When sourcing private label products from China, one of the challenges e-commerce sellers often face is narrowing down the supplier that’s right for their specific requirements. While it’s easy to find a list of suppliers on GlobalSources.com or other B2B websites, finding the company that is right for you takes time, effort and a little work upfront.
As a private labeler, only you know what type of supplier is suitable for you based on your unique situation. So before you start searching for suppliers online or head to a trade show, it helps to define your ideal supplier. This upfront work will save you time during the supplier selection process because you can very quickly eliminate candidates that don’t meet your requirements.
Here are the key criteria to look at when defining and selecting your ideal supplier:
- Supplier type:
Before you start sourcing for suppliers, you want to decide upfront whether you want to go factory direct or source from a trading company or use the services of a sourcing agent.
Let’s take a look at how the four types of companies are different, and the pros and cons of each:
- Manufacturer: A manufacturer is the factory that makes the product. Going factory direct has it’s pros and cons:
Pros:
- You can get lower prices when you go factory direct, and especially as your order volume increases you can negotiate lower prices.
- Making modifications to the product is more efficient as you have the option to communicate directly with the factory, and you can also communicate directly with the engineers at the factory.
Cons:
- It can be more time consuming because there is a lot of communication involved. The time difference also slows down communication and decision-making.
- The language barrier is another issue. Some factories are not that good at communicating with foreign buyers. Almost all suppliers will have English-speaking sales staff, but the level of English varies. Generally, companies in the Southern province of Guangdong have better English skills than suppliers in the provinces of Zhejiang, Fujian or some of the more other inland provinces.
- Some factories don’t accept low MOQs, or they might not customize your product for a small order. So if you’re just starting off, you could consider sourcing from a trading company.
- Trading companies: Typically, trading companies buy products from factories and sell to importers. They may have stock or they get products made at factories when there is an order.
Sometimes manufacturers have their own factories for certain products, and they might trade in other product categories. Some trading companies might have invested in a factory or they might even own some factories.
Pros:
- Sometimes trading companies can offer better service.
- They may have better English skills, and they may be better at marketing.
- Trading companies may have lower MOQs for standard no-brand products because they buy product in high volume from factories, stocking it and selling them forward to many importers (e.g. fidget spinners in a white box).
- Since they work with multiple factories, they might have a wider range of products and launch new products more often.
Cons:
- In some cases, you may be paying a higher price for the product, because the trading company adds their profit. However, a large and well-established trading company might be able to secure a lower price from the factory they’re working with because they have a better relationship with the factory and they are ordering larger volumes.
- If your product needs to be customized, it may be more difficult to communicate your requirements to the factory via the trading company, especially if it’s a technical product and your contact at the trading company does not understand the product well.
Ultimately, whether you source from a manufacturer or a trading company, what you want is for them to be transparent with you, and tell you clearly whether or not they themselves manufacture the product you are looking for.
Let’s take an example of a famous trading company in China called Richforth. They’re a huge company with separate departments specializing in different product categories such as home products, electronics and garments. On their profile on GlobalSources.com, they clearly indicate they are an exporter, and that they work with 847 partner factories. They don’t say they are a manufacturer.
When sourcing from China, trust and transparency go a long way. So it is important to look for companies that are open about their business scope and capabilities.
- Sourcing agent: If buying directly from a factory sounds like too much trouble, you can also get help from a commission-based sourcing agent. These agents can help identify and verify suppliers and facilitate communications.
Their fee can range from 3 to 10 percent of the purchase price. Be aware that sometimes agents get paid by both sides – the supplier and the buyer.
- Sourcing Service Provider: These are companies that can help with the entire sourcing process from end-to-end, including supplier identification, price negotiation, quality control management, logistics and shipment management, and other sourcing matters.
A sourcing service provider can relieve your stress by managing your entire sourcing process. There are sourcing companies that cater to the specific needs of Amazon and online sellers, and FBA requirements.
Many of them are managed by Westerners, which makes communication more efficient than communicating directly with a factory.
But of course, there are costs associated with the services they provide. They usually work on a flat-rate model rather than a commission. They also might get a kickback from the supplier.
- Regulatory compliance:
Before you start contacting suppliers, identify the certifications that are required for your product, and make sure you work with suppliers that can meet these requirements.
The importer, not the China manufacturer is responsible for ensuring all products are compliant, and documentation is complete.
If you’re not sure about your country’s regulations, third-party inspection companies such as Asia Inspection or V-Trust can tell you about the requirements for most products.
- The supplier’s export markets:
This is another important criteria for supplier selection. You should ensure the supplier has experience exporting to the country you’re importing into. This is because quality standards vary from region to region and country to country. A supplier that exports only to say, Africa might not understand the quality requirements for Europe or the US.
- Location:
China is a big country. Most products are manufactured in cities on China’s eastern coastline, but different areas often specialize in certain product categories.
If you’re buying your product in the wrong region, you may have a price or quality disadvantage
Specific areas specialize in manufacturing certain types of products. These areas would generally have a well-developed supply chain for the specific product. Generally speaking, the south of China around Guangzhou and Shenzhen, which is also known as the Pearl River Delta, specializes in high tech products.
The infrastructure in the PRD is quite advanced, and this makes transportation quite affordable. Sourcing components, raw materials, packaging materials, equipment etc. is easy due to the massive concentration of manufacturing in the area.
Similarly Ningbo city in Zhejiang province is where household appliances and plastic products are manufactured.
Tip: To identify the production hub for your product category, do a search for that product on a sourcing directory such as Globalsources.com. On the search results page, look for the number of suppliers in each province. The province with the highest number of suppliers is where the production hub for that product is.
- Size of the factory:
If your orders are small, it is usually best to avoid very large manufacturers because they might not prioritize your orders as they constitute a small percentage of their revenue.
However, also note that smaller factories usually need closer monitoring.
It is also common for factories to subcontract production to a smaller workshop and this can cause quality problems down the line. Be aware of this, and especially if you have your own IP, you might want to prohibit subcontracting in your contract with the supplier.
- Specialization, equipment:
Make sure you have a good understanding of your product before you start sourcing. Is there a special requirement that is a must-have for a factory? For e.g.:
- Copper plating
- FSC-certified wood
- MFi-certified products
Summary: These are some of the criteria that will help you define the supplier that’s right for you. Once you have defined your ideal supplier, head over to a supplier directory such as GlobalSources.com, and start searching for your product. Then, use on-page filters based on your defined criteria to narrow down search results, and contact only those suppliers that meet most of your defined criteria. Happy sourcing!
About the author: Meghla has been working with manufacturers and importers for more than 15 years. More recently, this includes Amazon FBA sellers. She organizes the Global Sources Summit for online sellers twice a year every April and October, co-located with Global Sources trade shows in Hong Kong. She also hosts meetups for online sellers in Hong Kong and Singapore. She was based in China for close to 10 years before moving to Singapore 2 years ago.
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