The 9 Deadliest Sins When Sourcing from China and How to Avoid Costly Mistakes

The 9 Deadliest Sins When Sourcing From China and How To Avoid Costly Mistakes

By Mark Houng

Import Export Veteran

One of the main issues that I see people struggling with sourcing from China today is not having clarity on the pitfalls.

Over the last 24 years I've been helping businesses from 85 countries solve this. And, today I want to tell you the 9 most common pitfalls to avoid when sourcing from China and how you can avoid committing these costly MISTAKES.

The Best Part?

With this knowledge you can navigate through sourcing from China in just weeks instead of months.

So Let's Dive In:

The 9 Deadliest Sins When Sourcing From China

Sin 1: You are NOT checking on the IP

This is something most people don't think about right away. Yet, it is critical.

While the IP laws can be rather complicated. You don't need a law degree or hire expensive lawyers to do your research. Your goal is to make sure that whatever you end up buying, you have the green light to sell in your country.

Here the deal! Your supplier does not have the responsibility to check on your local IP laws when they sell you something.

Nor does your local customs officer or your friendly Amazon staff.

It will be you. Yours alone, as the seller that has to make sure you are LEGIT.

I have seen in many instances, people buy something from China or anywhere around the world. Only to find out at a later time that the product is IP protected and they end up with a cease and desist letter, a bunch of inventory that can't be sold or a lawsuit.

So protect yourself at all times by first checking on the IP.

Sin 2: You DON'T reaching out to sufficient number of suppliers

This is a MUST for your import business. Follow this like a hound dog on its prey.

It's very tempting to fall into the trap of suppliers with the lowest price and write off other potential suppliers. Especially, for those that source mainly off B2B sites. But, remember to contact a lot more than you need...

The fact is, B2B sites like Alibaba is just a bidding platform. Suppliers use low prices to attract clients. Many suppliers underbid their competitors even when they know it can't be delivered. Many times, these people don't even have a business. And, when they receive the order, they turn to other suppliers and try to resell the order.

Don't believe for a moment that the pictures of the big factory they post are true. Most of them are just stock photos. I know because I happened to have visited tons of them.

If you rely on the quotes you get from them or try to negotiate with other suppliers using the lowest quote. You will wait forever to get your stuff delivered. If it gets delivered at all.

Sin 3: You ONLY have CASUAL understanding of due diligence process in China

Needless to say. China has very different social and legal structure. If you approach Due Diligence as you would in the US, you are going to be in for a big surprise.

Recently, a friend of mine sent me a message: "Hey Mark, I sent a payment to a supplier in China and now they are not responding to me and blocking me off of their Skype. What can I do? " I asked him if he did make due diligence and how? Like most people, he asked for some references and checked if the company was a trusted supplier on Alibaba.

Sorry bud, that doesn't cut it. If you believe even for a moment, that Alibaba has a handle on whether the suppliers on their website are bonafiable "trusted supplier". Let me tell you the answer is NO. Think about it, how many businesses in your local town come and go out of business every year? It's no different in China. Just because Alibaba might have outsourced someone to check up the business a while back, it does not secure them as good trust worthy suppliers.

So dig deeper. Find out if they are financially sound. If the supplier bank accounts matches. If the working capital is corresponds to their business license. If they have export license. And, every little details about the company owner.

It's always easier to prevent disaster than trying to fix it later.

(Note: if you want to learn how to vet suppliers in China like a PRO? You can go here to pick up the 19 point Checklist and find out how to vet for trusted supplier every time.)

Sin 4: You lack in-depth understanding of your products

Your successful venture with China starts with a well planned project management.

Understanding what it takes to make your product, the materials used, the process for manufacturing, types of packaging and the logistics, helps you understand the costs related to having your products build.

It will also make you an expert in the eyes of the supplier. So you are less likely to get cheated. It will help you to call out on their bluffs. Whether your are getting over quoted or under quoted. Or manage through production on time. You cannot do it without a clear understanding of your products.

Sin 5: You DON'T take the time to build the relationship with your supplier

Businesses in China is often relationship first business second. If you take the time to get to know them, visit their factory, have dinner and couple of wines together. They will bend over their backs to help you.

Perhaps your business is still small and the cost of spending money and time in China is not within your budget. Nevertheless, you should still make the effort to connect and learn as much as you can about them.

Talk about their family, their goals, their dreams, their desires. Don't be just another buyer who just talks about numbers. It won't get you very far.

More than often, something will definitely go wrong during production or delivery. If you have build a solid relationship, the suppliers will make an effort to bail you out. And, that is gold to your business.

Sin 6: You Mistaken Product Cost for REAL Cost

You must think I'm crazy. Because anyone you talk to will tell you to get the products at the lowest price and make as profit as possible.

This is a concept that's rather difficult to grasp for a lot of people. And, it's costing people a lot more than just a few dollars they saved on the product on the front end.

It's very tempting to go for the supplier that quote you the best prices. However, what is the real cost of product? The real cost is everything else that's costs you to run your business. In other words, everything other than money in your pocket is your REAL cost. Not the unit cost of the product.

Consider what it costs you to acquire packaging? How about UPC or FNSKU code? How about logistics prior to have your products build and after? Cost of product return? Cost of an unsatisfied customer?

A well thought out plan that incorporates all aspects of product making and delivery is essential to get the lowest cost. And, boys and girls, that's your REAL cost.

Want to Learn How to Vet for Suppliers in China Like a Pro? Click Here to Get the 19 Point China Supplier Checklist and Vet for Trusted Suppliers Every Time.

Sin 7: You assume the supplier is on the same page

It can be a huge relief when you find a supplier that says YES to your requests and communicate with you flawlessly. After all, most of the suppliers in China has very limited English speaking or writing ability.

I learned this the hard way when I first started building products in China. I was working with a supplier that was the largest manufacturer of LED products. So I assumed that they knew exactly what to do when I provided them with instructions.

But, every time when we received the product samples. There was always something that they missed or worse they decided to THINK outside of box.

As I learned very quickly, factories work with clearly lay out plans. Everyone has to follow procedures and there is no room for them to think.

If you want to get you products build FAST. Be sure to clearly lay out what your expectations are and communicate well with your supplier. NOT just what you want happen, as well as what you don't want to happen.

Sin 8: You don't provide a golden sample

For most beginners. Sometimes even people who have been importing from China for years.
Getting a product build could be extremely frustrating. There are so many moving pieces when you are trying to build a product. Even when you are making some small modifications.

It requires a lot of time to build that relationship that tacit understanding with a supplier can take place. Kind of like that first year in marriage.

Having a golden sample can help you shorten that communication lag with your suppliers. It will help your supplier navigate through EXACTLY what you want accomplished. Help them write the specs for their production line. And, most importantly help you get your products delivered PRECISELY the way you desire and FAST!

Sin 9: You wait too long to FIRE your shot (Not taking immediate action)

When you deal with a country that's thousands of miles away from you. With its sets of business, cultural, legal structures that are extremely different than what you are used to deal with. It's natural that you want to be EXTRA careful and you want to make sure you are covered on all the basis. But, it also takes a lot of time to get things moving this way. More over, when you take up too so much time going back and forth with a factory. They tend to loose patience and give up on working with you.

When I built my first product, it took me over 18 months to have it launched. And, my first sale was over $175,000 dollars. Every month I delayed, it cost me over $175,000+ in business. I quickly learned that it costs more trying to save a few dollars in the beginning. Than to pay a little more up front getting things done.

A successful venture starts with taking fast actions. Taking too much time will not only hurt you business, it will hurt your chance of ever becoming successful. Do whatever it takes to launch your products quickly. It will pay off in big ways.

That's it. If you pay attention to above you should be able to get most of your products sourced and delivered within 4 to 6 weeks. This is a system that took me some time to develop and I'm so glad I got to share it with you today. Tons of folks have gotten results from this and I can't wait to hear about yours!

Mark Houng

Import Export Veteran

Want to Learn How to Vet for Suppliers in China Like a Pro? Click Here to Get the 19 Point China Supplier Checklist and Vet for Trusted Suppliers Every Time.

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