To summarize grossly, two types of importers source products from China and low-cost Asian countries:
- “Hands-off buyers”, who are not in a position to invest much time with each of their suppliers.
- “Hands-on buyers”, who need to focus on reliability and quality, over short-term cost considerations.
In this post I am going to describe the first category, those I call “hands-off buyers”. Here are their common characteristics:
They deal with many suppliers and many product lines
They typically have very little time to spend with each supplier, because they are in touch with too many of them. For example, importers of promotional items have to source bags, USB flash drives, lighters, caps, T-shirts, etc.
Even worse, the purchasers of department stores/supermarkets/mail-order companies often source thousands of product SKUs.
On the other hand, a factory only works on one type of product, and a trading company seldom works across several product lines. So these importers have to be in contact with hundreds, and often thousands, of vendors.
As a side note, this type of buyer will only leave China reluctantly. An enormous advantage for them is the convenience of sourcing nearly all their products in one country. Vietnam, India, Indonesia, and other emerging countries don’t have such a wide offer.
They place one-shot orders based on price
If they are not willing to spend time qualifying suppliers, how to choose one? Price is the most important criterion, as long as the pre-production sample looks fine and the lead time is workable.
Product quality is often negotiable. They are willing to take higher risks with a cheaper supplier if it doubles their margin.
Many of the relationships with their vendors are adversarial, and based on a one-shot deal. There is little to no trust between the parties. Flexibility is key, because suppliers often raise prices or cancel orders.
They don’t spend much energy qualifying suppliers
The supplier is “responsible for providing a finished product”. These buyers do not care whether they are in contact with a manufacturer that produces in its own facilities, or with a middleman… As long as the price is low.
They might ask a few questions about the vendor’s business, test the general understanding of the salesperson, ask for names of reference customers, and do a Google search. And that’s it.
When orders are small, they are more interested in negotiating a low minimum order quantity or a good price, rather than bothering the supplier with background checks and factory audits.
They have no product expertise
Promo items buyers are good at specifying what logo to print. Mail-order companies know what packaging protection they need. Retail chains know what labels and barcodes are compulsory. But the product itself is nearly secondary.
Do they have time to describe and develop custom-made items? Not often. They tend to purchase off-the-shelf (standard) products, based on a sample found on a trade show or in a showroom. Their sourcing methods are sometimes similar to that of a housewife in a supermarket!
For molded products, a question they ask is “do you already have the mold for this?”, since they can seldom justify paying for a mold to be used only in one or two orders.
They accept the risks of importing, and use crude methods to limit them
Canceling an order at the last minute is a problem, of course. It might mean they upset, or even lose, a customer. On the other hand, if 20% of these cheap giveaway toys don’t work, nobody might complain…
This is the logic that guides their quality assurance strategy:
- They ask for pre-production samples, to get the approval for the order.
- They ask for production samples (if the product is light enough), to be aware of any widespread problem on the goods. Some minor deviations from the pre-production samples are usually acceptable because “the end user does not know what we originally wanted, and this is also fine”.
- They tend to do final QC only. The inspection is useful for putting pressure on the supplier, for noticing disasters, and for negotiating a discount when possible.
Many of these buyers don’t do any quality control. Some of them use an agent (because it’s so hard to find so many suppliers) and count on him. Some others accept the risks and don’t feel the need to cover themselves. And many don’t even know about quality inspections, factory audits, etc.
The Canton Fair is one big supermarket after all, isn’t it?