Q3 2018 China Business & Law Update for Busy Executives
Topic 1: Best of the 2017 Mailbag
Some of you have written in with great questions about China business. I’m happy to do my best to answer, or at least get you pointed in the right direction. I thought I’d share some of the highlights from last year’s digital mailbag.
But first, let me explain a bit about how I got into the China Sourcing business and why I offer the updates and video tutorials for free.
About 12 years ago, my group of companies had a growth spurt and we went from 2 dozen employees to 200 in China. In order to retain high operational standards, I spent almost a year reviewing or creating every SOP, template and checklist in order to have a comprehensive Operation Manual for my sourcing agency.
The manual served my company well and I realized that other importers, sourcing agents, and manufacturers would find my Operation Manual of value, so I took a three-month sabbatical from work and went to a beach in Thailand to write a sourcing guide book based on PassageMaker’s Operation Manual. A few years later, the proceeds from the book were used to helped pay for my pool villa in South Thailand!
Once the book was out there, to my pleasant surprise, I started getting a lot of requests for interviews with the media, such as CNN, Financial Times and CNBC. I also started doing a lot more speaking engagements. Those speaking engagements were fun and it was cool to get paid to speak to business organizations and trade shows in places like Australia, Dubai, South Africa, India, the US and of course China/HK.
But I realized I could reach a much larger audience if I simply recorded my presentations and posted them on YouTube. I hate those YouTube teaser videos where the video blogger just gives you a little taste of the topic then hits you up to buy a book or service. I also hate the jokers that have weak content on important topics.
So I went a different path, I put entire training sessions on my YouTube channel. My thinking was that if somebody is just getting started or thinking about getting started, they could watch my “crash course” for free. Then if they were serious about learning more, they could check out a bunch of 90 minute seminars (also free) that I recorded on topics such as finding and managing suppliers or protecting IP. And if they still wanted more, perhaps they could consider some very affordable options such as buying my book or even hiring me as a consultant.
I’m OK with giving heaps of free information in hopes of getting a few paid customers down the road.
Once I started putting relevant, high-quality, informative content out there on the web for free, I started to get requests for syndication. For example, check out the “what buyers need to know page” at Global Sources.com.
I’m proud to be the primary author of that content as well. And it’s all free.
I made so many mistakes early in my career in China, I’ve got plenty of lessons to share! Hopefully, the next generation of businesspeople heading to China can learn from my mistakes and avoid pitfalls while implementing best practices.
How has the sourcing game changed over the years?
China has changed a lot during the three decades I was living there. The good news is that China quality is no longer an oxymoron, the bad news is that it still requires decent due diligence and auditing to find that good supplier. And once you find the supplier, you still need to have a system in place to manage the vendor if you care about quality, lead-times, and pricing.
So yes, Chinese suppliers have come a long way in terms of professionalism and quality standards, but you still have to roll up your sleeves and get involved with the production details if you are doing anything customized or complex.
Is China still the best place to source products?
That’s a loaded question because it really depends on the product lines you are sourcing and the volume of your orders.
If the orders are really small, you won’t have much luck getting in the factory door in China. And if your product is very labor intensive, like shoes and socks, know that those lines have already started to migrate out of China to places like Pakistan and Bangladesh.
China is all about the “value added” products these days.
But thanks to the internet and online directories, it’s not hard to figure out where to look for suppliers. Just type in your product into a site like www.globalsources.com and pay attention to the countries and even specific districts of the given cities where the suppliers are showing up.
I hear that relationship is everything in China. True?
A relationship is very important but it’s just one piece of the puzzle. The holy trinity of China sourcing is Relationship, Documentation, and Verification. You need all three.
In terms of the relationship component of the equation, I have some great suppliers that I never met in person. But I am a great client for them because I place large orders, pay on time and have very clear product specifications for them to follow. Thus, we have a great relationship without having much of a personal relationship at all.
If you don’t match those criteria, you may need to spend more time getting to know each other so that the supplier feels comfortable doing business with you.
What are your top tips for those that wish to buy from China?
If I had to pick 5 top tips, please please please don’t forget the following:
- Don’t jump in bed with the first supplier you meet. Be picky and do your research. Visit them if possible BEFORE you place the order. And if they are on www.SupplierBlacklist.com, run away as fast as you can!
- If your order is greater than 2000 $USD, you are crazy not to have the following in place: written PO, bilingual contract, detailed quality standards. In other words, if it’s important to you, it better be written down and confirmed in advance by all parties. Don’t assume your supplier or even your 3rd party inspection agent knows your product details as you do.
- Make sure the Chinese name on the contract is the same name on their business license and bank account. Don’t be the sucker to sign a contract with one entity then send money to another. Happens all the time when you place an order to a Chinese factory then send the payment to a personal account or their HK trading arm. Good luck getting your money back if something goes wrong.
- Don’t give anybody in China the opportunity to put you out of business because of mistakes they may make. So don’t be afraid to start small and really make sure the supplier can make the product before you place that big order.
- And finally, if your supplier breaks the terms of your agreement (poor quality, missed lead times…) don’t walk away without a fight. Foreigners CAN get a fair shake in a Chinese court.
That reminds me, in a past issue we covered the topic of “how to recover funds from bad supplier” and you can download the articles from our new online archive.
Topic 2: Buying from China. What could possibly go wrong?
A lot. Check out the listings at www.SupplierBlacklist.com. I’m an avid reader of that site because I can learn from the mistakes of others and stay safe. Here are my votes for the “China Supplier Wall of Shame”:
- This HK supplier of electric components has been listed 6 times. They are so effective, they even scam Nigerians!
Check out “loss prevention” to learn how to avoid the pitfalls.
- Be careful when buying new or used machinery from China. See the actual chat messages from this supplier as he suckers in another buyer.
An ounce of due diligence would have avoided this mess. Don’t make the same mistake.
- Even if you use Alibaba’s buyer protection program, the buyer still has to be careful. Here is the latest example.
- This Qingdao Scammer pretends to be a factory, convinces buyers to pay for samples, then ships an empty box and disappears.
Have you been let down by a vendor? Please add the supplier to the blacklist!