Trying to sell physical products?
Manufacturing overseas can net you HUGE profits.
But you’ve heard the stories…
…China can be ruthless.
It chews up and spits out the unprepared.
The rumors are true.
In fact, I personally know someone who's raised $80,000 for his Kickstarter...only to have it flushed down the drain.
He was careful…
But somehow, he fell into a trap.
One that destroyed his whole business and the chance of a lifetime.
The worst part?
It was avoidable.
It’s why I decided to put my foot on the ground to help people do business in China the safe and correct way.
Whether you’re starting your Amazon FBA business or looking to launch your first crowdfunding project you will discover the five essential steps that will help keep your business safe from the jaws of China.
Here we go:
STEP 1 - Pre Qualification
Know What You Want!
You need at least a rough idea of the kind product you want to produce i.e.
The basic design (a specific product will often have at least a few distinctive kinds of design)
The basic specs (depending on the industry/niche, this could be the size, weight, length, color etc.)
- How much you want to order and how much you’re willing to spend. Being able to narrow the product niche on Alibaba will save you days if not weeks.
This step is obviously going to be much easier if you know your product well.
The better you know your product, the faster you’ll be able to determine what you really want and narrow your product niche on Alibaba.
Ask these questions:
What kind of factory are you looking for?
Are you looking for a factory to manufacture a completely new design that you made? This called an OEM or (Original Equipment manufacturer) factory.
- Is it a factory that will just put your companies name on the products they make? This is called an ODM (original design manufacturer) factory.
- Is it a factory that will put your companies name on the products they make but can also change the design a little if you want to? This is also called an ODM factory.
- Do you want a factory that does both?
Does it matter where my factory is?
Guangzhou is the main trading hub of China and is also home to the largest trade fair in the world. The Canton Fair is a bi-annual event where you see all parts of the globe flock to one city.
That being said, it’s important that you find a factory that’s easy to access location wise and also that’s in and around other factories that manufacture the same products.
- You can find competitive pricing when there is a hub of the same type of manufacturers.
- If you need to put out fires, staying in the same area will ensure your logistics aren’t all screwed up when you have to switch factories. Just go to the one next door.
- When launching a complicated product, keeping the factories near each other saves headaches. Ruggie (a kickstarter that raised $300k) came from 3 different factories AND had to be assembled in another one.
STEP 2 - Casting The Net On Alibaba
Once you’re on the Alibab.com homepage, you can either search for suppliers or wholesalers.
If you’re looking to only sell a limited amount of items, wholesalers maybe easier but your best margins are going to be made with the factories/suppliers.
With an ocean of products on Alibaba, it’s smarter to use the “search” bar with keywords rather than browse product types.
Once you type that in, you’ll run in to find a ton of different supplier ratings i.e.
Trade assurance, Gold supplier and Assessed supplier
I usually select only the Gold Supplier (GS) rating. The GS rating indicates how long they’ve been allowed to operate legally through Alibaba.
While Alibaba has its standards & procedures for this rating, keep in mind that the factories pay a membership fee to be considered a Gold Supplier so it doesn’t necessarily indicate quality. What it does is help you weed out inexperienced factories.
Focus on suppliers that at least have a 4 YR Gold Supplier rating.
They’re considered a legally registered factory by Alibaba for 4 years but chances are, they’ve been operating for much longer than that.
You’ll often see suppliers with names like “2015 Wholesale Italian Genuine Leather Wedding Dress Men Shoes/High Quality New Design Italian Men Shoes Made in China”
These are often new factories trying to get as much keywords into their name as possible.
IGNORE THEM (see below).
Pay close attention to factories that make many different products similar to the one you want. Look at the factories that specialize in your niche. This is where knowing specifics about your design and materials (as I mentioned in Step 1) will come into play.
You’ll have factories that have may have “Genuine Leather” in their name but only sell PU shoes. Pay attention to some of the smaller print below the name.
As depicted in the example above, if you’re searching for genuine leather dress shoes for men, a quick Google Search will tell you that PVC (Polyvinyl-Chloride) & PU (Polyurethane) are plastics and not the material of shoes you’re looking for.
See why you need to know your product?
Promise me you’ll do this thoroughly?
STEP 3 – Is The Factory Site Legit?
Following the dress shoes example, don’t waste your time looking at a factory that makes a 100 different types of jeans and only 10 styles of dress shoes.
The one you want is the factory that makes MANY VARIATIONS of dress shoes. This is especially important when your product is intricately designed, complicated or extremely unique because you need a factory with the experience and capability to create new designs.
After narrowing down criteria, I normally do a quick scroll down and open a few tabs on various factories.
Go through one of the factories in your tabs and straight away you’ll notice red flags.
An experienced quality factory will have a lot of basic information on the front page and they’ll also display products similar to the one you’ve selected to show their capabilities.
Novice or poor quality factories rarely have enough variety or information to display on their page.(below)
Apart from a quick look, don’t spend too much time on this page. Just check the company profile and view supplier’s site.
See if they produce lots of genuine leather shoes amongst other types as I mentioned Step 2.
As you can see, this factory makes literally 1000s of various shapes and sizes of leather shoes.
Now we can get more of the essential information by scrolling to the top and click on the “Company Profile”
STEP 4 – Dig Deep for the Essentials
On this page you’ll be able to find out the KEY facts about the supplier as a business. This is where you really learn about their Quality Control and Product Compliance history, production capacities and general business operations.
Basic information you can almost always find on Alibaba.com:
- Factory/Supplier Name
- Location (full address)
- Certification i.e. Business License # and Date Registered
- Qualifications i.e. ISO 90001/ASTM/SGS ready (don’t worry we’ll cover these in another post)
- Minimum Order Quantity (MOQ)
- Estimated Per Unit Cost (PUC)
- This is often dependent on how many products you want to make, the materials you want to use and how complicated your design is.
- Average Lead Times for Mass production
- Average Lead Times for Samples
- Factory/Supplier Size
- How many employees.
- Production capacity i.e. Can produce 10,000 leather dress shoes per month.
- Factory/Supplier Information
- Date Opened
- Main Products or Specialized Products
- You can normally browse their online catalogue to see what kind of products they’ve made and if it’s the
- Contact information (sales person’s name, mobile number and email)
Is the factory vetting process becoming a little clearer?
Good, let’s move to…
STEP 5 – JUDGING A SUPPLIER
You’ve found a supplier with experience, you’ve browsed their website, seen the products they make and seen their certifications.
Now it’s time to judge the quality of supplier using this information.
They might have a bunch of various certificates list i.e. Certified Nike Vendor Laboratory Accreditation Program.
You might be thinking…
“Cool, Nike! They’re probably reputable…”
While this could mean they have some sort connection to a huge brand like Nike. This certification doesn’t mean they’ve actually produced any Nike products.
They just passed Nike’s Vendor vetting program. This is a positive and should be viewed as added validation of the factory but it doesn’t guarantee quality.
You still need to look for the official Global Standards Certifications like the ones I mentioned in Step 4:
- ISO 9000/9001:2008(or the new 2015 version)
- SGS (S.A.)
- ASTM - American Society for Testing and Materials.
- GMC - Global Market Certificate
It's very important to make sure that you can see pictures of their certificates on the website or that haven’t expired yet. Some factories may list their expired qualifications in the hopes that you won’t notice.
See how sneaky that is?
Honestly, it’s hard to tell how many factories actually have up to date certifications. From experience, my guess would be 30% have them and 70% don’t.
I know I’m contradicting myself here, but some of the best factories we have worked and currently work with use either don’t have these or have expired certificates.
This is mainly because we’re on the ground in China and are able to either physically visit and vet a supplier or use our relationships to source quality factories. We use our GuanXi as they say in China.
Certifications are more important when you are trying to contact factories/suppliers while based in another country. But then again, they’re not always perfect.
Again, more booby-traps for those unaware.
Ideally, you would have someone on the ground doing the inspections for you.
When you can actually see the facilities, previous products, factory equipment, manufacturing process and sit down to talk to staff in person, you can avoid a lot of sleepless nights.
You don’t need to rely on phony certifications.
Anyways, once you gather the information on Alibaba, you’ll need to contact the factories.
Using the local language and understanding the intricacies of Chinese business culture play a massive part in making sure your project is on time, done well, and ready to ship.
If you leave this to chance…well… I’ll let your imagination run a little.
We know that this information alone isn't enough run your relationship with your supplier. That's why we're giving you our time tested free guide. Enter your information below and get instant access!