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Case study: Dealing with MOQ barriers when sourcing consumer electronics from China

A buyer of electronics writes in to ask:

I am in the consumer electronics industry, I currently sell TV’s, Sound Systems, Tablets, DVD/Blu-Ray players etc. I am very interested in importing TV’s from China. My business is small and growing so I am looking for a sourcing agent who can assist me in importing TV’s.

I specifically want 40″ HD TV’s only. I would like to place an initial order of about 100 TV’s. Future orders would be 300 and up every 2 to 3 months. I would prefer LCD TV’s over LED TV’s. I already have an importers license and have imported once before.

Could you connect me to a sourcing agent that would be able to assist? I am aware of PassageMaker but not sure if I meet their order value requirements for them to be able to assist seeing that my order is rather small. My thoughts were to get your advice first. I also want to get a quote first to make sure that I will have the financial resources upfront.

 Initial reply:

  1. You mentioned 100 initial units then perhaps 300 units down the road. What’s the target China buy price (FOB China port) you have in mind?
  2. Do you have an estimate of the costs to ship to destination market and clear inbound customs?
  3. What are your expected payment methods? The wholesalers will want to be paid in full before the good ship from China.
  4. The big question:  how much margin per unit can you spare for a 3rd party (for example, the freelance or small sourcing agent mentioned above) to manage the supply chain (assuming they are working on some kind of performance based compensation?) and the slight customization you require?

We’ll find a solution for you!

Glad to help!

Additional feedback:

Thank you for the prompt reply. The long-term goal is to put my own branding on the products. However I understand that my order quantity will not be sufficient to make it feasible right now. So currently I will take any local/no-name brands.

 

The packaging must preferably have only English printing on the outside and have an English manual. Furthermore, the products must have plugs for my country. (I can provide more information if required)

 

 

Here is a video series I made for people who want to source small order sizes from China:

 

 

Re the TV’s: I’ve got good news and bad news. The bad news, as you already know, is that 100 or 300 units won’t meet the MOQ of a TV factory.  The good news is that there are wholesalers in my city (Shenzhen) that can provide 100 units as that would be typical of the kind of order a hotel or KTV would place.  It is also good news that local TV’s are also 220V like your country. The bad news is:

  1. Most likely, if there is an English manual, it is English & Chinese rather than just English
  2. China wholesalers won’t have your particular plugs in stock as you particular plugs are not common.
  3. When you buy Wholesale level, if something goes wrong after the sale with the product quality, it’s unlikely that you will get any compensation or support from the wholesaler, so independent QC is essential.

So you would need some type of customization for items A and B. But if you are having the work done to customize the plugs, it would be easy to insert the English only instruction documentation at the same time.

Regardless if you buy 300 units or 30,000 units the upfront expenditure of time/money is about the same for things like:  supplier confirmation, sample testing, documentation of specification/ quality standards, project mgmt., pre-shipment inspection.  For that reason, a China direct option isn’t always economically feasible on small order runs and that’s also why the sourcing agency you mentioned (which I founded, actually), PassageMaker, services clients who have enough volume to not only interest the factories, but also cover their minimum annual service fees which allows them to assign professional sourcing staff and get things done right.  It’s the old conflict of do it right vs do it for low cost….

 

Long story short, you could find some wholesalers online, but without support on the ground in China to set and enforce the standards (plug, packaging, product…), monitor the quality, review the contracts, issue safe payments….you will most likely run into problems and financial loss.    So that leaves a couple options:

 

  1. You “DIY” manage the supply chain by making a few trips to China to purchase and inspect the TV’s in person (that assumes the wholesaler or another party you find can arrange the plugs themselves in China. Worst case you change the plugs one by one back home) Then work w a local shipping company to get the product shipped to you. I wouldn’t recommend this unless you have experience and plenty of time/budget for travel.
  2. I could introduce a small sourcing agency/ trading company or freelance sourcing consultant who would charge a flat fee/ commission or a margin to find a wholesaler of the TVs and sort out the plug/English language/QC/shipping.

 

Here is an article that explains more about the options: http://chinasourcinginfo.org/2014/05/13/options-for-support-with-sourcing-and-supply-chain-management/

 

Hope the information above helps. Let me know how things work out for you.

Glad to help.

Question answered by Mike Bellamy.

Author of “The Essential Reference Guide to China Sourcing & China Sourcing Academy. Founder of the PassageMaker group of companies.

Image Attribute: By Steve Jurvetson [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)]


Mike Bellamy

Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). Author of “The Essential Reference Guide to China Sourcing” and founder of PassageMaker Sourcing Solutions. Mike is co-founder of CSA, the China Sourcing Academy.


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