If you want good margins, sourcing from China is the most popular way to get products at a reasonable price you can sell for high margins. You can source products in the U.S. but after custom packaging, you’ll be lucky to get 10-20% margin. We’ve sourced products locally in the U.S. and from AliExpress but that was mainly to test out the viability of the product and to see if people actually searched for these products enough for us to make organic sales.
To successfully sell private label products from China, you have to learn how to source products. This post outlines how we sourced products successfully in the past and potential pitfalls that can occur when going through this process.
Before You Start Sourcing
Make sure you’ve done your due diligence when finding the right product to source. As we’ve experienced with more than one of our products, placing an order is easy, getting rid of it for a profit or break even point is not always as easy even if the product is “priced to sell”.
This article is only about sourcing products after you have found a great product or line of products you want to sell. Doing product research is a large topic and will be discussed in future articles.
Although the prices are rising year to year in China and many sources tell us Vietnam, Thailand, Korea, Turkey and even Japan are viable countries to source from, finding reliable suppliers are still difficult, especially for those just starting out. Alibaba makes it easier to find suppliers and the suppliers listed on their site are primarily Chinese companies.
Where do you start?
You can find companies to work with on Alibaba.com. Once you have the product you had in mind, start searching terms and related terms. Make sure the supplier has an acceptable response rate, trade assurance level and Gold Supplier rating, all of which are written in Alibaba. If you’re not familiar with what they are:
- Gold Supplier – They pay for an onsite check from Alibaba and get “verified” as a Gold Supplier
- Response Rate – Percentage you will get a response from the seller.
- Trade Assurance – In case you get screwed, Alibaba protects you for this amount of money
For most products, we normally look for 3-5 year Gold Suppliers with a response rate of over 75%. Trade assurance is optional for us but we have used it before for some peace of mind.
If No Good Suppliers Show Up When Searching for Your Product
If many companies show up, but none of them have a great response rate or Gold Supplier status, you can 1) message the ones that show up and hope for a response. 2) Find out the material of your product and ask other qualified suppliers if they can create a similar product.
Often times manufacturers can create the same product you ask for if you provide the right specifications. We normally do 1) and 2) and narrow it down from there.
Manufacturer versus Trade Company
There are big differences between a trade company and a manufacturer. Many companies are both manufacturer and trade company.
Trade companies often will work with multiple manufacturers and factories. Trade companies can also work with other wholesalers or trade companies to help you find your product. They can be a good way for you to find the products you need and work with a middleman that is used to catering to Western customers. Their prices have the potential to be higher because they take a cut from the sales. The problem with working with trade companies is that for most manufacturing questions (can you custom this part? do you offer these color schemes? etc..), they have to defer to the manufacturer which causes potential delays in response time.
Manufacturers are factories with industrial machines that actually produce the products. This is helpful because they can give you more specific estimates of when your product can be finished based on the specifications you give them. It’s also cheaper to work directly with the manufacturer. They don’t “buffer” prices as much as a middleman would.
I’ve worked with both types of companies and I much prefer working directly with the manufacturers. When speaking directly with them I get the feeling they understand what I am looking for much more clearly than sales people from trade companies.
For example, I once asked them to confirm my specifications and to reassure me he sent pictures of his industrial machine and he reassuringly explained to me the process that they would undergo to produce the product I was looking for as well as sent pictures of the actual machines they would use to product the product. They also tend to get back to me much quicker which helps move along the process faster. Remember, time is money.
Cons of trade companies: Time savings, cost savings, working directly with people that can understand your specifications thoroughly.
Contacting the Supplier
When you contact the supplier on Alibaba.com, make sure you have a good template set up. It varies depending on what you’re looking for, but theamazingseller.com has a template you can find here. Basically your questions should inquire about:
- Sample fees, time of receiving samples and cost of samples
- The price for the minimum order quantity (MOQ) of 250, 500, 1000 (or however much you want to purchase. Prices can vary greatly.
- What type of payment methods do they use? (PayPal, bank transfer, escrow)
- Lead time for production and delivery
- Logistics (their process for shipment to your destination)
- Attach additional photos of the products so they can have a better idea of what you are looking for. You can also give them links but be aware that some links may not open for them in China. We’ve had suppliers have issues with opening up Amazon.com links in the past.
Customization questions (cost of packaging, changing colors, adding inserts, product changes, mold fees) are also question you can include in the initial email but I usually wait until they respond to my initial set of questions before getting into the nitty gritty of customizing products or product packaging.
Filtering Out Bad Suppliers
There are a lot of bad supplies on Alibaba. The most important thing before evaluating the quality or price of their products is how they respond to your emails. If you’re having a hard time communicating with them even when your questions are crystal clear, things will most likely not improve. You should move on. It’s not very hard to catch bad suppliers by their actions. Lack of professionalism and communication skills shine through.
Things to ask yourself when considering the quality of suppliers:
- Are the seller’s responsive?
- Are they detail oriented in answering your questions?
- Are they noticeably skipping particular questions when you give them a list of questions to answer?
- Are they willing to go on Skype and hash out details with you?
Working with suppliers that you find hard to communicate with can be trying. It’s better to move on to other suppliers or sales people. It’s already difficult enough to successfully find and customize products from great suppliers, working with easy-to-find but bad ones is never a good idea.
Placing a Sample Order
Once you’ve found a supplier you’re willing to work with, go ahead and place your sample order to evaluate the quality of their products. Samples can be free but you still have to pay for express shipping. Expect to pay 50.00 – 150.00 when ordering samples. Ask them if they can refund the sample fee after an order is placed. They are vetting you to see if you are a serious buyer as well.
Tip: Take a look at their catalogue of products and see if they can add additional products in your sample box for free. The main cost is the shipping so if the additional products don’t increase the weight of the product substantial, most suppliers will be glad to add other sample products for you to evaluate.
If you plan to add your own logo on the product or custom packaging, you can ask the supplier how much it would cost to do this for your sample. The closer you get to the final product you envisioned in your head, the better. Note that it may cost an extra 50.00 – 150.00 dollars more to customize a sample with customized colors, printing or embossing.
Placing your Final Order
If you are satisfied with the sample, you can now place your order. You will typically pay a 30% deposit before production and the rest before they send it out. The options you have for payment:
- Alibaba escrow system
- PayPal (typically for smaller orders)
- T/T / Wire transfer
Note that If the company you are working with has “trade assurance”, you will need to fill out additional Alibaba.com forms to take advantage of this.
After the company completes production of your products (which can take 2-6 weeks), you can have them take pictures of all the packaging and products ready to be sent out. They should also send you a few production runs of your product and custom packaging so you can review it and use it for the pictures on your listing.
At this point you can also have your own quality control person or team review the products for you. If your orders are substantial and it’s your first time working with the factory, I highly recommend this. You can google “China inspection services” to begin your search or email us and we can provide a few we are familiar with.
- Sea Freight – Substantially lower than air. Slow. Requires freight forwarder to get into the country.
- Air Freight – Fast. Expensive. Good options for small and lightweight products.
Before determining what method of shipping to use, costs should be calculated based on dimensional weight and size of the products.
Shipping, freight forwarding and other logistical topics, issues and challenges is something that will be discussed in another article.
Conclusion and Checklist
With Alibaba, the formula for finding, contacting and ordering from suppliers has become much easier. By following the basic guidelines outlined above, you should be able to find a supplier and place an order with ease.
Here’s a todo list of items to begin sourcing products:
- Go on Alibaba.com and search for the product you are trying to source.
- Contact 5-10 suppliers that have high response rates, gold supplier status and offer trade assurance with questions, links or photos of and about the products you are looking for.
- Evaluate responses. How are their communication skills and professionalism?
- Order sample. Order sample with your logo or other customizations if possible.
- Be prepared to pay using PayPal or bank transfer. Not all companies accept PayPal.
- Be prepared to pay 50-150 dollars for samples, mainly covering shipping costs.
- Wait a week or less for samples to be shipped to you.
- If sample quality is good, place a large order.
- Pay 30% deposit. Use trade assurance to protect yourself if possible.
- Have products shipped to your freight forwarder, staging warehouse or to Amazon directly.