By Sam Boyd
I could write a book on all the potential mistakes that could be made when sourcing from China.
In an effort to create something a little easier to read with actionable tips, I’ve put together a list of 13 Mistakes the DIY Importer is Bound to Make.
- Using Paypal
Almost any beginner guide will tell you, only choose suppliers who accept PayPal. We say otherwise. There are a couple issues when it comes to using PayPal. You’re required to pay service fees. This can end up costing a ton and ruining your profit margins. A lot of guides will explain, PayPal is great for that added piece of insurance. The problem with this, if you’re using PayPal as a piece of mind to know your supplier can’t run away with your money, then you have not been vigilant enough with your sourcing. You should never choose a supplier unless you are absolutely confident they are capable of performing to your qualifications.
International Trade is an industry that is older than all of us. PayPal disrupts the system. Maybe this is my old school mindset coming into play, but a supplier is going to have a hard time taking you seriously if you demand PayPal. PayPal for international trade tags you as an inexperienced buyer who can easily be taken advantage of. Regardless of your buying power, it is important to act like you know what you are doing, even if this is your first purchase from China.
In the long run, PayPal isn’t going to help you. You’re buying from China, and because of this, you’re expected to conduct business with Chinese business understanding. A true business in China is built on trust and relationship. Using an American processing company notoriously known for favoring the buyer over the seller, and holding/confiscating funds for unknown amounts of time, is not going to help you in your efforts of extending the olive branch.
- Neglecting Compliance
Regardless of your import country, there are product laws that extend much further than getting past customs. When buyers don’t fully understand the product they are importing and all the necessary rules and regulations that go along with said product, serious issues can arise at any part of the life of the product. As the importer, it is your duty to import responsibly and legally. While a common issue is not understanding the necessary certifications to get past customs, resulting in fines or seizures, another overlooked mistake is further compliance with various government agencies and entities protecting buyers, products and the environment.
- Not sourcing forwarders
Not all shipping prices are equal. The shipping industry is large, competitive, and as ‘out to get you’ as any industry looking to make a quick buck off small, inexperienced importers. Just as it is vitally important to obtain product quotes from various suppliers, it is just as important to obtain quotes from forwarders too. If you don’t already have a strong relationship with a logistics company, or understand the cost structure of various ways of shipping, the best way to ensure you’re not being quoted an over inflated price is by shopping around.
- Showing your size
A common mistake new importers make is assuming Chinese suppliers have the same vision they have of their small but mighty startup. Chinese culture works much differently than western culture. In China, everything bigger is better. Because of this, some suppliers will refuse to work with importers who are clearly of small size because it is assumed, the more amount of employees you have, the bigger your warehouse, the nicer your car, dictates your businesses success and buying power. When in reality, for the west, this is far from true.
When creating on online buying profile, it is important to exaggerate just enough so Chinese companies don’t quickly discard you as insignificant. Instead of explaining you’re a small startup, build yourself up so when they quickly glance over you and your website, they have trust that your purchases won’t be a simple one and done deal.
This should not just translate to an online B2B marketplace profile, but also during communications. Factories are not going to be as open to walking you through the importing process, and there is a good chance if they can tell you don’t know what you’re doing, they’re going to take advantage of it.
- Expecting the sales agent to be organized for you
Mistakes in production happen, and they happen a lot when you assume the sales agent is the one taking all the notes for what it is you intending to purchasing.
A sales agent is not a waiter writing down your order, the communication barrier and the countless questioning can be incredibly confusing when finalizing a deal. Make sure everything is 110% understood, clearly written down in an organized fashion, and confirmed multiple times by the supplier.
- Not negotiating payment terms
The most common payment term when suppliers are producing goods for an importer is a 30% deposit to start the production and 70% when the goods have been confirmed. For importers, access to funds is crucial, and for some, it is crucial enough to negotiate better payment terms as opposed to getting the supplier to knock a few pennies off your price.
If a supplier insists on you paying the majority of the payment up front, this can often be a sign of the supplier taking advantage of you. For certain products, it is common for different payment terms, such as 50/50, but overall, you should always be working on having at least 30/70 for your first couple orders.
- Not negotiating better terms during continued orders
Negotiating payment terms is a great way to instill a stronger relationship with a supplier you’ve used multiple times, and one you intend to use in the future. The ultimate goal is to get goods imported and then pay net 30 or even net 60, meaning, you’re not paying for your imported goods until up to 60 days after you’ve received them.
For small suppliers and orders, it is still a win to be able to pay a 10% deposit and 90% on finalization, or even 100% at the end of production. So always work towards these goals. It shows trust between the buying and manufacturer, and, once in motion, can greatly increase your purchasing power.
- Assuming you can ship defects back to your supplier
It is illegal to ship defective goods into China. Chinese customs will seize the goods. The cost alone would eat up profits because you’d be expected to cover all shipping costs. There are much easier and less expensive alternatives to look into, such as inspection services, fixing the goods domestically, or even cutting your losses.
- Assuming the factory is going to follow Western business customs
Many buyers assume that because they are messaging factories from the comfort of their own computer screen, that they are not doing business in China. Regardless of the way you look at it, if you’re speaking with a Chinese supplier and using a Chinese factory to produce your goods, you are doing business in China. Because of this, many importers assume western business culture rules prevail to Chinese business culture.
By not taking the time to learn about Chinese business culture, you’re doing yourself a great disservice. Not only will your understanding be recognized and greatly respected if you are abhorrent to Chinese cultural customs, but it will also strengthen your relationship with your supplier.
- Not verifying the supplier
Just because a factory has a verified account by Alibaba or any other major manufacturing database, does not put you in the clear. There are a variety of services out there that will verify a supplier, of course our A -Z Sourcing Service includes this, but so do services such as ExamineChina.com.
Buyers who are eager to do business with suppliers and get their goods in quickly will often get lazy and not cross reference bank accounts with listed business addresses and phone numbers.
- Not having a backup plan for every stage of sourcing & production
Mistakes happen. By not having a safety plan for each step of the way, the only person you’re hurting is yourself. Make a plan, think of points of error and at each stage and be ready to deal with whatever may come up.
Errors don’t just happen in manufacturing, they can happen during domestic shipping within China, during the shipping process, at customs, or even weeks after your goods arrived. Be vigilant and stay one step ahead.
- Not building a personal relationship with your supplier
The suppliers you are speaking with are not faceless drones taking you order, they’re actual people. A great way to build a relationship is to also build a rapport with these sellers.
Most international trade sales agents are twenty something year old, freshly graduated college students with degrees in business english. Because of this, it is helpful to relate to them, show them that you can not only be a good business partner, but also friend.
Chinese business is fueled on relationships. Any personal relationship you have with someone at the factory you intend on using continuously, will allow you to greatly excel your imports. Once you’ve built rapport with your sales agent, work towards communicating with their manager as well.
- Not negotiating additional goods to makeup for defects
For those who opt out of third party inspection services should never finalize a negotiate without getting a small percentage increase of goods to make up for the inevitable defective units. This is a super simple way to cover yourself from the beginning from returns and defective goods.
There you have it! 13 common mistakes made by the DIY importer.
Sam Boyd is the founder of www.GuidedImports.com, a third party sourcing service assisting e-commerce importers in scaling their operations in China. Sam and his team work with hundreds of e-commerce and Amazon sellers, acting as their purchasing office on the ground in Shenzhen, China. Their goal is to simplify all aspects of dealing with Chinese manufacturing by offering a truly streamlined sourcing service. You can connect with Sam at www.guidedimports.com/contact.