Product Sourcing: China: The Basics

Product Sourcing: China: The Basics

“If You Aren’t Already Looking At China, Start Now”

If you are looking for greater profits, an expanded product lines, and niche markets then you can’t afford to ignore China these days. Maybe you grew up thinking it is a distant, closed-off land, but this is no longer the case. Here are some facts about China:

  • China is the world’s fourth largest country with one fifth of the world’s population.
  • The GDP of China is now over 10 times larger than what it was in 1980, when the previously closed country began opening its doors to international commerce.
  • Chinese people and culture are spreading more than ever, and in turn Chinese people are eagerly looking abroad to Korea, Japan, Australia, Europe, and the United States- absorbing and learning from foreign culture and business know-how.
  • China is known as “the factory of the world” and the chances are that, at this moment, you are reading this text on a computer with at least some of the components made in China, wearing clothes made in China, sitting on furniture made in China… and planning on making a profit from buying and re-selling even more goods made in China! If you’ve shopped at Wal-Mart, you’ve shopped at one of the largest importers of China’s good.

China is already taking a leading position in the economy of the world, and this means opportunities for you to take advantage of. Recent economic developments in China, such as new stock markets, ever-increasing investment in the domestic market, and aggressive entrepreneurial expansion by Chinese exporters, mean that China’s economy is still evolving and actually growing faster than ever.

“But I don’t speak Chinese.”

Let’s look at two big improvements that make communicating with China easier:

1. The Internet

China has rapidly implemented broadband internet access for all cities and towns, thanks to cable networks and fast implementation of ADSL by the Chinese telecoms.

The power of the internet is breaking down barriers to communication. International phone calls are cheap or free, email is fast and efficient, and websites provide an unparalleled marketing platform.

The Internet (Continued)

Small businesses or even individuals are empowered to compete in an international market, and the possibilities for business connections are seemingly endless. Chinese people have perhaps only just begun to wake up to the possibilities of the internet marketplace, but it’s certainly true that thanks to the world wide web, China has never been more accessible.

2. Cultural Changes

Inevitably Chinese culture is becoming more outgoing and international thanks to influences of TV, movies, music, fashion, and the Internet. But of course the real driving force is money, and if Chinese people are good at anything, it is spotting profitable opportunities.

Chinese businesses and individuals are less and less restricted by national regulations, allowing for more travel, more trade, and more expansion into foreign markets. In fact, like it or not, Chinese businesses are already coming out of China and approaching you! China itself is full of business opportunities for foreign firms and investors, but entering the Chinese market can be a thorny business.

Chinese companies geared for export are going to have English speaking staff, possibly also other languages, and they’re ready to help you build a relationship. Even if you’re not an experienced jet-setting business-person, people in China are definitely not going to scorn you for being a beginner to this country.

During this Topic, the opportunity we are talking about is not inside the China domestic market – the opportunity starts at home, with you, on your computer. We want you to begin to be able to profit from China, without leaving home . (Of course if you want to come to China that can be a great idea and well talk about that later.)

Note: Travelling to China isn’t difficult these days, and to make contacts in China you can start just with the telephone and your email. In fact, you may be able to write off your whole trip as business expenses! We’ll tackle that later on.

Why import from China?

Let’s look at the long list of why you should!

  • Chinese factories make all imaginable types of products, usually much cheaper than anywhere else.
    The world’s largest companies are still moving more and more of their manufacturing to China because its about the bottom line. The lower manufacturing costs mostly come from low human resources costs.
    • The job market in China is highly competitive while living costs and expectations are relatively low: this means factories can employ people very cheaply.
    • Most factories don’t need to pay social security or insurance for their workers, and providing for their living costs isn’t too expensive. Absence of bureaucratic red tape, a lower corporate tax burden, cheap energy costs, favorable interest rates, abundant cheap real estate, and low construction costs, are all factors that lower the running costs for a Chinese factory.
    • The low production costs leave more room for middlemen in China, Hong Kong, and/or Taiwan trading the goods even before they reach export markets.
    • The closer you can get to buying from the source – the manufacturer / factory in China – the lower the price you get.
    • Thanks to the Internet and evolving cultural changes, it is now possible for a foreign buyer to go to directly the source, something that was very difficult previously.
  • Chinese suppliers are heavily geared towards exporting to western markets and are actively marketing their products to buyers like you. You can expect Chinese efforts to expand into international marketing to become much more vigorous and visible in the next couple of years.
  • Since the suppliers in China are sending goods to your country, why not get them to send directly to your customers? Drop-ship!
  • Chinese suppliers are not too picky (or loyal!) about who they supply to, and even beginners with no registered company are able to buy from China. Also, Chinese people have few cultural or religious prejudices – in other words, they are very open-minded about which nationalities they are doing business with… as long as there is a good sustainable relationship… and a reliable flow of cash!

Are you still unsure whether China is right for you? Consider looking at it from this point of view:

•  Wholesalers here in the United States are already buying from China, so why not go direct to the source yourself?

  • If you are selling on eBay or your own website, it’s a certainty that your competitors are already buying some or all of their goods from China. You now have the opportunity to do your sales a favor and get the same or better low-priced sources.
  • The wholesale market in your country is probably very saturated with other people like you buying and reselling those same products. Compare that to China, where you could be the only persons in your state or even country importing a particular product or from a certain Chinese manufacturer. Niche Market opportunities abound!
  • Importing from China will give you the opportunity to develop your business by finding new products at better prices in the future, especially as your relationships with Chinese suppliers improve. Can you say the same for your suppliers back home?

“The Wrong Approach… “

Importing from any country used to be much more difficult than it is now. Buying directly from China was pretty much impossible for normal business people (let alone consumers) up to about five years ago.

Now there are more and more people profiting from Chinese sources in every sort of business, and they’re not all huge bulk buyers like Wal-Mart. In fact, the great opportunities for you importing from China exist in covering the product areas that are NOT already owned by larger players.

That’s the BIG mistake a lot of people make:

Don’t think you can start importing from China and beat the prices of Wal-Mart, Radio Shack, or Amazon.

They’re already importing from China in huge quantities! They are buying in quantities which mean they have gone beyond simply getting good discounts: they are actually in full control of their suppliers and the prices.

And that’s not to mention their massive logistics systems, marketing power, and customer service strength.

Of course you can’t compete with them.

A lot of people think about importing a product, look at that product in the big stores and compare their first price quote from China… and the direct China price is already more expensive!

Many people give up at this stage.

We’re going to talk more later in this Topic about how to import products that will sell, and not fall at the first hurdle!

Here is just one hint about a better way to approach the China import opportunity:

•  Every day there are thousands of auctions listed on eBay for “MP3 Player”– it’s a hot category– but my count today of the first 300 auctions showed only about 30 different models being sold.

•  Wal-Mart in the USA sells 130 different MP3 Players.

•  Dixons (the largest electronics chain store in the UK ) sells 50 different MP3 Players.

•  Searching on www.made-in-china.com for Chinese MP3 Players will give you a choice from over 4000 MP3 Player products.

•  A large proportion of these products are totally new designs and unavailable (so far) in US markets.

Can you see where this is going…?

There is no single, secret key to success in China importing, but there are certainly things to avoid.

We will cover some common pitfalls later. We are also going to talk later about product research and how to deal with suppliers successfully.

Summary:

  • Importing from China is a can be a profitable venture and allow you to stay competitive, or even develop a new money-making business. Even if your products are too specialiized, or you already have good import sources elsewhere, you should research the possibilities in available in China.
  • Importing from China is not as difficult as you may believe. China is quickly becoming a more open, modern country, and businesses are looking to expand their business with you.
  • Importing (from anywhere) is a complex and often risky business if you don’t know what you’re doing. You need to spend a lot of time researching, so you know your own market – before you even begin talking to suppliers in China.
    • China is very different in culture, language, mindset, business, history, and economy to what we know in country. There will be a lot to learn if you want long-term success.
    • Research and learning about China will help you succeed. Even more useful is time spent researching specific companies and getting some initial contacts can ease your mind about doing business overseas.
    • Keep an open mind about selling different products – maybe even product areas you don’t know much about yet. There are a lot of untapped opportunities in China and opportunities to market your own niche of products.

Copyright 2014, Power Sellers Center