Sourcing from China: Three tips for SMEs

Global eCommerce company Alibaba.com has highlighted some key tips for start-ups looking to source goods from overseas, including the importance of meeting suppliers face-to-face.

Alibaba’s primary business is to serve as a directory of Chinese manufacturers, connecting them to other companies around the world looking for suppliers.

According to Alibaba, a growing number of Australians are looking abroad for products, with an average of 21,400 new Australian users registering on the platform each month.

With everything from pre-fabricated homes to paperclips available, entrepreneurs can source a single component for their product or a pre-manufactured item. But the sheer size of the market can be difficult for a new business to navigate.

With that in mind, Alibaba’s James Hardy and Australian entrepreneur Tessa Hartnett outline three key tips for start-ups struggling to find the right supplier:

1. Wait for the “real reply”

“Knowing the culture and idiosyncrasies of the country that you are dealing with is critical to your success, particularly with a country as diverse as China,” says Hardy, Alibaba’s director of international business development and marketing.

“First and foremost there is the language barrier. In most cases, the person you are speaking to or emailing with can speak English, but they may not be the final decision maker.

“So when they say ‘yes’ or ‘no problem’ take it with a grain of salt and wait for the real reply from the owner or manager.

“Knowing how things work can save you huge amounts of time – and even money.”

2. Know who you’re dealing with

Another critical factor is whether you are dealing with the factory directly or through an agent.

Tessa Hartnett, owner of Vurge Jewellery, says the factory has the final say on what it is able to produce. Dealing with an agent can therefore be time-consuming if their promises fall flat.

Harnett, who owns nine online stores, sources globally to stock her various businesses. She says while agents have their drawbacks, they can also provide a great deal of variety as they may represent multiple suppliers.

“It is essential to understand who exactly you’re dealing with and this can usually be ascertained with the right questioning, and some clues you learn along the way,” she says.

“But there are other tools available to help entrepreneurs starting out. For example, you may want to consider a factory audit to find out exactly what kind of supplier you are dealing with.

“It may not be possible or even necessary for all entrepreneurs starting out, but my best advice is to see the factory for yourself. Meet the factory owner face-to-face.”

3. Find a factory that fits

Having the best matched supplier is another critical factor. While this might sound obvious, it can be tricky to find a supplier who suits your needs.

All factories have minimum order quantities, which will suit different importers’ requirements.

Some suppliers are able to produce products to your specifications or with minor modifications, while others simply provide pre-manufactured products for resale.

Ultimately, you need to determine which supplier is the right size for your business and business model.

“You need to find a factory that suits your needs,” Hartnett says.

“A factory that averages orders of 100,000 units isn’t right for your 10,000 piece order. It does not stack up from a commercial or customer service perspective.

“Always order a sample too. This allows you to compare products and how they will work for your business.”

This article first appeared on StartupSmart.