Choosing the Right Supplier to Private Label From
When you look for a Supplier in China, you should also be looking to build a long term relationship with them. If you build a long term relationship, you're less likely to have problems, and more importantly, your Supplier will be more willing to find a solution to any problems. Too many new importers look only at price along with overstated promises and ignore all of the other details of a Supplier that can't necessarily be found in a few emails back and forth.
Here are some things I look for in a supplier. Comment below with any of the things you look for in a supplier.
Would You Go for Beers with Him or Her?
In the startup world, you'll often hear Venture Capitalists talk about applying the “Would I have beers with this person?” test. Essentially, a VC doesn't want to invest in someone that they don't like genuinely enough to go out and have a few beers with (beers can be substituted for any of your favorite bonding activities).
For Venture Capitalists, this is a figurative analogy as we in the West rarely actually meet our vendors/employees/investors/etc. outside of the office. But in China, this test is both figurative and actual. If you don't like your supplier enough that you would want to have a few beers with him or her, then they're probably not a good long term partner for you. And in fact, if you ever visit China, you will almost certainly find yourself actually going out to have beers with this person!
I was once working with a Supplier for about a year before I finally visited him in Dongying, Shandong Province. Things had been going quite well. However, when I arrived in Dongying, upon checking into my hotel he asked if I would like a “Lady of the Night” that evening, which definitely isn't my thing. Later we visited his factory which was easily one of the dirtiest factories I had ever visited. I don't expect much in China but $#%^ covering the floors and walls was pushing it. Finally, while leaving, we walked past a bone thin guard dog who was promptly kicked when he barked at us. As a definite dog person, this angered me. I knew this wasn't a supplier who I could ever look forward to visiting over the years and I never placed another order with them again after this.
If you work with multiple Suppliers, you want to work with a supplier in the same general geographic area whenever possible. For me, I have a couple of suppliers in Ningbo, China (which is one of the major ports in China) so if I can choose between a Supplier in Ningbo and, say, Tianjin, I will almost always choose the supplier in Ningbo. The reasons for this are two fold. First, it makes visiting Suppliers much easier if you can travel to a city for a couple of days and arrange visits with multiple Suppliers, potentially without ever leaving your hotel! Second, if you need to consolidate freight, having products shipped into the same containers from Suppliers who are relatively close is easier than Suppliers who are relatively far away.
Picking suppliers in the same approximate area is not always easy as China tends to have industries cluster in particular areas, for example, Sports Goods in Shandong Province, Textiles in Zhejiang, etc. But when you have a choice, it's good advice to go for the Supplier closest to a region you're already doing business in.
On one other geography note, traveling to China provides a great opportunity to travel on the pretense of doing business. China is a very large country, and its climate varies as greatly as the United States does. And just like in the U.S., business conferences tend to always be in cities like Miami and San Diego opposed to Buffalo and Minneapolis. So as an important tip, cities in China like Xiamen and Shanghai are much warmer in the winter than cities like Beijing and Qingdao.
Don't Be Their Biggest Customer and Don't be Their Smallest Customer
Again, this advice is practical advice no matter what country you are doing business in. If you are the smallest client of a Supplier, you can be assured that your orders will have the least precedence. This means you could potentially face issues like longer lead times, lower attention to detail, and an overall general lack of concern in dealing with your orders and any issues that may go with it.
On the other hand, if you're the largest client for a Supplier, you'll face other issues. The biggest issue concerns capacity, and whether the Supplier will actually be able to complete your order in the required time. They might also not have the ability to complete it to the standards you require.
Ideally, you should pick a Supplier where your business size falls somewhere in between. In China, finding such a supplier should not be an issue. There are Suppliers with factories the size of small cities, and there are Suppliers with factories the size of small families. Find the factory where your order means something but not everything.
Alibaba reveals an approximate annual revenue of each company under the Supplier profile. Conversely, by using a tool like Import Genius, you can also see how many shipments the Supplier has made to the U.S. If they have zero shipments this is a bad sign and if they have dozens being sold to the likes of Walmart and Costco this can also be a bad sign – try to find a Supplier somewhere in between with a few shipments, ideally to small-medium sized companies.
Find a Supplier That Matches Your Experience
There are Suppliers that have an abundance of international trading experience and Suppliers who have none. There are suppliers with an abundance of English speaking staff and Suppliers who have not a single English speaking person.
Overall, the more foreigner friendly a Supplier is, the higher the prices you will pay. This might be a turnoff for you, but remember that things like frequent quality inspections, boundless emails and telephone calls, etc. have costs as well. So while working with a small factory in the countryside who has never seen a foreigner before may bring you the lowest base cost, your actual costs may end up being significantly higher than the foreigner friendly Supplier.
A lot of people see Trading Company as a bad word in China. A Trading Company however, removes a lot of the obstacles that dealing directly with a factory might bring, so you should not dismiss the thought of working with one completely.
As your experience grows as an importer, searching for strictly the lowest price may be of utmost concern, but for beginning importers, it's often wise to stick with a Supplier with at least some experience dealing with foreigners.
China is the factory of the world and a world of factories. There is a Supplier for the guy importing $500 worth of socks and a Supplier for the guy importing $5,000,000 of high tech drones. When searching for a Supplier consider factors outside of price, consider the long term relationship with your Supplier, and your business is more likely to prosper from it.
Very Helpful information.
Very Nice article David. You are right to say there are are cluster for manufacturing in China. You can not always choose where you want to find your supplier and indeed travelling from cities to cities is sometimes necessary to perform factory audit of your supplier.
Dongying is a very dirty city, full of oil and gas company mostly. When you go there you will see a lot of oil machinery.
On our side our clients can not always travel here and there, we even have some buying agent and sourcing office based in south China sometimes who need to audit and inspect in the north.
We provide them factory audit and quality inspection in this case via our quality inspectors based on site.
Feel free to follow us on http://asiaqualitycontrol.com if you need more information or some solutions;