Information
Here we try to briefly explain some important matters that you must remember as an import from China. It could be you know some or most of them but then going through them can give you comfort or remind you some mistakes made before.
China Economy
With a population of over 1.3 billion, the People’s Republic of China is the most populated country in the world. China is the second biggest economy in the world after the US followed by Japan in the third place. China’s economy was closed to $5.8 trillion at the end of 2010. Japan has been hit by a drop in exports and consumer demand while China has enjoyed a manufacturing boom. At its current growth rate, analysts see China replacing the US as the world’s top economy by the year 2020. By then, Chinese goods and services are estimated to represent as much as 15% of global trade. The US economy is currently almost three times the size of the Chinese economy in monetary terms.
What not to Import
Spend substantial time to evaluate the local market for suitable products which are in demand or will be in demand in days to come and customers who want to buy them. An importer or retailer knows the first rule to success is to know the customers and what they are willing to pay handsomely for.
Following competitors’ offering one might end up importing too many “Me too” products. Too much competition will drive profits down. The real China importing opportunity is the right product at rock bottom prices. By all means, avoid looking for products that are already being imported by large retail stores such as Nakumatt and others who are specialized importers with their own distribution channels. One cannot compete with their buying power and specialized sourcing departments or consultants.
Product Branding
Having your own brand could be the main key to success for your imports. This establishes your corporate image with Chinese manufacturers and local customers. It sets you apart from the rest of the crowd and portrays a professional touch.
Searching for Suppliers
As mentioned elsewhere, identifying suppliers in China is not easy because there tens of thousands of them and one cannot visit everyone. One has to filter down to suppliers that may have the products selected for import.
The information found in search engines is so rich with suppliers’ products photos, short product description, and videos of the factory and showrooms. What you might not be aware of is that many of these companies are not manufacturers but only trading companies or agents. This is not necessarily bad if you are new to importing business because they can provide services that factories are not willing to provide for small to medium sized imports like you.
Buying Factory direct or through middlemen
Buying factory direct or though middlemen both have their merits and demerits and the import must be able to choose the best option
Establishing Communication
After browsing through the search engines and narrowed down to a few suppliers, the next action is to establish communication with them on price inquiries and product quality and specifications.
When communicating with the selected factories or suppliers, one must enquire about their company background (ownership, number of staff and main export countries). Point to learn here is if a factory is producing goods for countries a known low quality requirement. This will mean they may not be able to comply with the strict trade requirements of the EU and USA.
Product Cost Calculations
On negotiating better prices from factories, one need to first decide which buying terms will apply; is it FOB or CIF. FOB stands for Free on Board and its terms are carriage to be arranged by the buyer and risk transfer from seller to buyer happens when good pass the ship’s rail. CIS stands for Cost, Insurance and Freight where carriage and insurance is to be arranged by the seller.
As an importer, one should always keep complete cost calculations in mind which requires more than only calculating the landed costs.
Visiting Suppliers/Factories in China
Visiting China factories personally is very important though many do not see the need until they make mistakes. The concern here is the product quality assurance. We usually deal with small to medium sized factories which need clear instructions from us and this is best done by a meeting face to face. One of the issues working with an agent is that they may be knowledgeable about a wide variety of products but not necessarily sufficiently experienced in any of them. The Chinese mentality prefers frequent personal contacts with their foreign trading partners and visiting their factories goes a long way to achieve this.
Be prepared for Surprises
The small and medium sized factories will usually offer the most competitive prices and since the importer wants to maximize on profits from importing, they will be the best to partner with. During the factory visit, one can be in for many surprises and may have to revise the first judgment arrived at from previous communications with some of the factories. You will find that some of the factories are smaller than expected and have only a limited production capacity available on their own premises. They do not want to miss out your orders so they hire subcontractors to produce them instead.
Hiring subcontractors is totally unacceptable because they are usually inferior in quality management and care less about your orders because you are not their direct customer. If a factory ahs this policy, just do not work with them if you want to stay out of trouble.
The importing consultant
A better way you can achieve superior results is by employing a neutral company as your import consultant. Our company can you this service at affordable costs. We have over 10 years experience in dealing with Chinese manufacturers and the Kenya market.
Simply send us your requirements and we will execute them in the best way possible. You do not need to worry about inferior factories because we know how to avoid them. We are Chinese who have worked in China and Kenya for over 10 years and understand both the Chinese and Kenya business culture. We have no special relationship with any factory in China and will strictly follow your instructions.
Order Samples
Ordering samples is an essential part of your quality assurance that is often overlooked by companies new in importing business. Always provide detailed information about your sample requirements as this is the key to your success. Why key to success? Imagine that you did not pay adequate attention to instructing the factory about your sample requirements and they prepared the sample according to their factory standards. Remember time is money and you need the samples checked for compliance with local quality standard requirements. It needs to be right the first time.
IP Phones
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If the first sample is incorrect, you could take a risk and place your order hoping that the factory will get it right the second time. It is not good to take the risk because there cannot be a guarantee that the factory will follow your new instructions.
It is best to ask the factory to manufacture new samples. Time starts to become an issue as you wait for new samples to be produced and shipped to your country in 7 days. You would have lost possibly a month but it is worth it. Never place any order with new suppliers before you receive acceptable samples of the proper quality approved by your internal or outsourced quality control department. Anything else is a gamble and you do not want to begin production with that level of risk. Only after establishing a business relationship with China suppliers can you be confident that they will closely follow your instructions. It is important to set things right from the beginning.
Samples are not free
Samples are rarely free as they are handmade and very labour intensive. Even if they are simple plastic products, the factory has to follow importer instruction and injection mould them in a certain colour which is time consuming because the plastic injection machines run at full capacity and the injection is limited to one colour at a time. If importer asks for several different colour samples, they can only make them when they have production in the requested colour. Naturally this increases the time it takes to receive the samples.
An alternative is to paint the samples but the surface of a sprayed object looks different from injected one and may mislead you to approve something which later turns to be imperfect.
The above explains why factories are reluctant to provide free samples to new customers. In many cases we can convince the factory to refund the sample cost after reaching a certain order volume. It is good business to negotiate this in the beginning.
You will also be asked to pay the freight charges for the sample delivery to your country. This can be expensive because samples are usually sent by air currier in order to make up lost lead time and stay on schedule. Factories do not want to pay these charges because it is often difficult to convince them to do so.
