Sourcing in China

Mickk

Sourcing in china treads from someone asking about alibaba or how to find products often pop up here so I thought I would give my experiences so far.

A little background, I have imported around 25 containers over the last 2 years but have never been to China before. I had the luxury of starting small because of financial restraints and the fact that I was a small startup with a low turnover. This meant that I could just start with buying a few pallets at a time rather than full containers. Also I always bought a decent quantity of samples and a trick I used when dealing with new suppliers is to make some requests that wouldn’t be normal to try and test the response and ability of the contact to manufacture the samples. I have said before that I thought alot of “manufacturers” are just tech suave English speakers who pretend to be factories and charge a massive premium for answering all the emails and paying the massive alibaba advertising fees. I‘ve been lucky to have found good suppliers who I have a good relationship with, I have also spent 3-4 grand on samples (and freight) which looked great on paper and turned out to be rubbish...

I have talked a little bit on here before about a new product I have invented/designed and have a patent pending on, I am going to launch it in the states in November. This time I don’t have the luxury of time and small orders to iron out any issues. The value of my first order will be over a million (yuan ) so I decided I had to visit china and get everything right from the start or it would bankrupt me... The problem I had is that the engineering process or design I needed for my product hadn’t been used in a similar way before so I had to design the product, design a process and then find a reliable factory to make it.

I didn’t want to use any of my existing suppliers because my new product is a different type of equipment to what they make. My first problem was that China is so big I didn’t know where to go, if I found one supplier who looked good on the internet I would be putting all my eggs in one basket to go to his city. I decided to find 15 or 20 different suppliers that looked good (dealt with the same material and technologies) and plot them on a map to see if there were 4 or 5 who would be in close enough proximity to visit. When I found them using alibaba ect. I noticed that every single one of them was not only in the same area, they were all in the exact same city! It was about 300 miles from shanghai airport, a city called Yongkang. I searched google for the city and practically nothing came up, a paragraph of Wikipedia saying it was known as hardware city was about all the info I could find. I found a load of information about a close by city called Yiwu which is the biggest commodities market town in china, with over 2.6 million sq m of commodities markets! (http://yiwu.gov.cn/ywwwb/english/e_gyyw/e_ywgk/) I decided not to contact any of the suppliers I had found, I reckon that if you give them advance notice they arrange it with the factory that actually produce the goods to give you a tour and make sure there are employees scurrying around everywhere pretending to be busy. The one thing I did was find an interpreter, 40 euro a day and it included transport around to the different factories.

I only decided last Friday I could spare a week from work and go on Saturday (had open visa already). I spent the first day checking out the Yiwu markets. They have it all broken down by types of products. The sports section had about two or three hundred shops over two floors, they have small shops/agents on one floor and up the top they have larger factory direct sales showrooms for larger orders only. There was about 80 factory direct showrooms and about 20 for gym equipment that suited. The rest were mostly massage chairs (sports?), ping pong balls, basket balls and pool tables ect. Out of the 20 another 4 or 5 were in Yongkang so I took brochures and told them I would visit the factories.

The intrepeter is a lovely bloke, very genuine and without ulterior motives. I was worried that deals might be done behind my back between the interpreter and the middle men acting as factories. His father’s friend has a factory that was suitable and not on my list but he even advised me that recently he was in a bit of financial trouble so it might not be the best idea to do a large order with him... I had a list of 13 factories plus 4 from the markets. I thought it would take two or three days to visit them all. By lunchtime we had found out that 9 out of the 13 “factories” listed on alibaba and 2 of the ones from Yiwu markets didn’t exist. Out of the three real ones on Alibaba two (one of whom advertised on alibaba as being 100,000 sq m) were mickey mouse factories with very basic equipment and just a couple of staff. One was a medium sized factory (around 2000sq m) and the other was massive (around 10,000sq m). The two from Yiwu were medium sized and basic aswell.

I discussed my needs with the engineer from the large factory, they had good electronic machines and their own manual powder coating plant. The technician was really helpful and obliging but the sales rep just wouldn’t quote competitively. Some of the agents on alibaba were beating his price and they are adding a decent percentage? I thought it might have been a wasted trip as I had visited all the factories on the lists and not made any real ground. My product is fairly simple so I decided I might set up my own factory to make it. My guide said it wouldn’t be a problem, his words were “the Chinese government are very open to foreign enterprise because we are a very hard working people but we need to copy the business skills from the west”. Factory space is around 15 cents a sq m to rent 5 mins from the city centre (so you don’t need to build dorms) and in the second hand hardware market I priced all 5 machines I would need to bend, cut, stamp, press and form the product to only around 15k. I could outsource the powder coating and buy in pads and bolts and the box like most factories.
I noticed on the map I had bought of the city centre that it wasn’t only the local amenities that were listed but also the larger factories in the city. It’s not a tourist place, Yiwu was full of arabs and there was even a halal restaurant, I think I saw one other westerner but I’m sure they are common enough, I was only there a day. I have only just seen a Russian couple in my hotel an hour ago, the first non Chinese in Yongkang in 4 days so I don’t think it’s the type of place you can buy your way onto the map for advertising to the tourists. I bought a county map and I did find a gym equipment company I hadn’t found before.

When we turned up and the first thing I saw when we walked into the office was an Ikea poster with I think their code of conduct in Chinese (the interpreter said it was about cleanliness and procedures). The factory was beyond massive, they said it’s over 100,000 sq m, a million sq ft!!! I asked them about ikea and they said yes they produce for Ikea, Lidl, Aldi and Everlast boxing! Then during the tour (of about a tenth) of the factory I saw them packing boxes for Argos. When we got down to prices and they were around 25-30% cheaper than I had been quoted before. I thought I had it sorted and we set up a meeting with the chief engineer. I searched the internet for them but couldn’t find anything about them, they might have a Chinese site but I doubt it.

I met the engineer and went through exactly what I need done. Without getting too technical I need a shape made and I am fairly sure it could be made by simply forming the end of the metal to this shape. It is one process and takes 4 seconds per unit. There is no chance of human error. His solution would involve 5 process’s one of which would involve an element of human error (welding). The cost is only around 50 cents extra per unit but it’s more about the fact it’s just wrong, over engineered and would look ugly. So that’s where I’m at now, I have two days left and I need to either find a another large scale factory (very unlikely), prove to the engineer it can be done my way or set the wheels in motion to open my own factory (in partnership with a Chinese manager).

Back on topic to sourcing in general, my experience is that alibaba is very hit and miss. Yiwu markets didn’t seem great either. When I asked the massive company where they got their clients from and they said trade shows is best, especially international ones (FIBO in germany is the biggest gym and fitness one). I asked them about advertising on Alibaba and they said it is not worth it for them, good English speakers cost 4-5 times what a labourer costs. They said you just get thousands of enquirys, quotations and hundred euro sample orders and with the cost of the English speaking staff it just isn’t worth it. Another example of this is the biggest metal factory in Yongkang, in English is called China Gohigh. (www.chinagohigh.com). They have a 100 acre factory and used to advertise on alibaba and others but decided it was such a drain on resources and the orders were so insignificant it just wasn’t worth the hassle anymore. The stopped selling to anyone outside of China, if you ring or email them they wont sell to you! That said one of the contacts from alibaba was a huge busy factory so I'd say a lot of it is just down to luck.

The map worked great for me for finding the big boys but it might have been lucky. One other trick I use which has worked in the past to find out who the big US companies are buying from is to use the google bots to search importation sites, for example if you want to see which company intel buy from type site:importgenius.com intel into google. You will see a sample of bills of lading including the word intel detailing the importer, the exporter, the commodity and the weight. His has worked a treat for me in the past but you wont get access to all the bl’s just some of them that import genius display at random on their site. Apart from that a factory visit is the only way to really show what’s real and what’s fake. One mistake I made when searching alibaba was to disregard any companies who were called Industry and Trading companies. From driving around the different industrial estates there are loads of companies just called this and you never know what they make. I also disregarded Import and Export companies which was correct, they are just middle men/trading offices.

Out of interest I asked about wages and the difference between the labourers and the engineers is amazing. A few of my mates might start learning Chinese because while the labourers get only about 2.5k euro a year the chief engineer of the place I went is on 100k euro (and he is useless). He would be right at the top end of earnings for engineers, it is a really big company. Experienced engineers do still get really good money, average is about 50-70k euro a year.

Also I don’t want to burn my bridges with argos or affect any confidentiality agreement they might have with the suppliers so I wont name the product but I will say I saw an argos product being packed which cost them 5 euro and is in the Irish catalogue for 120 euro! I don't want to say everything is going to pick up again now but for the last 12 months business in my interpreter's fathers factory was down around 45-50% from what it was in 2005-2007. Just in the last 4 weeks he says it is the first time him and all the factories in the region are up on that a bit, about 20-30% (from the level of the last 12-18 months) but I don't know if he has accounted for seasonal buying, Christmas orders start coming in now.

I noticed a couple if trends that people might be interested in, one that I thought would be perfect for that chap on the dragons den who didn’t pay his vat. He got a hard time and seemed like an alright bloke so I tried to find him to tell him about it but he just went bust with 650k of debts... (http://www.toynewsmag.com/news/31236/Atomic-Toys-collapses) Anyway they are called wave boards and every single kid or teen over here is on them. Maybe they are already on sale in Ireland but i have never seen them and literally you wouldn’t see a street anywhere here without someone on one of these. They only cost about a fiver in a decent factory or cheap ones are only around three and I’d say you would get 40 or 50 euro for them in Ireland on your own website and you could wholesale them into bike shops and toy stores for 20. They are cool and they don’t look like a fad because they are very clever. They have a sprung torsion bar in the middle which can twist and wheels are on castor wheels like a shopping trolley for changing direction. The angle they are set at means it propels you forwards when you sort of sway from side to side, you never have to put a foot down to push like a skate board.

Another thing which would have mass market appeal is a new microfiber mop and spinning bucket. Again I havn’t seen it in Ireland yet but it might be on sale. It is very simple but does solve a problem. Cheap mop buckets break when you try and wring out mop heads with pressure or you have to bend down and squeeze the expensive ones. This system has a pedal which connects to the bucket and is highly geared, when you step on the pedal it spins the bucket so the water wrings out. They are about 3 euro to buy over here and are on qvc for 50 dollars.

Another thing that seems to be piled high by every building site and roadside is them very white lightweight bricks. I remember seeing them on an episode of grand designs and that they are carbon neutral. Maybe it is some government policy to get planning permission you must use these bricks but that doesn't sound like the China I thought I knew... I will try and find out tomorrow, I might need to know the regulations and bull**** if I do go ahead with my own factory.

Some non business related things that struck me, firstly the amount of money over here is unbelievable. I sort of expected it in Yiwu where all the foreign businesses come to find suppliers but even in Yongkang the place is unreal. In Yangkong I have seen two Bentley and three Porsche garages. This city only has a population of 550,000. I’ve been here 4 days and seen 4 Maserati Gran Tourmiso’s, 4 Quattroporte’s, 2 Hummers,40+ BMX X6’s, 50+ Porshe Cayennes and literally hundreds of 750iL Bmw’s. A sign of how booming the car market is here is that BMW have launched a special extra long luxurious 5 series for the Chinese market only! They don’t even bother to sell the normal one. It’s not as if it’s cheaper to buy a car either, the 523Li is 55k euro. Also Cadillac and buick are huge over here, don't think they even bothered to launch in Europe. The shops seem even more expensive than Ireland for branded stuff, the cheapest real Nike t-shirt was in a sale at 22 euro, most of them are 35 euro. A ****ty 4oz striploin steak (in the only place in the city that does western food) is 22.50 euro and I spent a tenner to wait half an hour and find out that a “New York Brownie Surprise” is two scoops of ice cream with chocolate sauce, hundreds and thousands and a sliced cucumber down the middle...

Atlas_IRL

Great thread Mickk unreal at what we charge over here compared to what they actually buy them for.

You would make a killing over here with them wave boards if they hit off.

http://www.youtube.com/watch?v=aLccdPF68_o
looking at the comments here, they seem expensive enough!

Good luck in your sourcing.

In China at the moment, in Shanghai. Have to agree about the wealth and everything you have said. Another thing that surprised me is how beauitful the women are over here. Not really into Asian women but over here, you have absolutely beautiful women that just aren't in Ireland...It's upsetting. It breaks my heart.

Mitchomagic

Great thread,have to argee with what you said, have been to China a good few times,and its the only way to source products.Web sites are fine to gauge markets,but you have to cut out the middleman an go direct to the manufacturing areas.

Good luck with the business

Any luck with getting your product sorted ? Did the Engineer listen to you or have you found someone else etc ?

Mickk

Deleted User wrote: »

Any luck with getting your product sorted ? Did the Engineer listen to you or have you found someone else etc ?

The engineer wouldn't entertain it so I left it... I found another factory from a logo on one of the products in the massive factory's showroom! I thought that if they bought products in from them they must be well priced and also big. I went to them and it was actually a small factory but their engineer was very good and positive. He went straight down to the workshop and had a sample made up in about a half an hour! I spent alot of time in the factory and discussed every detail, they gave me a quote in one day (a good one too) and they even made up mock boxes to see exactly how we would pack it and how many I can fit in one container.

The only problem was that I just had a really bad feeling about the owner of the factory. The sales rep and the engineer were great but the more I dealt with the owner the more I didn't like him... From searching the net they have a load of websites but they are all under different names. Also their limited liability is only 80k euro which is very low by Chinese standards.

What I think I am going to do is hedge my bets, pay the mould fees and get an order sent to Ireland for just a pallet of them from the company with the good engineer (but bad owner)... I am also going to set up my own factory ( a joint venture with my chinese manager). I have bought the equipment I need and rented a small warehouse. I am going to get moulds made and start producing the product myself. If I run into any unexpected problems I can get the other factory to make them.

I want to land the product in the states in the first week or two of November so I really have to start production in 6 weeks and I have to get the box and inserts done between now and then.

Rujib1

As far metal parts and plastic mould parts, India is now lower cost than China!

The curry is better as well :P

R1

Mickk

Rujib1 wrote: »

As far metal parts and plastic mould parts, India is now lower cost than China!

The curry is better as well :P

R1

I have priced iron in India and China has always been cheaper. I have brought in containers from two different leather suppliers in Pakistan and found them really slow and quite stubborn. They insist on using their shippers and weren't as accurate as the Chinese, I have never had anything missing on any container from China, both suppliers from Pakistan sent the containers with items missing...

fiscalstudent

one of the most informative threads I've ever seen on here. Thanks for sharing Mickk. DO you already have a chinese manager in mind? how did/will you find someone suitable?

RUDOLF289

To All,

I have posted this attachment before. Especially first time importers / exporters may find this useful information.

Happy to clarify or assist with any aspect of imports / exports or distribution

Regards,
Rudolf289

mini1275gt

Hi All

I don't know if this is classed as advertising my company ( mods if this is sorry in advance ) Our company has a sourcing office in China for the last 3 years with all staff speaking english etc, If I can be of any help please PM me of see our web site www.kube.ie to get details of what we are about . I visit China every few months and have gotten to see lots of factories in my time there . The Chinese over promise and under deliver always allow extra time on orders , QC etc, The best of luck with your new product.

Regards
Brian

Mickk

fiscalstudent wrote: »

one of the most informative threads I've ever seen on here. Thanks for sharing Mickk. DO you already have a chinese manager in mind? how did/will you find someone suitable?

Hi Fiscalstudent,

I met someone while I was there and I trust them. I was going to have him working for me just once a month doing qc when containers were ready. We decided we could have a go ourselves, he knows the product better than anyone after being with me and the interpreter while I discussed every detail of the manufacture to numerous different engineers...

The backup factory is starting producing 100 samples this week and I reckon I am about 4 weeks away from starting so it will be interesting to see what the differences will be between the two.

scull2009

thanks for the thread, some great reading, i'd love to be able to do what your doing - don't have the cash for it though, have maybe £5,000 in bank