Buying Wholesale in China : how to guide

Notwithstanding COVID-19 preventive actions, coupled with a low consumption for the last year, China is still the go to destination for buying wholesale globally. Whether foreign buyers seek low-cost made in China, or competitive advantage over their local competitors, or even an improved economies of scale, Chinese wholesalers help import businesses to maintain a profitability overall.

While the margins offered by low end products are reducing due to the increase in workforce wages and stricter regulations, there is still a lot to do with middle-end and high-end Chinese wholesalers. Today’s workshops and factories have never been as well-managed and equipped. Export companies in China have gathered a great amount of knowledge about products, international standards, and foreign business habits. In a nutshell, Chinese wholesalers have come a long way when looking 30 years back.

Nowadays, the challenges when dealing with importing wholesale from China are for example the sheer number of so-called “wholesalers”, “exporters”, and “trading-companies”. This alone can feel overwhelming even to a seasoned buyer. So, together, let’s see what China wholesale strategy may work for your business.

Step 1 : Finding the right Chinese Wholesale Company

“A chain is no stronger than its weakest link” makes a lot of sense when it comes to describing the success of a business in relation to its supply chain, whether it is located in Asia or China.

Spending time, and effort (and thus, money) to identify the right supplier is key to building a durable and strong wholesale purchasing strategy. But the question remains, where and how to find the right wholesaler for your import company.

Never start with B2B platforms, put your ear to the ground instead

Searching for Chinese wholesale suppliers on B2B platforms is not always the best way to find a wholesaler in China. Especially since these platforms are somewhat cluttered and less and less like a directory. The best advice someone can give you is to :

1. Ask around in your network for references. Nothing compares with genuine feedback from another importer about the performance of the Chinese partner.
2. Check the notes that you took down on your last trip to a trade show in China. You will undoubtedly find company names, and even notes about the encounters and impressions suppliers left you at the time.

Get in touch with a sourcing company and let them do the heavy lifting

The second method that comes to mind is to find a suitable sourcing company to help your business find the right supplier. Sourcing companies offer services, not products. Here are the strengths of Chinese sourcing companies :

• Sourcing companies in China have their own industrial network. They have access to channels your business does not.
• China sourcing agents give importers full access to wholesalers name, location, contact details, product list and can assess the risks before ordering.
• They invoice for the resources and work involved with finding, contacting and screening suppliers.
• You and your team can decide to hire a sourcing agent on a per-project basis, and control your costs, as well as the lead time for sourcing.

Avoid the pitfalls of Alibaba, Made-in-China and the likes

Alibaba.com, made-in-china.com and globalsources.com are some of the biggest B2B directory/ordering platforms you can easily find when looking for Chinese suppliers. These being among the largest, they may also prove difficult to navigate for some. Here are the reasons why :

• Alibaba.com started as a Chinese manufacturer’s directory, and evolved into something quite different. The platform is now more and more product-oriented and goes to such lengths that it is more time consuming to actually find out about the company behind the product.
• Made-in-China.com and Alibaba.com may display inaccurate information about vendors on the platform due to the vast amount of data to check for. For example, it is a common practice for some Chinese companies to display the number of employees in the hundreds when there are actually only a dozen. Who should you trust then?
• The sheer number of companies on these wholesale directories create intense competition which results in unnatural and uneven visibility of vendors.

All in all, I still find information on globalsources.com to be more reliable.

Step 2 : Negotiating Terms & Orders in China

The downside of any global sourcing project is the increase in risks compared to buying locally. Whether retail brands buy from Asia, Europe, the Americas or anywhere else, any importing business will need to balance the risks with safeguards. Implementing safeguards is a part of negotiation.

1 – Make sure your requirements are all translated into written form

Dealing with a foreign wholesaler increases your risks, making sure that you can leverage your supplier with written evidence of a requirement made prior to placing the order is key to minimizing risks.

2 – Sign off a “golden sample” before you place an order

A golden sample is a sample of the product that was validated by both parties before the order is placed. There must be a clear understanding on both parties that the actual manufactured product may display variations. Especially if the product is handmade. Get in touch with a Quality Inspection company if you need guidance.

3 – Navigating the complexity of negotiating with Asian suppliers

Mindset, language, and business habits are different from country to country. Hopefully the English language is a commonality. Working on a Chinese/English contract can help a long way with getting your company’s bottom line clearly stated.

4 – Key information that any Proforma Invoice should display

While you can fine tune the details of your order via email or chat with the wholesaler’s representative, it is important the following information is displayed on any contract/ Proforma Invoice your company signs with a supplier:

• Both company’s names & detailed addresses. Beware if your team finds out that the company details on the Proforma Invoice is different from the name of the company you are in contact with.
• Name + contact details of the representative of the Chinese wholesaler.
• Product name & core specifications (dimensions, color, functions, packaging). This varies widely depending on the product and industry.
• Quantity of product orders & allowed variation. For example when buying raw material, one should be wary of the +/- allowable variation in quantity. This may affect the overall purchase’s budget, or stock level.
• Unit price, and total price in your designated currency.
• Incoterm (FOB, EXW, CIF, …)_
• Delivery time (and place of delivery). Careful about wording here, “manufacturing lead time” means time needed for manufacturing. It does not include time needed to process the goods out of the factory and deliver them to the nearest port/airport/rail freight station.
• Payment method : T/T 30%-70% or else, L/C, … Payment terms are usually a big part of negotiation, but in our experience only a handful of wholesalers agree to ship the goods before receiving full payment for the goods.

Step 3 : Preventing delays and quality defects

Again, “A chain is no stronger than its weakest link” and a Chinese or Turkish supplier may be your company’s weakest link. But there is hope, plenty of made in china goods are inspected before shipment each year. It is our strong belief that ALL shipments should be inspected for defects in quality and packaging. Regardless of how much trust there is between a buyer and seller.

In order to prevent shipping goods from China with a high defect rate, securing the help of a Quality Inspection company in China is sensible. The second step will be to implement a Quality Strategy with your Q.C company and supplier. Depending on the manufacturing process, frequency of your orders, and quantity ordered, the qc company will share a plan for you to approve or tweak.

Step 4 : Shipping products without overpaying

Shipping costs are high, this is an understatement when you happen to compare 2018’s shipping costs with 2022’s. But this is not the main issue. In order to make imports from China profitable, one should take into account shipping costs. According to our experience, the key is to find a suitable shipping agent and build a relationship that can lead to further cost cuts.

Most importantly, seeking quotes even when you are not shipping will help your team identify periods in the year when shipping costs are lower. Additionally, you may identify better deals too.

Lastly, you may ask your wholesale company in China for a reference. In that case they may offer to handle shipping themselves. Know that most suppliers handle only intermodal freight up until arrival at your port. They seldom handle land freight, customs clearance on your side.