbound & outbound cost
E-commerce platform fees (if it has)
Random customs examination
Fumigation (if necessary)
You final import cost per piece is just one of the cost items. To make sure every item is taken into consideration, making a checklist to calculate your final cost is a good option. It can help you avoid missing when you are determining your product landed costs and adding markup for expected profits.
8.Try to compete with big names via price wars
The big names/retailers/brands have very good channels when it comes to supply chains. Price war won’t be a good strategy to win your market share.
What are some suggested tactics?
Involving differentiation, your products are distinguished from others, more attractive to your target market.
II. Brand appreciation
Brand is just like a powerful magnetic field. Brand companies can grab and keep customers “simply” and meantime have the brand appreciation capability. Branding is a long way to go but a good investment in understanding your client’s needs and interests for a long-term profitable return.
III. Value-added service
If you want customers to return to you for repeat business, value-added service is one of the best ways to build up the brand loyalty. You want to provide so amazing services that clients can’t resist and don’t feel like changing to other options.
9.Pick the lowest offer provider without second thoughts.
Low price is definitely tempting but low prices must have a reason. Suppliers, freight forwarders, or brokers may provide with a very low price to attract your attention and interests. Cheapest offer doesn’t mean your lowest FINAL cost. Be sure to do your homework and verify whether these providers will be able to provide quality products or services that are worth your choice.
Is the manufacturer’s offer based on Ex-work or FOB or CFR terms?
Does the freight forwarder’s offer include extra cost at both shipping port and destination port?
If you work with your vendor’s freight forwarder ( via CFR trade term), ask in advance how much it will cost at the destination port. (Some of the forwarders don’t charge the seller sea freight at the shipping port but will charge the buyer very high costs than regular fees at the destination port)
Know more about negotiation in this post: How to Negotiate with Suppliers?
Category C: Shipping
10.Improper packaging for your goods
Lots of importers ASSUME the sellers will take care of all the packaging because they have the experience in exporting. E-commerce business owners have a better sense to confirm packing information with Chinese manufacturers due to e-commerce business nature and private label necessity.
No matter the products will be shipped by air or by sea, whether the products are fragile or not, remember to check with your supplier how they are going to pack your goods. It won’t hurt to ask and check, but it will hurt(your goods and you) if you fail to make sure the packaging be done correctly.
In the article of Top 4 must-do before you import products from China, we discussed details about packaging that could be of some help.
11.Fail to insure your goods
There are different insurance options. Cargo Insurance can provide protection against risks of physical loss or damage to freight from any external cause during shipping, whether by land, sea or air.
Accidents happen like damages, stolen, ship crash etc. It’s not a high probability but not a zero probability either.
Normally insurance won’t cost very much. If you decide not to pay the insurance, but get into an accident, you don’t have any coverage. It means losing all of your cargoes and money and time spent on the particular project.
Continue reading the costly mistakes in China sourcing practice: