Choosing the right manufacturer that you want to work within China can be a challenge. Yes, there are marketplaces out there like Alibaba and Made in China that can help in finding a manufacturer. But deciding on the supplier that you want to build a business relationship with is a different story. Through this article, we will give you some insight on how to determine the correct manufacturer for your business.
How to Properly Choose a Supplier
We want to determine if the supplier is worth reaching out to in the first place. We will be building a build a business relationship with this supplier. So choosing the right supplier from the get-go is going to save you time, money and headache. We are going to help you narrow down your search for a supplier with 3 simple steps.
Going Straight to the Source
In China, there is a number of different type of sellers. Most of which are middlemen operating as a Wholesalers or a Trading Company. This is not what we are looking for. We want a Manufacturer, this will allow us to have the highest profit margins. So how do we determine if we are dealing with a Manufacturer and not a Wholesaler or Trading Company?
Difference Between Manufacturer, Wholesaler and Trading Company
First, let us understand the difference between them. Then we can take a look at how to choose a manufacturer.
Manufacturer: A Manufacturer is what we are looking for and is the very start of the supply chain. Manufacturers are the ones that create the product in the first place before it is sold off to Trading companies and distributors.
Trading Company: Trading companies deal with a huge selection of product categories, not just products. A Trading company might have a lot to offer when it comes to selection. But they still make their money by adding a margin on top of the manufactures price. When searching for a product you would want to deal directly with the manufacturer but this is not always an option. If you are first starting out as a seller you will need a low minimum order quantity. The larger the manufacturer the larger the minimum order quantity will be. To reduce your MOQ, you should seek out a Trading Company or Wholesaler.
Wholesaler: Work similar to trading companies but the main difference is they often also import products themselves. They will also have a dedicated staff that will speak English to deal with overseas clients such as ourselves. You may even save on shipping expenses if they already have your product in the US or Europe.
Finding a Manufacturer
Now that we know the difference between them we can now take a look to see how we can spot one. First, we can look at the product offering that the supplier has. Generally, a real manufacturer will use similar materials and have related functionality throughout there product catalog. Manufactures are specialists in there chosen category. If their products aren’t related at all. Then I would start to suspect that isn’t a real manufacturer.
If at any point you see a list of different products. From children’s toys, electronics, and clothing. All were produced by a so-called manufacturer. They most likely are a wholesaler or trading company. The main reason being is that to produce such a wide range of products requires different types of machinery and materials. All of which will be hard to acquire even for the larger manufacturers.
Once we have a quick scan to see if they are really are a manufacturer, we can find out for certain by asking or looking up there business licensee.
Each Company that you are going to be dealing with in China will have a business license otherwise don’t deal with them. Within every business licensee, you will see ‘Business Scope’ label (经营范围 – Jīngyíng Fànwéi). Within this section, you will find exactly what the supplier has permission to sell as. Unfortunately, all of the business licenses are written in Mandarin. But with some google translate, you will be able to figure out if they are a manufacturer or not. Listed below is what a Chinese Business license should look like.
Most suppliers should be willing to supply their business license if you just ask for it. If you are unwilling to just ask or you don’t want the supplier to know that you are researching them you can look up there business license.
Looking up a Chinese Business License
If you don’t want the manufacturer to know that you are researching them then you can look up there Business License. Visit AIC (Industrial and Commercial Administration Bureau) This site will list all the company’s business licenses and what categories they are allowed to sell in. Please note that you will need to already know what Provence the company is registered in. The site is broken down by Provinces so you will have to search a company based on the Provence that they are in.
Experience in the Market
When choosing a supplier you want one that already has experience within the marketplace. For instance, sellers that already are exporting to your desired marketplace like the United States or Europe. Your product may require additional testing to pass customs. Of course, this varies depending on the product that you are manufacturing and the market place that you will be selling in. That is why you want to find a manufacturer that already has experience with your market. The supplier will already have test certifications and declarations of conformity to be able to pass customs. They will also be able to answer any questions or concerns you may have.
Alibaba, for example, makes it easy for you to figure out how often a supplier exports to a certain market. Under Company Profile there should be a section called Trade Capabilities. This section will list the main markets that this supplier ships too.
As you can see from the above image. This supplier has very little experience in dealing with foreign markets. Most of there trade is done Domestically and throughout Asia. Just 2% of there orders are shipped to North America giving me the impression that they have very little experience with that market.
Work with Established Businesses
While some manufacturers might be starting out and will tempt you with lower prices. I strongly recommend only working with manufacturers that have been in business for more than 2 years. The reason being you want a manufacturer that is proven within your product category. That knows the in and outs of the product that they are making. Figuring out the kinks and creating a better product takes experience.
How to find out how long the a Chinese manufacture been in Business?
This is why the business license is so important. It will also show the date of incorporation for the company. Giving you a clear idea of how long they have been in business.
Also when you are looking for the date of incorporation you will be able to see if the business license is still valid. you wan to make sure that you working with a company with a valid business license. otherwise once again don’t work with them.
Research the Manufacturer
Finally, you would want to research the Manufacturer for any online reviews. and to establish they are who they say they are. Do not exclude this process. Online reviews and recommendations are still a good way of figuring out if they are a good manufacturer or not. Always use caution when reading reviews just in case they are fake and manipulated. If you have any concerns about the manufacturer you can always reach out to past customers to see if they can supply information.
Ask the manufacturer for photo verification of there facility. Having the manufacturer write your name on a piece of paper and take photos of there facility. It is a great way to see if their photos match up to there website and verify they are who they claim to be. This also gives you a look at there in workings to see if this is someone you might want to work with.
Finding the right manufacturer for your product can be a challenge. But verify some critical information first and creating a shortlist about the manufactures that you might want to work with is a good start. You want to be working with an actual manufacturer that has experience shipping to your marketing and years of experience building the product itself. By verifying these three steps will help you make the right decision down the line.