- Published on Friday, 18 January 2013 17:22
Hi! I’m a first time buyer with China, and of course I am extremely nervous about the process. Albeit the cost for what I’m wanting to purchase is just below $300, I want to try to make the transaction as pain free as possible. I have been communicating with a vendor regarding heat transfers for clothing. After the vendor customized an image for me, that I found on her site, she sent it to me in the chat window. When I saw it, I was interested in purchasing it.
Originally she asked if I could send money via PayPal, but having done my due diligence I didn’t want to send the money via PayPal because they release funds as soon as the vendor sends the invoice to your account. Being a ‘first timer’ I don’t trust this method, thus I refused doing it this way. Afterwards, we agreed that I would send the payment ONLY after the vendor sent me a copy of the US Custom form along with a copy of the Bill of Lading for tracking verification. I thought we were clear until the questions and tone in the chat window changed shortly after we made the agreement.
It was back to wanting me to send the money through PayPal once they forwarded a copy of the tracking info to me, but then there was no conversation for about 20-30 min…and out of nowhere, a conversation began with the vendor reminding me of our agreement and saying they could still do the order in advance. At one point, she referred to herself in the third person…so of course I became suspicious all over again. I am a start-up company for women’s clothing, and while I could purchase heat transfers from suppliers here in the US, I am interested in some of the unique designs that I have come across on their site, which is why I pursued it.
Questions: How do I get around these types of interactions and manage to find a legitimate vendor? How do I know if I’m dealing with a legitimate company especially when I don’t have the means to travel there myself? Is $300 enough to consider? Since it’s not a lot compared to some of the large manufacturing issues that I’ve read on your forum, I wonder if this is an amount that is easy to target? I guess there is still the possibility of them showing me a Bill of Lading and US Custom Form but yet sending me garbage…and is there any way to avoid this? Thank you so much for your assistance.
The harsh reality is that, it is very hard for a small buyer (300 USD order for example) to go factory direct in China for most product categories. Here is a blog post that explains why: “Too small to go factory direct?”
However, if going factory direct is unrealistic, you may still be able to go, “China direct” and deal with a China based wholesaler online.
Regardless if you are dealing with a factory or wholesaler or even Chinese retailer, you still need to do two important steps:
1. Confirm the seller is legit
This video (Video 2: Evaluating Suppliers) will walk you through the basic steps, but the core principle is that you should be asking for references. If you are risk adverse, you should have an audit of the supplier done to confirm that they can deliver what they promise.
2. Link payments to performance
You mentioned your desire to structure your payments to protect yourself. You are wise to request a structure where payment is due upon presentation of documents from a cash flow perspective, still that method does very little to protect you if they ship junk. You may not realize that professional inspection agencies can be hired for a few 100 USD to check out the goods before they ship, and before you make the final payment. Check out Video 4: Project Management and Quality Control for more information.
I wish I had better news, but to cover the very minimum steps to protect yourself will cost a few 100 USD (asking for references is free, but not doing some kind of inspection is very dangerous). So if you are ordering 300 USD worth of goods and spending a few 100 USD more on QC, you may find your margins eroded. The fact is, you have to take basic precautions whether you buy 1 unit or 1 million units. At the end of the day, purchasing 300 USD worth of goods from your domestic distributor will most likely have a lot less drama and risk than trying to buy a few 100 USD online from overseas.
I wish I had better news, but China direct is hard when you are small.
For your reference, here are some related videos and blog posts:
Video 8: Avoiding Scams
A small buyer placing orders with Chinese Suppliers: contracts, travel, and other issues
Should a small startup, dealing with electronics, go factory direct?
How to place an order with a supplier in China while living somewhere else
Chinese Purchase Order (PO) formats/templates for large and small orders
Question answered by Mike Bellamy, an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. Mike is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.