How to Find the Right Overseas Supplier

So you’ve discovered the amazing potential of selling physical products, and realize the cost effectiveness of importing. This, in essence, is the embodiment of the most prevalent business mantra in existence; “buy low and sell high.” But now the fun begins. What next?

As a first step in the importing process (second step in the overall process, right after choosing the right product to sell), you’ll need to find a supplier. This is both a daunting and crucial task, as your supplier is effectively your business partner. Many other services and components will serve as “partner” to your organization in a broad or poetic sense of the term. However, your supplier truly is a partner in as important of a capacity as any full-on equity partner would be.

The reason is because, without a supplier, you have no physical products business. Now, this doesn’t mean you are beholden to any one supplier. But, you will always need one for a complete supply chain.

So how do you find the “right” supplier for your new, under-served, genius product and budding import business?

As an importer with years of experience and a few orders under my belt, I’ll go over MY process.

First You Must Look

This may seem obvious, but you start by actually looking for your supplier. Don’t worry, I’m not going to pontificate using substance-less clichés and euphemisms. There is an actual PROCESS to searching for suppliers. Essentially you can uncover suppliers in three different ways:

  • Search a B2B site.
  • Go to a sourcing fair.
  • Hire a sourcing agent.

B2B Sites

Alibaba is the most popular B2B (business to business) website. Global Sources is another popular and well-known one. What these websites do is feature catalog pages, much like any consumer marketplace (think Amazon), that showcase products available by manufacturers, trading agents and suppliers.

From those pages you can uncover products of all kinds, in any niche, made of any material, and be introduced to a factory that makes it. The site gives you the ability to contact the supplier either through a built-in messaging system, or through communication channels listed on their profile.

You simply search for the product you are looking for, a category of products you are interested in, products by feature or popularity, or search by supplier. The resulting search page will deliver you hundreds, if not thousands, of listings from which you can check product specs and communicate with a supplier about placing an order.

Sites like Alibaba and Global Sources provide a convenient way to remotely sift through the wares of factories around the globe from the comfort of your own home. When you’ve found viable candidates, handling communications through email and Skype (or Wechat, Whatsapp, Line, etc) allows you to negotiate pricing, initiate a contract and ultimately source a product of your very own.

Sourcing Fairs

A sourcing fair, otherwise known as a trade show, is a fantastic way to be exposed to hundreds of suppliers within the span of a couple of days. Rather than have to trudge through the tedious process of emailing back and forth, you can actually walk up to dozens upon dozens of suppliers every hour and shake their hand.

More importantly, you also get to see their offerings and witness their quality by handling their products in person. Sourcing fairs truly can open up many doors to importing for you if you’re willing to make the trip.

While there are many smaller trade shows all over the world, the largest physical products sourcing fairs for importers are definitely Canton Fair and the Hong Kong fairs (Global Sources, HKTDC and Mega Show). These all happen around the same time twice a year in Guangzhou China and Hong Kong, respectively.

You simply book your trip, show up to the fair armed with business cards and an empty bag, and walk down row after row of products and suppliers, collecting information you’ll want to sort through later to find your next trade partner.

Sourcing Agents

A sourcing agent has essentially done all that leg work for you. They’ve established the relationships, or at least refined the search process, so that they are able to quickly and efficiently find a supplier for almost anything.

Agents do cost money, and many take a percentage. This will certainly decrease your overall margins, but sourcing agents can be a useful tool in your importing arsenal. They can provide skill where you lack, connections where you have none and negotiating power. It may be true that an agent decreases your margins, but a good sourcing agent may also get you a better deal in the first place.

Sourcing agents typically live in Asia or near enough to many factories to be able to visit them when necessary. This is a common position for someone who has extensive experience in corporate sourcing or importing. You can typically find a sourcing agent easily through a search, although often people prefer to be referred to one by a trusted colleague.

Narrow Your Search

If you decide to work with a sourcing agent, then moving forward with them or their agency is probably like hiring anyone else in your business. You’ll ask questions about their qualifications and get a feel for whether you communicate well. If you agree with the agency guidelines, then you’ll test them out.

Finding a supplier at a sourcing fair may be quite similar. Again, you have the benefit of speaking to a representative in person. You can ask the standard questions such as how long they’ve been in business, where their main markets are, what their annual sales are and whether they have any certifications, etc. You’ll likely only work with a factory you feel good about.

It is important, however, that you have strict standard criteria that an online vendor must meet when sourcing on a B2B site. The reason is because these are people you won’t have met, you won’t have spoken to, that likely don’t even speak your language. And there are many of them. You will need a mechanism to qualify them. Other than the qualifications you trust your chosen B2B site to hold suppliers to, you won’t even know if you are dealing with a real company. So here are the standard criteria I set for suppliers on Alibaba before even reaching out:

  • Must be a “Gold Supplier” for at least three years. The reason for this is, Gold Supplier status is simply a paid premium account. It doesn’t mean the supplier is being held to any special standard. BUT, if they are willing to pay for three years, then likely they aren’t a fly-by-night operation.
  • Must offer “Trade Assurance” as a payment option. Trade assurance essentially is an Alibaba controlled escrow account that holds payment until all parties have gotten what they signed up for. It isn’t completely efficient and the fees are high, but if a supplier is willing to use it that’s typically a good sign.
  • Must have a niche website. What I mean by that is, a lot of suppliers you find on Alibaba, when you go to their website, you’ll see they offer….EVERYTHING. To me, this means the bulk of their business is likely in functioning as a trade agent. If I am looking to work with a manufacturer to eventually design new products I want to know they have a deep understanding of the types of products that niche carries.

These three points help me to determine who I can pass over and who I should consider reaching out to. When the list is “pruned” the next step is to vet the factories.

Initial Contact

The next logical step at this point is to reach out to suppliers and begin the conversation. If you hire a sourcing agent, this will be taken care of for you. In person at a fair, you’ll handle this with a hand-shake. But online, you should have a carefully crafted strategy.

It is important to do your due diligence. If you find a supplier who meets your criteria and has a product you are interested in, you should spend some time on their website and catalog page to see what other products they offer. Get an idea for what their specialty is. Take a look at the markets they serve. Do they serve your country? If so, then they likely have all the necessary certifications. If not, they may be eager to open that market (and thus give you a good price). It is good to have an idea of these things before you open lines of communication.

After you’ve learned what you can, then it is time to send out emails, opening the doors for a future negotiation. In the first contact, it should NOT be your objective to get a quote. Sourcing, much like dating (or any kind of business really) cannot be rushed into. Most suppliers get inundated with requests for pricing and MOQ before any relationship is developed. Typically, these inquiries go nowhere. If you want your potential supplier to take you seriously, you must treat them the way you wish to be treated.

You’ll want to develop a relationship. In that relationship development process, you are sending the message that you are seriously looking for a supplier of this product. You should also convey that you are a prudent business person who respects the time of others but also expects the same. You’ll want to come across as sincere yet experienced. All of this can take place through email and/or Skype communications.

My personal process takes the supplier through a series of inquiries, where I convey that I am in control and serious. Also, the process allows me to pay attention to a few key things:

  • How responsive they are.
  • How seriously they take me.
  • How eager to work with me they are.
  • The quality of their work.
  • The quality of their systems and processes.

Ultimately, the back and forth communications will yield at least one, if not a small handful, of viable suppliers to manufacture my next round of inventory.

My Email Templates

Here are the email templates either I use, or I have my assistant use. These are definitely customizable, and will often shift based on new information. However, they provide the ground-work for what I am trying to achieve; finding a superior quality product for the best price possible from a reliable supplier.

First Contact

Hi XXX,

My name is Veronica and I represent an online retailer MOTM.

 We’ve been very successful selling a number of products on ecommerce platforms in the US, such as Amazon.com. We’ve also expanded our operation to sell on platforms in Taiwan, such as PC Home.

 We sell a variety of products ranging from baby products to kitchen items, sports and outdoors goods and more. We are currently expanding into more products in the XXXX category. This includes XXXX [product inquiring about].

 Currently we work with a number of different factories, but we are looking to consolidate. Ideally we’d like to find a single factory that can manufacture a number of our products for us.

 My first question is, are you the manufacturer of these [products]?

 If so, do you offer OEM, custom branding on the product itself?

Do you offer custom packaging?

What about customization of the product itself? Would we be able to make modifications?

 I ask because we are looking to establish our brand presence in various niches and it is important that we can provide our products with the full brand experience.

 Thank you for your time.

 Regards,

Veronica

 

Followup 2

Hi XXX,

 So your factory can manufacture these products to our custom specifications and offer custom packaging? That’s great news.

 The next thing we are concerned with is quality.

 It is important that our customers continue to receive the level of quality they have grown accustomed to. So we need to compare quality samples.

 Do you have samples of these products on hand? Or can you make them?

 If so, I would like to arrange to have them sent to my boss in Taiwan as soon as possible.

Thank you again. I look forward to hearing from you soon.

 Regards,

Veronica

 

Followup 3

Dear XXX,

 Ok, I would like to arrange a sample order.

 We typically do all our shipping by sea as we don’t have an air courier account.

Is it possible for us to use your factory’s account and you can add shipping cost to the sample invoice?

 We would like to order X samples [number of samples of whichever products are interested in].

Please provide an invoice for samples when you can, including shipping.

 Shipping address for quote is:

 Anthony Lee

ADDRESS

Ph: phone number for customs

 Also, please provide payment terms with samples. For sample orders, we prefer PayPal as a payment method, but we can also Western Union or wire transfer.

 Let me know if you have any questions.

Thank you for your attention.

 Regards,

Veronica

 

Followup 4

 Dear XXX,

 Thank you for that information. We will be paying the invoice for samples and shipping shortly.

 Please also note that our primary concern is quality, and we will be comparing quality from multiple sources.

 However, for our reference and future planning, it would be most helpful if you could provide us with a quote.

 First, would a small initial order of 1000 units be acceptable?

 If so, can you provide an FOB quote for those 1000 units?

 And can you give me a production time estimate on 1000 units?

 Other things that would be helpful:

Any testing, safety certifications or qualifications you have on this product or your factory.

 Also, a copy of your business registration would be appreciated.

 Thank you,

Veronica

 

As you can see, with these back and forth emails I am able to determine what I need to know. If they don’t answer my questions, I don’t move to the next step until they do. If they don’t at all, I won’t work with them. If they are hard to get in touch with, I won’t work with them. If their prices are unreasonable, I won’t work with them.

This sequence allows me to see whether the supplier will make a good partner. Now, this is only the first phase, as there is much more involved. Contracts, agreements and bulk order payment terms all come after. But this is a good start.

Final Vetting

After you’ve set all this up, you have an idea of price range (remember it is still negotiable), production time, and ease of working with the supplier. The last, yet arguably most important, thing to take into consideration is product quality. This will be determined based on your samples.

At the end of this sequence, you should have at least a few orders for samples put in. The suppliers sending these passed all of your other “tests” and made it to the final round. Now it will be time to compare quality side by side.

At this stage, you need to look very carefully at everything.

  • Is it a brand new sample, or did they just send you a used item from their sample room?
  • Does the product withstand normal use?
  • Does it withstand rigorous use?
  • Does it withstand cleaning?
  • Can it be easily damaged (scratched/torn/marred)?
  • Can it be easily broken?
  • Does it provide sufficient space for branding?
  • Did it come in a color box or custom packaging?
  • If so, what is the quality of the packaging?

After you’ve answered these questions, you’ll have a good idea of who you would like to continue to pursue as a possible supplier partner.

The “Final” Negotiation

I put the word “final” in quotes because negotiations are never final. However, this will be the last one before you place your bulk order. If you followed the above template, you have already gotten a quote or some idea of prices.

Now you need to negotiate on the bulk order amount and actual price. Typically how I do this is I take my lowest priced offer and go to the other suppliers (I try to have a pool of three to work with) and say something to the effect of:

“Hey, so we’ve evaluated your samples and I’m really impressed with the quality. If this is the quality of every order then I can see we stand to gain a lot from a long term relationship. However, we have an offer from another factory with a very similar quality (though not quite as good as yours). That offer is for $X, which is $X LESS than your offer. I’m more concerned with quality so this normally would not bother me, but my partner is attracted to the better price. I am trying to persuade him to work with you anyway, but I wonder if there is any way you can help me. Can we get some sort of discount on the price, just so I can show my partner you are eager to work with us? This would help me convince him. I can also assure you, if you can help me with a better price point, we will stop evaluating samples and suppliers and give our business, current and future, to you. Let me know your thoughts.”

In the end, I choose whoever has the highest quality for the best price. Communication is a big factor in the decision too. When all is said and done, I end up with a great supplier partner, and using this method you can too.

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