What are the steps to sourcing products in China?

What are the steps to sourcing products in China?

Sourcing products in China involves several crucial steps to ensure that you find reliable suppliers and quality products. Here’s a detailed guide to help you navigate through the process:

1. Identify the product: The first step is to determine the item you wish to import. Understand your market needs and customer preferences to make an informed decision.
2. Research suppliers: Utilize B2B marketplaces like Alibaba to gather information about potential suppliers. Apply filters such as ‘Trusted and Verified Suppliers’ and ‘Trade Assurance Suppliers’ to narrow down your search and increase the chances of finding a genuine supplier.
3. Contact suppliers: Reach out to a few companies directly to request product specifications, images, and minimum order quantities (MOQs). Be cautious of prices quoted on websites, as they may not reflect the actual price and are often used as a bait.
4. Shortlist suppliers: Once you have identified 4-5 companies that meet your requirements and are priced suitably for the Indian market, plan a visit to the factory for material inspection. It’s essential to inspect the products firsthand to ensure you receive what you approve.
5. Inspect the factory: When visiting the factory, insist on meeting the actual manufacturing staff rather than dealing with an agent. This approach increases the likelihood of receiving genuine products that meet your approval.
6. Collect samples: Obtain samples from the suppliers and, if possible, have them signed by the agent to confirm the approved quality.
7. Negotiate terms: Suppliers may demand an advance payment, usually 30% of the total order value or a letter of credit (LC) for the full amount. The remaining 70% can be paid against a clean on-board copy of the bill of lading (BL). While many companies agree to these terms, some may request the balance before dispatch after inspection. Exercise caution to avoid being taken advantage of.
8. Draft a sales contract: Request a sales contract and transfer the advance payment through a Telegraphic Transfer (TT). You can ask your bank to conduct an OPL (Bank to Bank verification) to verify the authenticity of the company. Ensure that the delivery time is clearly mentioned in the Sales Contract or Proforma Invoice (PI).
9. Avoid aggressive bargaining: It’s advisable not to negotiate too aggressively in China, as suppliers may initially agree to your price and later change the supplier to meet your price requirements by compromising on quality. A discount of 3-5% is a reasonable and safe range for bargaining.
10. Pre-dispatch inspection: Before dispatching the goods, it’s advisable to inspect the material again. If travel costs are high, consider hiring professional inspection agencies like SGS or Lloyds to inspect the material on your behalf and provide an inspection report.
11. Consider other factors: When importing from China or any other country, be prepared for long lead times, which can range from 45-60 days from order finalization to material arrival at your warehouse. Factor in potential changes in exchange rates and avoid products with slim profit margins. A safe margin for the first deal is 8-10% to cover unexpected increases in your cost price due to exchange rate fluctuations and customs clearance issues.

By following these steps, you can navigate the complex process of sourcing products in China and increase your chances of finding reliable suppliers and high-quality products.