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80/20 Sourcing – Page 12 – Are you frustrated sourcing from China? Do you find communicating with Chinese suppliers daunting? As Amazon FBA and PL sellers, online sellers, and small business importers you know that time is at a premium. By applying the 80/20 rule, I will teach you how to effectively and efficiently source from China. Learn best practices from the pros, avoid common mistakes, and find out what NOT to do so you can build a 7-figure business
Are you frustrated sourcing from China? Do you find communicating with Chinese suppliers daunting? As Amazon FBA and PL sellers, online sellers, and small business importers you know that time is at a premium. By applying the 80/20 rule, I will teach you how to effectively and efficiently source from China. Learn best practices from the pros, avoid common mistakes, and find out what NOT to do so you can build a 7-figure business
Breaking news! Hanjin, one of the world’s largest shipping company’s has just filed for bankruptcy protection. Apparently they ran into financial troubles. But the key point is this.
45 of their ships are “stranded at sea”. Ports are not willing to let their ships dock because of their financial uncertainty. As a result over 500,000 containers are in limbo now.
Hanjin containers at the Port of Long Beach
If you have an ocean shipment currently in transit, I recommend you check with your freight forwarder to make sure that it is not on one of these Hanjin vessels. If so, better prepare for delays.
Even if this didn’t affect you directly, you may be impacted because freight costs are going up! The cost of a 40 ft container from China to the US is expected to rise up to 50% in the near future with Hanjin’s vessels going offline while ocean freight traffic increases as we enter the busy retail holiday shopping season in Q4. According to freight forwarder Flexport, “The price from China to West Coast ports rose from $1,100 per container to as much as $1,700 on Thursday, while the cost from China to the East Coast jumped from $1,700 to $2,400.”
If you were affected please contact me and let me know your situation. Sharing is caring – please forward this to anyone that might benefit.
What do you think of first when negotiating with suppliers? Do dollars signs come into your head? Price right? But did you know there is another factor which can make or break your business and it is often overlooked? In fact by negotiating this properly you will have more money to pay expenses, pay yourself, or invest back into your business, cut your risk of losing that money, and gain leverage if any problems arise.
Payment Terms
In summary, by negotiating the right payment terms you can score these wins:
Maximize your cash flow
Minimize the risk of losing your money
Gain leverage against the supplier if you encounter quality problems
What are Payment Terms? Payment terms are the designated amounts of money you pay the supplier at various points in time. This process begins from when a purchase order is placed, through production, to delivery. In other words, this is how much of the order value you will pay at various points of time throughout the production process.
Long story short, the less you pay upfront, the more cash you will have on hand, the less cash you are risking, and the more leverage you have in case there’s any problems with the order.
For example, for sample orders it’s common to pay 100% upfront because not only is the value is so little , this also quickly gets the supplier started with production and delivery.
On the other hand, you should be more careful with trial orders since several thousands of dollars can be at stake. Moreover, when working with a new supplier I suggest to always err on the side of caution. For initial orders, I normally negotiate payment terms of 30% or 50% advance payment and the balance due after inspection before shipment.
You might be thinking – Why do I need to pay anything at all at the start of production? Well if you are not a large well-known buyer (e.g. Walmart, Target) then in order to get the suppliers interested in doing business with you, they are inclined to reduce their risk by collecting an advance payment when you place the order. This payment will help offset their costs to purchase raw materials and the logistics of moving them to the factory as well as to pay their workers’ salaries as production begins. After the order is completed, the balance is then paid ideally after an inspection assuming the buyer is satisfied with the product quality.
Why negotiate payment terms?
First off it’s in your best interest to negotiate payment terms to defer partial payment later so you can increase your cash flow. This means you have more working capital to pay expenses, your salary, or invest it back into your business. For example by negotiating payment terms of 30/70 and deferring 70% of the balance until after production, you have another 30-45 days to make that money work for you.
Secondly as a buyer, the more capital you have tied up early in the production cycle the more risk you are taking in case anything goes wrong.
Common rookie mistake: When dealing with large orders, if you pay 100% advance you are taking on a lot of risk. For example if the supplier suddenly closes shop and stops responding, there’s not much you can do to get your money back. Also if there are any problems with the product discovered later and you have already paid them 100% you don’t have much leverage to get them to fix the problem.
Conversely, if you’ve negotiated payment terms so that you are withholding payment until the product passes an inspection, then you have LEVERAGE to ask the supplier to fix these problems. In other words, the buyer can say: “fix these problems or else you’re not gonna get paid!”
When can I negotiate Payment Terms?
Similar to pricing, payment terms can be negotiated throughout the life of the business relationship.
The pre-order negotiations phase is the first opportunity to stake your position in the battle of payment terms. Keep in mind however, just as you are evaluating the supplier, they are also evaluating you the buyer! If you’re an Amazon private labeler, you are just as an unknown to them as they are an unknown to you. In other words they are taking a risk on you so naturally they want to try get as much as they can from you upfront to reduce their risks.
Over time as both parties get to know each other better, as a stronger relationship forms, as trust increases, and guanxi is built, then payment terms can evolve.
Guanxi – Building relationships to build business
Here is an example of a common payment terms scenario starting from the initial phase of ordering samples, to placing a trial order, to a repeat order, to building guanxi with the supplier to get more favorable payment terms.
Sample order: 1pc at $75. 100% payment in advance.
Trial order of 500pcs $2,500. 50% advance payment and 50% paid after inspection before shipment.
Volume orders: 1,000pcs at $4,500: 30% advance payment and 70% paid after inspection before shipment. Note price was negotiated down as well.
Over time as “Guan Xi” grows orders of 3,000 to 5,000pcs placed every 60-90 days: 100% due upon copy of B/L. This means that the buyer did not pay for the order until AFTER it was shipped.
A review of common payment term scenarios
The key takeaway here is that you will negotiate better payment terms over time as trust builds, volumes grow, and guanxi is obtained. If you tried to come in from day one and negotiate 100% payment upon copy of B/L the supplier probably won’t respond to you unless you’re email address says “@walmart.com.”
Speaking of which, the big box retailers are able to negotiate payment terms of net 60 and beyond because of the gigantic order volumes they can award the factory. So you probably won’t get the luxury of paying for a shipment up to 60 days (or more) after shipment because you’re not ordering tens of millions of dollars of product!
Case study 1:
Remember besides for a sample order, never pay for 100% upfront unless you’re willing to lose that money. One example is student of mine who before she came to me paid 100% upfront for a trial order. She placed the order blind without ordering any samples. When she asked me for advice, I asked have you seen the actual product yet? She replied that she only saw pictures on Alibaba and over email.
BEWARE: Often times in China “What you see is NOT what you get”. The pictures on Alibaba often times are often taken and copied from other sites or photoshopped to high-heaven. So I never trust the pictures from suppliers alone.
I recommended that she have the supplier send her samples of the products before production began to validate the sample quality. So she did and when the samples arrived she was in for a big surprise. It turned out that the products were NOTHING like what she was promised. The edges were cut crudely and unfinished. There was damage to the surface of the product. And the product was so flimsy that it couldn’t even do the job it claimed. Fortunately she conducted the transaction through Alibaba Secure Payment (Escrow) and is now in the process of getting her money back.
But imagine if she went ahead with the order. She would have lost thousands of dollars with an order full of junk not to mention the headaches of trying to fix it.
Case study 2:
A client of mine ordered a lot of fashion accessories from a supplier and they agreed on payment terms of 30% advance and 70% due after inspection. After placing the purchase order and monitoring production he noticed that there was a color discrepancy in the fabric. Because he hadn’t paid the 70% balance he had more leverage to get the supplier to agree to fix the problem. If on the other hand he paid 100% upfront, there’s no telling if the supplier would turn around and say: “Sorry mei ban fa”. This is one of the most common expressions in Chinese. Translation: “there’s nothing we can do”.
Lesson learned: For trial orders and above, if you pay 100% upfront not only have you tied up your cash too early, your increasing the risk of losing your cash and in case of any problems you have no leverage against the supplier to fix them.
How much you can negotiate for always comes down to your relationship or “guanxi” with the supplier. If the boss believes in you and sees you as a Grade A buyer, then you can get preferential treatment translated into better pricing, more favorable payment terms, more attention to your order, and prioritized deliveries.
Rule of thumb: If you’re new then don’t expect too much coming out the gate. 50/50 is fair starting out. 30/70 is good.
By properly negotiating payment terms you can free up more cash, reduce your risks, and increase your leverage with your suppliers as your business grows.
After reading this, if you were able to negotiate better payment terms to free up your cashflow and gain more leverage let me know! Good luck!
DELAYS are one of the biggest nightmares that we deal with in sourcing. Any time your order is late, you not only lose time but also money and sales.
In China, there is a huge upcoming economic event that hasn’t gotten much coverage from the Western press that has potential to cause delays and disruption to your upcoming shipments. This event is the 2016 G-20 Summit in Hangzhou from Sept 4-5. As usual, China is not a very transparent place and they haven’t officially announced how the surrounding areas will be impacted in terms of factory closures, traffic control on the roads, and increased security at the ports. But I’ve done research tapping into my network in the areas of manufacturing and supply chain. So I’d like to share some findings with you so you can minimize the chances of delays to your shipments.
G-20 Summit to be held in Hangzhou in Sept.
What is the G-20?
The G-20 is a major economic summit where many world leaders including Chinese President Xi Jinping, US President Obama, and many others will meet to discuss global economic growth. They will meet in Hangzhou, which is located in Zhejiang province a few hours west of Shanghai.
To give you some background into what happens when China hosts a major event seen around the world, let’s look at the 2008 Olympics in Beijing. This was a huge event for China since it was put under the global spotlight. Some even called it a “coming out party” for China. It’s a matter of culture as well since it’s a major “face” issue for China as the host to ensure that the event is a success. So China pulled no punches in making sure that everything went smoothly. As you may know Beijing’s big problem is it’s horrible air pollution – in fact it’s one of the most polluted cities in the world.
So what did China do to clean up the skies during the event? Well first it shut down many of the heaviest polluting factories around the surroundings areas. This reduced a lot of pollution and emissions. Then they banned many cars from the roads. This reduced emissions from tailpipes. As a result attendees were treated to miraculously blue skies during the Olympic Games. It was glorious! However less than 24 hours after the event, as factories reopened and cars were let back on the roads, the skies turned smoggy gray again! So expect similar measures as China prepares for the G-20 – factory closures to reduce pollution.
Another important factor is safety. There are terrorist threats in China as is the case elsewhere in the world. So security measures will be on high alert in the next few weeks. This will impact transportation. For example trucks delivering goods to factories and finished products to ports for shipment may encounter increased rates of inspection, which lead to delays.
Will all factories close down? What industries will be impacted?
No, based on my research only certain factories will be closed. In fact the most impacted industries are fabric dyeing mills, printing factories, and chemical product suppliers and manufacturers. The common theme here is that they all deal with heavy polluting or potentially hazardous materials. These pose both pollution risks as well as security risks.
Where are the impacted areas?
The government has already ordered factory closures in the following cities in and around Hangzhou. More areas may be affected going forward.
During this period there will be tremendous traffic control. Not only have many fabric dyeing mills and printing mills in the affected areas been ordered closed, these type of liquids and chemicals are currently being forbidden from being transported to factories in and around Hangzhou as well. So this may cause additional delays.
Trucks near Hangzhou are reportedly required to have security licenses and will need to pass through additional security checks. Based on past experiences, some chemicals and hazardous products may not be allowed to enter these areas until after this sensitive period. Relatively mundane sounding products like batteries may turn into contraband during the next month.
Moreover the Ports of Ningbo and Shanghai will be affected as goods passing through will be under close scrutiny. So if you have orders shipping during this period, don’t be surprised if they get flagged for inspection leading to delays.
Take a look at this warning about the upcoming G-20 meetings from FedEx’s website. Even they seem unsure of the impact of road closures!
Even FedEx is unsure of the impact of the G-20 on their deliveries
Cost Increases
Because of dyeing factory closures and as production is consolidated into fewer factories, expect costs to rise. The remaining factories have increased demand and limited supply so classic economic theory dictates that prices will rise.
Furthermore some dyeing work has been outsourced further out to Suzhou so this may affect delivery times as well as increase shipping costs.
How long will the impact last?
Though the actual meeting will only be held over a few days in early September, the actual footprint will be much larger. We have learned that dyeing and printing factories suspected of being heavy polluters or dealing with potentially dangerous chemicals had been ordered to begin closing down from late July. And this period has been apparently been extended through mid-September well after the conclusion of the G-20 meetings.
So what can you do?
Since China is not a transparent place and traditionally suppliers will not proactively share this type of information with you until it’s too late, it’s your responsibility to talk to your supplier and freight forwarders.
First, ask and find out the impact on your production and shipments (if any). Also you may want to work around these dates to minimize your chances of being disrupted by the G-20 meetings.
Finally learn to anticipate these types of major events in the future so you can plan ahead.
Lesson learned! Have any of your orders been delayed by the G-20 or other external factors? Please reply or leave me a comment.
While many of you have enjoyed a summer getaway to beat the heat and escape your daily grind, China manufacturing continues to churn away. Factories continue to churn out orders so long as there is business to do and money to be made.
However recently some of you may have noticed slower response times from suppliers and even delays to your deliveries. No it’s not the general malaise of summer but actually there are several important events happening that can affect your sourcing and deliveries.
The first two events have to do with the weather. First in South China, a major typhoon just hit and it was the strongest storm in over 30 years according to Xinhua News. Flights have been cancelled, schools closed, and factories shut down. And flooding is expected for up to 3 days. In this case, many factories have closed due to safety precautions and production and service has been affected as a result.
Though it’s very likely that factories will be back online as soon as the typhoon passes, if you are expecting any important orders to be confirmed or deliveries to be made, beware delays! Affected areas include Hong Kong, Shenzhen, Dongguan, and Guangzhou.
Preparing for the typhoon!
Moreover this storm is expected to move north and may affect coastal areas later this week. Stay tuned!
The other event is the unusual summer heat that has hit the eastern coast of China. Recently there were several days of sustained heat over 40 C (104F) coupled with high humidity. This resulted in a heat index of over 55C or 131F! Affected areas include Shanghai, Zhejiang and Jiangsu regions. Some factories in these areas have taken days off because of the heat risks to workers. So expect delays this week as well.
Takeaway: if your suppliers have been slow to respond this week, no, they’re not away on vacation but the weather could be the culprit! But do communicate with them to monitor your production as well as to check if they are safe!
However there is a larger economic event looming on the horizon that can have a broader impact on suppliers in and around Hangzhou. More to come about that soon.
Have you encountered any delays from your suppliers due to weather? Let me know!
I’m very thankful for the opportunity to host a webinar with Junglescout’s Greg Mercer and Gen Furukawa this week. We covered four key areas of sourcing:
Chinese cultural and value differences and “Guan Xi”: It’s a relationship business
Supplier selection strategy – First cast a wide net then go deep sea fishing
Negotiations – You get what you pay for
Quality Control – The Never-ending story
Here’s the replay in case you missed it!
By the way, Junglescout is one of my favorite research tools for selling on Amazon. I use it myself and highly recommend it!
We covered a lot so let me know what’s your #1 pain with sourcing?
Exciting news – I’d like to invite you to a free LIVE webinar on the “Secrets of Successful Sourcing” which I’m hosting with Junglescout’s Greg Mercer and Greg Furukawa on Monday June 13th at 4pm PST.
This is the first time I’ve ever done this LIVE where I will walk you through the entire sourcing process from research to finding the right suppliers, asking the right questions, quick ways to spot and eliminate the bad apples, ordering samples, and what to do before placing an order. Not only that but I will share a real case study with sourcing an actual product – and no, it’s not a garlic press!
You will takeaway several best practices I’ve learned in my years of sourcing in China as well learn from my mistakes to save time and make more money in your Amazon business.
We also will have a LIVE Q&A at the end where I’ll answer your questions.
For those of you who sign up, I’m offering a free bonus email script to instantly increase response rates from suppliers and get them to take you more seriously.
If you’re selling on Amazon or eBay you know that just competing on price is challenging. But I’d like to share some secrets I’ve learned managing multimillion dollar sourcing campaigns for my clients. One of the best ways to maximize your margins is to CUT YOUR SOURCING COSTS. In other words PURCHASING FOR LESS will give you more room to price your product competitively and win the buy box. So here are five ways to cut your sourcing costs.
Reduce your product costs
Negotiate payment terms to increase your cashflow
Reduce shipping costs
Quality control cost reduction
Consider going out of China for additional cost savings
1. Reducing your product costs
Reducing your product costs from your supplier is one of the most direct ways to save money. Here are some ways to negotiate lower product pricing with your suppliers.
As your order volumes grow so will your relationship with the supplier. So it’s natural that you can negotiate better pricing as volumes increase and trust grows. Suppliers like larger volumes especially if you share your purchasing plan with expected annual order volumes.
Here’s an example from a recent product I’ve sourced from China. In the first order, we purchased the product at $5.20 per piece from the supplier. We purchased about 500 units in the first order. In the second order, our volume increased to 1,000 units. So we renegotiated the pricing with the supplier and got the same product for only $4.70 per piece! This is a price discount of $0.50 per piece or approximately a 9% price cut. This will have a multiplied effect on your bottom line in reducing your import duties as well as reducing your Amazon and eBay seller fees if you choose to sell at a lower price but still maintain the same margins.
A second way to negotiate lower prices is to leverage other suppliers’ quotations. For example if Factory A is offering a product for $2.00 and Factory B is offering it for $1.90 you can use that as leverage against Factory A. But beware: in China you get what you pay for. If you cut the price too low, factories will cut corners on the product. So don’t go overboard with low price negotiations.
Another opportunity to negotiate lower prices is to take advantage of external economic factors such as currency depreciation. As the Chinese economy is slowing down, the government, which controls the RMB exchange rate, gets fearful that the slowdown will turn into a recession. Long story short, government policy will lower the foreign exchange rate of Chinese RMB against the US Dollar to make Chinese exports more competitive. In fact if you look at the foreign exchange rate in the past 6 months, the RMB has depreciated 4.5% from August 2015 to April 2016. This is a golden opportunity to renegotiate your price to take advantage of the 4.5% depreciation. Basically your dollars are worth 4.5% more against the RMB so you can ask for a 4.5% discount. The caveat is that your current quotations must have been made before the currency depreciation – in this case before August 2015. If so, then you definitely should renegotiate your pricing or you’re leaving money on the table. Note that the factory will not necessarily give you the full 4.5%. They will use other cost increases (labor, material costs, etc) as an excuse but I’ve gotten 2-3% price cuts by sending just one email.
Currency depreciation is a golden opportunity to negotiate a price cut
2. Negotiate payment terms to increase your cashflow
Nobody has unlimited money and as your business grows you will want to order more inventory to keep up with growing demand so you can scale your business. A common bottleneck is the amount of cash that you have tied up in your business – specifically in purchasing inventory from suppliers. One of the best ways to free up more cash is to negotiate more favorable PAYMENT TERMS as your order volumes grow and as you build a long term relationship with your supplier. Let’s look at this example.
In the beginning when placing a trial order payment terms normally are split between an “advance payment” or deposit when placing the order and a “balance payment” paid before shipping. When first starting typical payment terms are 50/50 or 30/70. But did you know that you can and SHOULD negotiate this as your business grows? Ultimately it is about TRUST and the more they trust you, the better terms you can get.
One of my previous clients had been doing business for many years with several Chinese auto parts suppliers. In the beginning the suppliers would only offer payment terms of 50% advance / 50% before shipment or 30%/70%. Later as the client’s order volumes grew to $20k to $30k per month so the trust. Eventually the suppliers agreed to payment terms of 100% after shipment.
Ultimately it is about TRUST and the more they trust you, the better terms you can get.
You can see in the chart below that typically buyers start off in scenario 1 (50/50) or scenario 2 (30/70). Better payment terms would be scenario 3 (essentially meaning that you don’t have to pay for the goods until the supplier finishes production and you inspect the shipment. This can free up your cash flow tremendously to invest it in other parts of your business (or paying yourself first as Rich dad says).
As a side note, the big players like Walmart can get payment terms of Net 30, Net 45, and Net 60 which essentially means they don’t have to pay for the goods until up to 60 days AFTER SHIPMENT. But they can do this because they purchase enormous volumes and have the buying power to negotiate these terms. I suggest you focus on getting to at least Scenario 2 or 3 as your business grows.
Payment Term Scenarios
3) How to reduce your shipping costs
There are many ways to lower your shipping and logistics costs. If you are shipping by air freight then you know that it’s not cheap. One way to save money is by using the supplier’s pre-negotiated air courier rates which are lower than what you can negotiate with the shippers. Suppliers typically ship substantial volumes so they can negotiate a lower rate with an air courier than you can as a single buyer. You can take advantage of their Fedex, DHL, or Air Express Couriers to get lower pricing. Many Amazon sellers have used Air Express Couriers with success. Their rates are cheaper than the major international shippers such as Fedex and DHL. Be sure to get a tracking number and some references to protect yourself.
As your volumes grow and if you are shipping larger bulky items, then sea freight is the best value. However be prepared for longer shipping times (typically 30-45 days depending on the destination) and more bureaucracy from import and customs procedures. In this case I recommend hiring a freight forwarder and customs broker to handle this work.
4) Quality Control Cost Reduction
If you ever had quality problems then you know that this can get very expensive and very frustrating fast. Several of my readers discovered quality problems with their product AFTER the product was delivered. In these cases the problems were not discovered until after arriving in the US. In most cases, it’s not economical to ship the product BACK TO CHINA. It will be very expensive and it will take a lot of time. Some were able to negotiate free replacements from the supplier however this still takes a lot of work (back and forth emails) as well as a significant amount of time for the replacements to be manufactured and shipped.
Quality control and product inspection can significantly reduce your sourcing costs and save a lot of time. I won’t bore you with jargon such as “Six-sigma total quality management systems” used by sourcing professionals but the 80/20 of it is this. Amazon and eBay sellers can takeaway these two points:
a) Monitor quality during the production process to catch problems early and fix them: You don’t have to physically be at the factory to monitor quality. One simple way to do this is to request photos of the production process to monitor any problems and catch them early. For example one of our products had a black buckle. We asked the supplier to send photos of the product during production and we saw that the supplier mistakenly used a silver buckle instead! Fortunately we caught this problem early and had them fixed it before bigger and more costly mistakes happened.
b) “Pre-shipment inspections”: I’m surprised that most Amazon and eBay sellers DON’T inspect their products before shipment. I always feel it’s better to inspect the product BEFORE they leave factory than after landing in the destination country. Obviously it’s much easier and faster for the supplier to fix the problem on-site then having to go back and forth over-seas. Second, if you’re stuck with defective products in the US, you’re not likely to send it back to China. It’s way too cost-prohibitive to ship by air and too time-consuming to ship by sea. I haven’t even mentioned the import duty costs and customs declarations bureaucracy that you have to go through either. Third, even if the suppliers agrees to replace them its going to take forever for them to arrive (production, shipping, customs) and think about the sales you have lost during this time.
If you’re thinking what if the supplier won’t fix the problem after inspection? Well if you’ve negotiated payment terms properly to pay the 70% or 100% balance after inspection (see above) then the supplier is motivated to fix them problem… or else you’re not going to pay! This is leverage.
3rd party inspection agencies are fairly common and cost roughly $310 per “man-day” of work as of now. Normally one day of work is enough to get the job done for small/medium sized shipments. I consider this a cost of doing business and an insurance policy against bigger problems down the line.
If this is cost-prohibitive, I recommend you ask the factory to make a “self-inspection report”. This includes photos of the product, instruction manual, packaging, measurements, and anything else important. It’s not ideal but better than flying blind.
5) Consider “going out” of China
China is not as cheap as before with rapidly increasing labor costs. Did you know that factory workers command up to a 15% raise every year?! In fact many factory owners tell me it’s a “struggle” to attract and keep good workers. Just like in the west, Chinese “millennials” are the “me-generation”. They are not willing to work as hard as their parents did for so little. At the same time, China’s macroeconomic policies are pushing China to be a more service-based economy. In other words the government doesn’t want China to be the world’s “cheap” factory forever. Take a look at how China’s monthly wages compare to other countries. China isn’t as cheap as you thought!
China is not cheap compared to labor costs in Thailand, Indonesia, and Philippines
What does this mean? Many large companies such as Nike, H&M, and Apple have already begun to shift their sourcing away from China to countries such as Vietnam, Thailand, and India to take advantage of lower costs. It’s important to note they are mostly sourcing simpler products lower on the “value chain” such as apparel, fashion accessories, footwear, and basic electronics.
Nowadays, large multinational corporations often implement a “China +1” strategy where they don’t put all their eggs in one basket. They may source certain products from China and others from suppliers in countries such as Vietnam. This diversifies their supply chain and reduces the risk of “putting all your eggs in one basket”. Smart importers do this as well to not only enjoy cost savings, but also reduce the disruption caused by Chinese New Year factory closures by shifting their sourcing to other countries during this period.
Where do you find these suppliers? For online searches, besides Alibaba, Global Sources has numerous listings of manufacturers from countries besides China.
Looking offline, trade shows are great way to meet legitimate suppliers not from China. You don’t even have to travel far as there are many regional trade shows in your home country that may target your product category. For example there are trade shows in Florida targeting pet products, the MAGIC and WWIN fashion trade shows in Las Vegas, and numerous others taking place locally.
Keep in mind that not all products can be found for a lower price outside of China. But it’s worth giving them a shot to reduce your sourcing costs as Chinese costs rise year on year.
Bonus 6) The 80/20 Rule: time savings = cost savings
Many Amazon sellers find that sourcing can be a time-consuming process. So besides cutting costs, saving time can be the biggest win for your business. You may have heard about the 80/20 rule or Pareto’s principle: “The Law of the Essential Few and the Trivial Many”. 80% of your results come from 20% of your work. 80% of your sales come from 20% of your products. The same rule can be applied to sourcing. If you would to get a free email script to negotiate the price cut, please signup for my free newsletter.
Recently I listened to an interesting podcast from Scott Voelker aka “The Amazon Seller”. He shared a story about a quality problem with one of his Amazon products which led to a SUSPENSION. The problem was with with his bundled product. Apparently “some of his products were missing pieces and the customers were returning them”. Well Amazon noticed the unusually high return rate so they SUSPENDED his listing! This meant ALL HIS SALES STOPPED on this listing. Scott was smart to take action and file for a removal order to take back the defective inventory to fix it. Obviously he wasn’t going to ship them back to China (too expensive and time consuming) so he decided to fix them himself. Meanwhile he switched the listing from FBA to merchant fulfilled (different selling option) to start selling the product again.
But in the process HE LOST A TON OF SALES from the time the listing was down to when he fixed the problem and shipped them back to Amazon. And he had to spend his own time and hard-earned money to fix the problem. This took away time he could have spent growing his business or being with his family. Furthermore it’s important to note that merchant-fulfilled listings generate much lower sales than FBA. Many Amazon Prime members only buy Prime fulfilled listings so he lost out on these sales opportunities.
Now I don’t mean to bash Scott and he’s quite an expert on selling on Amazon FBA and he’s a great teacher who’s given a lot to the Amazon seller community. But like the rest of us, nobody is perfect and we all make mistakes. So the important thing to ask is: “What can we learn from this? What could Scott have done to prevent this nightmare?”
What if he could have detected these problems early-on before the order left the factory? If so, he could have asked his supplier to fix problems BEFORE THEY SHIPPED. And at AT THEIR COST. This would have meant:
No customer complaints and returns leading to a suspension
Not having to ship products from Amazon back to his house and then back to Amazon FBA
Not having to spend time (and money) to fix the problem himself
No lost sales
I think Scott would be a happy camper!
How do we do this? Rather than flying blind and taking a risk on every shipment, experienced sellers and importers inspect their products BEFORE they leave the factory. It’s called a pre-shipment inspection. And it’s a small price to pay for the amount of time, money and headaches it can prevent. Benjamin Franklin once said “An ounce of prevention is worth a pound of cure.” So I’d like to share with you how I arrange pre-shipment inspections to reduce quality problems, lower the risk getting suspended by Amazon, and save you time and money so you can focus on growing your business.
First off, here are some of the main BENEFITS of arranging a pre-shipment inspection:
Catch quality problems early on so you don’t have to deal with defects after products land in the US
By catching problems before they leave the factory, you can have the factory FIX THEM at their expense! Sure it may take a little longer to ship but you will be getting peace-of-mind and better quality product. On the other hand, if you waited until the products landed in the US (e.g. ship it to your house) then my question is, how will you fix any problems that arise?I recently met an Amazon seller from Romania who sold on Amazon’s US platform. He told me about a problem he had with a shipment from China. Since he didn’t live in the US he has his supplier ship the products to his a friend in the US who would inspect it before shipping to Amazon’s warehouses. Well after the product arrived in the US they discovered problems. After emailing back and forth with Chinese factory, they was cooperative and agreed to replace these defective products and ship them to the US. But the seller lost significant time going back and forth with the supplier to solve this problem not to mention the opportunity cost – lost sales. I estimate this process would take at least two to three months for communication, production, and re-shipment resulting in at least tens of thousands of dollars in lost sales!If on the other hand, he hired a 3rd party inspection agency to check the order and fix the problem before it left the factory, he probably could have avoided the problem and have less headaches and more sales.
Lower your return rates and risk of Amazon suspension If you ship direct to Amazon WITHOUT an inspection and discover problems later (like Scott did), then you will definitely get negative customer feedback, deal with many returns, and possibly face an account suspension. You can significantly lower your risk by a arranging a simple pre-shipment inspection.
Keeps the supplier on their toes – get better quality product Many times, simply letting the factory know that you plan to arrange an inspection before shipment will keep them on their toes. This means they will pay more attention to your order production because they know you are serious about quality. Some experienced importers tell factories they will inspect even if they don’t follow through to arrange an inspection! While I don’t necessarily agree with this, it does work from time to time.
Allows you to ship product from the factory straight to Amazon (and not to your house) to start selling sooner and reduce shipping costs It doesn’t take a genius to figure out that shipping from point A (China factory) to point B (Amazon FBA warehouse) is faster and cheaper than point A (China factory) to point B (Your house in the US) and then to point C (Amazon FBA warehouse). Also I would much rather have the factory handle problems in China (lower cost of labor, no additional shipping times) than handling this in the US (high cost of labor, emails back and forth with factory to resolve the problem, shipping times of replacements from China to US, etc).
By now you’re probably asking WHEN should I arrange an inspection? Is a pre-shipment inspection necessary for every order?
As a general rule of the thumb the more complex the item, the newer the item (i.e. first production run), and the newer the supplier the greater the risk of problems. Thus the greater the need for inspection to lower your risks. Another key reason to inspect is if you are aware of a common defect with your product. For example if one of your products scratches easily and you are aware of this problem based on past order history then it makes sense to arrange a pre-shipment inspection because “history repeats itself.”
I like to think of a pre-shipment inspection as a safety net to lower your risk. This will help you identify these problems before shipment while they can be more easily and cheaply fixed.
Here’s an overview as to when to arrange a pre-shipment inspection:
Expensive products or high order values: In these cases it makes sense because the cost of inspection is lower on a order value basis. For example for a $30,000 shipment a $300 inspection amounts to only a 1% cost while for a $3,000 shipment this amounts to 10%! It makes more sense to inspect when you have shipments with larger order values.
Highly complex items: I’m more likely to inspect items that are more complex with more moving parts such as electronics. In other words products where things are more likely to go wrong.
Fragile items: Anything easily breakable or scratched such as glass. I make sure to have them inspect not only product but also PACKAGING. Chinese suppliers often times package their product improperly which causes damage DURING SHIPMENT. So make sure there’s enough protection around the product to reduce risk of damage during transit. This is especially true for sea shipments because imagine your product being on a ship for a month. Boxes move around and product gets damaged if not packaged properly.
New items: If the factory is making this for the first time, then expect mistakes. This is an especially important time to arrange inspections to catch these problems early.
New Suppliers: Just as in a first date when you are getting to know each other, if this is your first time working with a supplier there will be some bumps in the road. You’re more likely to have miscommunication, and misaligned quality expectations when first working together. Over time, as the relationship develops and as you learn each others’ preferences, likes, and dislikes, these “bumps in the road” will smooth themselves out.
Common defects you are aware of: If in a prior shipment you had problems then you should instruct the inspector to pay special attention to these problem areas. For example with one of our products, the first batch of product had loose screws. So in the next batch we made sure to have the screws inspected. So it makes sense to not only inform the supplier to make a corrective action plan but also for you to take the initiative to inspect for this problem in the next order.
EXCEPTIONS: When can you choose NOT to inspect? Do I need to inspect 100% of orders?
In a perfect world, inspecting 100% of all orders would be the ideal way to eliminate risk but this is not feasible. We are in the real world we all have budget constraints and limited cash flow. And we are running against the clock and want to get the product for sale to our customers. So here are some of my insights. Do take this with a grain of salt as these are general rules and your mileage may vary depending on your product, tolerance for risk, and your aggressiveness.
Simple products: One instance where we did not arrange pre-shipment inspections is if the product is very simple with a low likelihood of any critical problems. If it’s a simple metal and rubber auto part there’s a lower chance of things going wrong than if it was a tablet computer
Wide range of quality tolerance that is difficult to define: Another instance is if you’re more tolerant to what is defined as acceptable product. For example one of our clients who sourced auto parts from China did not want to arrange pre-shipment inspections because they felt it’s likely that all of the orders would be “FAILED” according to the inspection agencies standards. It was a low cost metal and rubber auto part. So the client is willing to tolerate a certain degree of difference that is difficult to define on paper to an inspector. In this case they decided that an inspection would not be worthwhile. Over the years of importing numbers containers of product per month, were instances of defective product (which the supplier replaced at their cost) but over the long haul this strategy saved him money.
Small orders: If you’re making a small order then the cost of an inspection may not be worthwhile. For an order of $1,000 you probably wouldn’t want to spend the $300 to hire an inspection agency. This would be 30% of the order value. What would I do instead? I would ask the factory to make a self-inspection and send me the report. Or I would ask them to ship me pre-production samples
HOW to arrange a third party pre-shipment inspection?
I’ve outlined the three main parts to a pre-shipment inspection. These include the supplier’s factory information, expected inspection date, your product name and specifications, and inspection details. Here is a sample pre-shipment inspection checklist using solar vacuum tubes as a reference.
Supplier’s factory information:
Factory address: both English and Chinese
Contact person’s name, telephone, and email
Date of your scheduled inspection
Date of shipment
Product Name and Specifications: Be as specific as possible. Put yourself in the shoes of the inspector. The more reputable inspection agencies will have internal checklists based on product categories that you can use if you’re not sure what to inspect.
Color, Material, Finish: List your product specifications which include pictures, measurements, material, packaging requirements, your logo, UPC barcodes and any other details that you want to check.
Dimensions and weight: Note the accepted tolerance levels that you can accept. For example if the tube is 1.80m long and you can accept a length between 1.79m to 1.91m or “+/- 10mm.” (see picture below). You might ask why should I accept any tolerance, I want the product to be EXACT. Well in the real world, nobody is perfect especially factories so you should decide upon an accepted tolerance limit and note this in your purchase order (before production begins).
Logo and labels: Important for private labelers.
Additional comments
Reference sample: Optional but you can provide a sample to the inspector as a reference.
Inspection details: Make sure to list the most common expected problems with your product.
Test instructions: If you have any specific instructions, note them here. If not, the inspection agency will have a pre-determined checklist based on your product category and you can use that. This depends on your exact product so consult your inspection agency.
Expected results: What you expect for the product to pass inspection.
Sample size to test: I recommend you follow the inspection agency’s suggestion.
Expected defect description: Describe your expected defect. For example: “Glass tube damage”.
Defect is considered: Three main types of defects: Critical, Major, and Minor. I recommend you follow the inspection agencies standards if you are new to this.
Accepted Quality Level (AQL): Think of this as the upper limits of defects that are allowed. If they find a larger proportion of defective items, then the inspection will result in a “FAIL”. A common AQL is Minor: 4%, Major: 2.5%, Critical: Not allowed (See picture below). Your inspection agency will have these options for you to choose from.
HIRE an inspection agency
I normally budget around $300 per day for inspection. If cost is a concern and you have a larger number of units in your order you can reduce the sample size to one man-day. Of course a smaller sample size may miss some problems. But that is the tradeoff.
In terms of inspection agency recommendations: I’ve used Asia Inspection over the years with good results. The major players in the inspection agency game include multinationals SGS and Bureau Veritas though they may be more expensive.
WAIT for the results
Normally I expect to receive results within 24 hours of inspection. Based on this you will either (a) approve the lot for shipment or (b) reject and/or work with the supplier to fix the problems.
IF PASSED then I review the report details and note any minor defects and then green-light the shipment.
If they “FAIL” the inspection then it’s purely the buyer’s (YOU) decision whether to accept the shipment because they have been forewarned.
Common reasons inspections FAIL:
Besides quality problems, another reason an inspection may be wrongfully “FAIL” an inspection is due to miscommunications in the Quality Control criteria. So make sure to double check all the measurements, pictures, packaging, and any other common problems in production.
In my years of sourcing from China, I’ve noticed a common trend. When in doubt, the inspection agency would rather FAIL the inspection to protect themselves than approve it. In other words, if they “PASS” a shipment that has problems discovered later then the inspection agency can be held responsible. If they FAIL a shipment and the buyer agrees to ship it, then it’s purely the buyer’s responsibility in making this decision.
What to do if your pre-shipment inspection fails?
Look carefully at the details of the inspection report. Are the reasons it failed enough to refuse shipment? Sometimes if it’s a “minor” defect you should ask yourself if this is acceptable to your customers. Steve Jobs was famous for saying “real artists ship” which means that it’s more important to actually deliver than delaying a launch trying to make the “perfect product”.
Show the report to the factory and ask them for a corrective action plan to fix critical problems.
Then depending on the outcome and who’s at fault, arrange a re-inspection. I recommend hiring at least a different inspector (or agency) to prevent any “buddy-buddy” relationships from forming. (See “BEWARE FRAUD” below)
Decide whether or not to accept shipment.
If or when placing a re-order later, emphasize the problems and the corrective action plan in the purchase order.
BEST PRACTICE: If the first inspection fails and the factory was at fault, you should negotiate to have the supplier pay for re-inspection. This will save you $300.
Poor man’s pre-shipment inspection: If you want save money and are willing to take a risk
If you choose not to hire a third party inspection agency, the least you can do is to ask the supplier to self-inspect the order and send you an inspection report. Clearly this will option is not as comprehensive as a third party inspection nor will it come from an unbiased source, but it’s better than nothing. Remember pictures are worth a thousand words and you may be able to spot some problems. This is how I would do it:
Ask the supplier to take pictures of the product, the instruction manual and any inserts, and packaging. For product and packaging, ask for pictures from different angles.
Ask them to take measurements and weights (if applicable)
Ask them to test it based on common problems that occur
Optional: If you have a sourcing agent or trusted person in China, ask your supplier to send a few units of actual product to them for inspection.
BEWARE FRAUD
Sourcing in China is a dirty business. Sure there are honest guys out there but there are so many moving parts that can go wrong that it’s hard to keep track of them all. Kickbacks and bribes are not uncommon. Third party inspection agencies (both big multinationals and smaller agencies) are not immune to this.
So I’m not surprised when newbies report that their factories tell them that the third party inspection agents asked for a “tip” or else face a failed inspection report. It happens everyday in China. So what can you do? At the end of the day, I take the inspection agency’s recommendation with a grain of salt. Their decision is one factor but I always look at the DETAILS of the inspection report. Ask yourself WHY was it failed and do these problems matter to me and my customers? Ultimately you are the CEO and it’s YOUR DECISION whether or not to accept the shipment.
In summary, pre-shipment inspections are an excellent way to reduce your risk of quality problems which can lead to high customer returns and even an Amazon account suspension. Regardless whether you hire a third party to inspect or have the factory self inspect, the important thing is to try to catch problems BEFORE the product leaves the factory floor. This way they can fix it at their expense and this will save you a lot of time and headaches down the line.
We are officially in the middle of trade show season. Whether you are attending the Canton Fair or smaller regional trade shows, here is how to attend a trade show like a pro to find the right suppliers, ask the right questions, and find the right product at the right price.
First of all you might be asking why trade shows? Aren’t they dying when you can find suppliers online? Well, do you want to own a 7-figure Amazon business? FACT: according to a 2016 survey of Amazon sellers, MULTIMILLION DOLLAR AMAZON SELLERS ARE TWICE AS LIKELY TO ATTEND TRADE SHOWS? This is according to a survey done by webretailer.com.
What does this mean? It’s not just a matter of simply showing up at the Canton Fair and finding the right supplier right away. You have to know how to ask the right questions to find the right product at the right price. In part 1 I showed you how to prepare for a trade show. Here I will review best practices AT THE SHOW and AFTER THE SHOW.
First let’s take a step back. Many of you know the 80/20 Rule or Pareto’s Principle “The law of the essential few and trivial many”.
80% of the world’s GDP is controlled by 20% of the people
80% of a company’s sales come from 20% of its products (bestsellers)
80% of your results come from 20% of your work
In terms of sourcing: 80% of suppliers out there are NOT the right fit for you. Your job is to find the right 20% and focus on those! Let’s call them the YES suppliers for the purpose of this article.
Focus on the Essential Few
So let’s apply the 80/20 rule to trade show sourcing. By now you’ve already pre-registered for the show and reviewed the map so you know which halls to target so you will hit the ground running. If not, see part 1.
AT SHOW:
At the show your goal is this:
See as much as possible in a limited amount of time
Decide WHO are the ESSENTIAL FEW to follow up with
In other words “80/20” the suppliers and don’t waste time on the trivial many. Trade shows are huge. When I visit one, sometimes I walk 20,000 steps a day!
Trade Shows are a lot like Speed Dating Events
In fact it’s a “Meet Market” and I compare it to speed dating. Just like one of these networking events, you’re not going to talk to everyone. Use your eyes to see which suppliers may be the right fit for you first before you approach them. As I’m doing this, I keep in my head 3 buckets: “YES, NO, and MAYBE”. I ask myself “Where will I put them?”
Yes, No, or Maybe
Before we get into asking questions, first you should question yourself. I prepare a short elevator speech introducing my experience and the product category I’m in, demonstrate an ability to buy, and then a call to action where I will ask them questions. Many first time trade show goers forget about this step. In fact a proper introduction will build confidence and make suppliers more comfortable in doing business with you. This can mean revealing products not on the trade floor, lower prices, and a greater incentive to do business with you.
At the show, here are 7 questions that I ask suppliers.
Do you manufacture [XYZ product]?
If yes, then continue. If no, thank them and move on
Are you a factory or trading company? Many Amazon sellers prefer to work with direct factories so here are some ways to tell them apart from middlemen. Most times I ask them directly and they tell me. Another way is to look at their product selection and if there is a common theme. For example silicon product manufacturers will offer silicon baking sheets, silicon gloves, and silicon measuring cups so it makes sense they focus on one type of material. On the other hand trading companies will offer everything under the sun such as iPhone cases, USB power banks, and selfie sticks. Telling them apart is both an art and a science. I will dive deeper into this topic in the future so please signup to my free newsletter to be the first to know.
Which countries do you export to? I call this the country test. If your marketplace is the US and the factory exports to Africa or the Middle East then BEWARE. Their quality will be about the level of a 99 cent store. In other words CHEAP. They will claim they can make better quality but this is risky. In fact their whole supply chain is configured to low quality standards from cheap raw materials, to low skilled labor, to low quality control standards, to heavy handed packaging procedures, etc. I normally select suppliers who have experience with my marketplace or similar quality level marketplaces.
What other products do you manufacture?
There are two benefits to this question. First you are double checking the common theme test to verify they are a factory. Also you can discover new product opportunities this way. Million dollar Amazon sellers report that they ask suppliers for product suggestions.
What quality control system do you have?
Depending on your product you can ask about quality control systems. ISO 9001 is one of the most common.
Beware: ISO9001 certification can be purchased and its quite common practice in China. So take this with a grain of salt.
Can you private label for me?
This is important for Amazon private labellers. It’s good to check if they can do this for you in the beginning. They will normally require a minimum order or tooling fee – both of which can be negotiated.
How much is this?
To me the price is just one variable of the supplier equation and not necessarily the most important at this time. I get an estimate first and then ask for a firm quotation by email after the show.
The CIO of a major online sourcing platform recently asked me “How do you capture this information?” When talking with suppliers, I quickly take notes in my notebook which I will use when deciding whether to follow up. First I staple their business card to the page. Then I take down the name of the person I spoke with (not necessarily the same as the name on the business card) and the main points. Also I will note their booth number. I’ve forgotten to do this before and when I tried to find them again I got totally lost. This will save a lot of time.
I also take pictures of the product and the people. I learned this trick from one of my clients. It helps a lot after you return home and are trying to figure out who’s who. Also this builds the relationship or “guan xi” as it’s an appreciated gesture.
Finally I note the next steps for follow up: questions, request for quotations, and research (e.g. Jungle scout).
Common mistakes: I’m not perfect and here are some mistakes that I’ve made over the years attending trade shows.
Don’t fall in love too fast. Just like in speed dating there’s plenty of fish in the sea so don’t commit to anyone until you’ve walked the entire floor.
Don’t spend too much time with unqualified suppliers. If they’re a NO supplier, thank them and move on quickly.
Don’t spend too much time talking about pricing. Get a reference quotation first. There’s a couple reasons why. One is the salesperson does not have the authority to make a formal quotation by themselves. Normal the sales director, boss, and/or engineer needs to have a say. Also they just met you and don’t know you well enough to give you a low price.
Don’t forget to follow up. Just like you, suppliers will have met hundreds of buyers and they may have 100 things to do after returning to their factory. Take the initiate and email them.
Once you’ve seen the entire show, leave.
POST SHOW: But wait – you’re not done yet. You need to filter and follow up.
POST SHOW: You’re not done yet!
After the show I will have a ton of business cards, notes, and catalogs. I will separate them into 3 stacks:
YES: For Follow Up
NO: For the trash
MAYBE: Keep in case you need backup suppliers
So how do I manage all the emails after the show? I create a spreadsheet with the YES suppliers and their contact information, reference quotation, notes, and next steps. Then I follow up with an email template that I copy and paste. In the subject line I include their company name and product so I can quickly recognize who’s who.
Best practice: Never give them your primary email address! I create a separate email address for sourcing. Be prepared for a lifetime of Happy New Years, Merry Christmases, and endless supply of spam.
The follow up email will address these essential points leading up to a trial order:
Request for quotation based on your specifications. Please signup to my newsletter for a free RFQ template.
Questions about their company and product
Arrange samples if needed
Trial order
Here are some tricks of the trade that will get you ahead of your competitors at the trade show:
Get there early – There will be less people on the floor and you will get more attention from suppliers
Talk to the most senior person – I try to at least meet a sales director or manager as they have more decision making power
Take and early/late lunch to avoid the lines
Avoid the afternoon of the last day – Everyone will be closing down and not in the mood to talk business
Combine your trip with other goals – Factory visits and other trade shows
Get a VPN if visiting mainland China – Anything Google-related (Gmail, docs, maps, translate, etc), Facebook, Twitter, Instagram, New York Times, and others will be virtually inaccessible from China. More VPN info here. Make sure you get it BEFORE YOU ARRIVE. Many VPNs themselves are blocked in China.
Don’t go out and get drunk at night – Complete rookie move
Remember you’re at work and a good trade show can be priceless. With these tactics you will be on your way to finding the right suppliers and products at trade fairs so you can own that 7-figure business and swim in your money like Scrooge Mcduck!
Swimming in money
What’s your #1 problem when attending trade shows? Comment below and let me know.
Every year as the seasons change as we enter spring and fall – do you know what that means? Besides better weather, it’s trade show season! Just as there’s “more than one way to skin a cat” there’s more than one way to find a Chinese supplier. Besides using sites such as Alibaba, did you know trade shows can be a great way to:
Quickly identify qualified suppliers (and weed out the bad ones)
Meet them face-to-face to build trust
Get your hands on samples immediately
Find new products and trends
Imagine all the time you save speaking with someone in person rather than emailing back forth every night to get a sample delivered to you. I wrote an article earlier which outlines the benefits of attending trade fairs so I won’t get detail here why you should go. But before you hop on a plane to China, do yourself a favor and take 20 minutes to prepare to save time and headaches so you can maximize your trip.
Online preparation
Pre-register online and print out confirmation code – This way at the fair, you will skip the long registration lines like an VIP.
Research the exhibitor list and highlist the ones who are related to your products.
Get a head start by CONTACTING SUPPLIERS BEFORE YOU GO. This way you won’t be as overwhelmed when you get there. Another benefit is that you will get a headstart on the other buyers at the fair because suppliers already know who you are so you can work on warm leads.
Review fairgrounds map to plan your attack
Best practice: If visiting Mainland China (e.g. Canton Fair), signup for a VPN before leaving your home country! Anything Google-related (such as search, Gmail, Maps, translator, etc) will be a pain in the butt to access from China. Forget about Facebook, Instagram, Twitter, Youtube, and certain news sites such as New York Times. Things change but they are blocked completely as of now. Certain 5-star hotels may have enable their own VPNs, but I wouldn’t hold my breath. Here are the VPNs that I use.
Trade show everyday carry (EDC) – Packing list as a buyer:
You will meet a ton of suppliers at the fair. And you will forget who’s who. That’s human nature. So to make the most of your visit, your goal should be to organize this information so you can recall it when you follow up after the fair.
Here’s the system I use which is a hybrid of old school note-taking and high-tech smartphone tactics. If I meet a supplier that I’m interested in, first I staple their card into my notebook. Then I take notes on the page about their product, export markets, reference pricing, who I spoke to, and next steps. Also I write down their booth number in case I want to return later (very easy to get lost!). Finally before I leave I take a picture of their card in front of the booth and products to remind myself later if I do decide whether to follow up afterwards. Sometimes I take a selfie with the salesperson I spoke with so we remember who’s who.
Here’s my everyday carry:
Business cards – Bring more than you think you’ll need. At least 200
Notebook
Smartphone – Take pictures of the booth, products, and people.
Pens – cheap ones that you can leave behind
USB Charger and charging cable for your smartphone – this is a lifesaver
Wheeled luggage for catalogs and samples – save your back, they get heavy!
Comfortable shoes – Dressed to walk but look professional
“EPAC” 30 second elevator pitch – Think of yourself interviewing for a job. Just as a hiring manager vets their applicants, suppliers will vet and even GRADE their prospective buyers! How do you make yourself into a “Grade A” buyer in their eyes?
But to make a good impression and get the supplier to notice you first put yourself in their shoes. Suppliers would love to get a huge order from a Target or Walmart and traditionally they didn’t pay much attention to small volume buyers selling online. To put it bluntly, to them you’re a nobody (yet!). However times are changing and with the global economic slowdown as well as the explosive growth of e-commerce recently, they may be willing to listen to you if you play your cards right. So how do you persuade them to pay attention to you?
Before we start when meeting suppliers first make sure they can supply the product you need. Do this by simply asking. If not, then move on. If so begin by introducing your company, which market you sell into, and products you’re interested in.
Some keys you need to demonstrate are your experience, your ability to buy, and potential. No need to get into too much detail but just enough to hook them and get them to start telling you more about their product and company. I call this system EPAC: Experience, Products, Ability to buy, and Call to action.
Experience – Highlight your strengths just like as you would your resume to make them interested. Which market do you sell in? Have you imported from China before? How long have you been in business? Suppliers would much rather work with experienced buyers so don’t be the rookie who doesn’t know an FOB from a T/T.
Products – What type of products do you sell now and what are you looking to buy?
Best practice – a picture is worth a thousand words – save pictures on your smartphone and show them to the suppliers. This will cut down on a lot of misunderstandings. Better yet, have an RFQ ready that you can email them after you meet. This will put you in front of other buyers less prepared.
Ability to buy – Suppliers like it when you share a purchasing plan and not just try to negotiate down minimum order quantities (MOQ) to start. For example “We plan to purchase 200,000 units per year if the quality and pricing are acceptable. We will start with a trial order of 500 to 1,000 units after evaluating samples.” This is much more of a turn on than dealing with someone who can’t even meet the minimum order quantity MOQ. Of course this can be negotiated but MOQs are designed to filter out less qualified buyers.
Call to Action – You want to know more about them so start asking questions. Are they a manufacturer or trading company? Where do they export to? Do they have XYZ certification needed for your market? What’s their reference pricing for 10,000pcs?
Finally as a bonus think of value you can bring them!
Value – What’s in it for them? Listen to what they say and find a need you can fill. For example which markets do they export to? Maybe they would love to get into your market. One supplier I met recently at a trade fair tells me they have competitors who sell to the US and on Amazon. They are not there yet and they would love to get in which I can help them do. So they are willing to offer me better pricing. Think about their needs, fill them, and bam – you’re in! It’s not an essential but it adds to their impression of you if you can offer them value beyond just the order.
The 3 S’s of communicating with Chinese suppliers: Finally keep in mind that for Chinese suppliers, English is their second language. Imagine if you had to speak to them in Mandarin Chinese! It’s not easy so it will require a different set of vocabulary than talking to your friends or colleagues. I like to think of it as explaining your business to your grandmother: simple language, slowly, and with a smile.
Simple: Simplify your language. Remember you’re talking to grandma. No slang.
Slowly: You’re nervous. Or excited. But don’t rush. Speak clearly and slowly.
Smile: Body language is universal and a smile builds rapport and makes them more open to you.
In summary remember the 80/20 rule:
Before the trade fair frontload the work online first to save time
Use your everyday carry to streamline your visit
Practice your “EPAV” 30 second elevator pitch with the 3S’s in mind to make suppliers want to do business with you
With these tips and practice you’ll find the right suppliers at trade fairs to get better product and pricing than your competitors who are only searching online. Now tell me what’s your biggest challenge when attending trade fairs? Please feel free to share your stories and comment below.
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