If you decide to create your own product, you have more creative control to design an item that is true to your customers’ tastes and needs, is innovative unlike anything on the market, or has better value for money. Having your own branded items sets you apart from the competition.
It makes your business more unique and more difficult to replicate by your competitors. Besides, it puts you higher in the food chain, cutting out middlemen in the process. While creating your own product is complex and time-consuming, it can certainly pay off.
We have put together the 6 steps for you to take manufacturing in China into your own hands:
Product Development / Finding Reliable Partners / Negotiation / Production Process / Logistics & Payment / Due Diligence
Let’s look at each step for creating and sourcing products in more detail.
Before you start driving, it’s a good idea to look at the map and know the destination. The same is true for sourcing. If you don’t know what you want, how high (or low) your budget is when you need the items, and how many…how can potential suppliers?
Put together the specifications, maybe discuss them with your team, and write them down. They should include:
Quality including raw materials
Budget including fulfillment cost (logistics, bank fees, etc.)
Quantity: request several quantities to compare prices
Lead time including transportation
Photos or videos as a reference (e.g. from a similar product that you saw online)
Certification: check if the country where you sell the products requires certain certifications, e.g. CE in Europe or FDA in the US
Keep in mind that when working with Chinese suppliers, the payment terms are typically 100% prepayment.
Also, remember to make sure that you have the copyright to create a certain product. For example, if you wanted to produce Barbie bed sheets, you would need the respective license rights in the distribution countries.
Another tip we would like to share is to consider if you can simplify your product without giving in to its quality or value. If you are producing a bag, maybe not all the handles or zippers are necessary? It goes without saying that a simpler product is simpler to produce and has fewer risks for error.
2) Finding Reliable Partners
This may be the most challenging task. Especially, if you don’t speak Chinese. But more and more factory managers and agents are learning English to do business with their international clients.
Besides the well-known online platforms, consider the following options to find reliable manufacturers to source your products from in China:
Attend trade shows and exhibitions in China
Collaborate with a sourcing agent or trading company (commission-based or flat fee)
To verify suppliers, make sure to get factory photos, certifications, and recommendations from previous clients. Review their business license and make sure you can do business with them legally. This includes payment terms, contracts, and the place of jurisdiction for legal disputes. If you are in the country, make sure to go to the factory and see for yourself.
Open and honest communication is important so that both parties are satisfied. But keep in mind that doing business in China may be different from what you are used to. Building a positive face-to-face relationship with your business partner is the key ingredient to a successful partnership in China.
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Once you find suitable potential suppliers in China, send them the product specifications to check if they can produce the products according to your needs.
Bargaining about the price, quality, quantity, and delivery time is normal in China. Most manufacturers in China require a rather high minimum order quantity (MOQ). The higher the order quantity, the better the price.
Keep in mind to be respectful and reasonable. You can’t get the best product at the cheapest price within the shortest time. “You get what you pay for” is universally true.
4) Production Process
Once you have found a supplier, the sampling process is rather simple and straightforward. It is also rather inexpensive and we highly recommend you do not skip this part.
You can go back and forth in the sampling process until you are satisfied with the result. Normally, the sampling cost will be deducted when you place a bulk order. You only pay the sampling cost if you decide not to go ahead with an order.
Next is the green light for production. Ask for regular updates and photos to avoid any production downtime due to a lack of communication.
Keep in mind that during Chinese public holidays (Chinese New Year being the biggest festivity in January/February), factories typically close for a longer period of time.
Now that your products have been produced, they are inspected by a manager of the factory, to ensure uniform quality and that everything is in order. Next, your items are ready for shipment.
5) Logistics & Payment
There are several forwarding types from China. The most common ones are:
EXW (ex works): this means you have to organize transportation from the location of the factory to the final destination. But you also have full control over this process.
DDP (delivered duty paid): the seller pays and arranges transportation to the final destination (including customs). This option is more expensive and you have less control.
A freight forwarder (a middleman between the shippers and the carriers) can help you with this process. Transportation by air is faster and more expensive while shipping by sea is slower but cheaper.
Whether you’re a startup or an established business, you can also save time and energy by working with a third-party logistics provider (3PL), who takes care of the whole fulfillment process for you.
Customs is a whole topic in itself. It includes the declaration, cost, and time period to process. If you don’t know exactly what and how to label your goods, they may get stuck in customs for a long time. Make sure to correctly and fully declare the export and import country, the type of goods, the value, and the quantity. Oftentimes, you also need to state the cost of shipping and insurance.
Payment and bank fees can also be complex. Make sure to clarify with your bank beforehand if and how they can transfer payments to China. Some manufacturers have subsidiaries in Hong Kong or Taiwan which can make it easier to transfer the payment from Europe or the US.
After you receive the goods, do a quality check immediately as claims typically are only processed within a short period of time.
You can find more information in our detailed article on importing goods from China here.
6) Due Diligence
When sourcing products from China or anywhere in the world, take reasonable steps to avoid scams and fraud, and ultimately a disappointment.
Especially if you don’t travel to China yourself it is easy for the supplier or third party involved to take advantage of your situation. For instance, the suppliers you have selected may not even have a factory in reality, while portraying themselves as credible wholesaler.
A Chinese business consultant can help you to get through this process smoothly.