You can buy products from Chinese manufacturers 2-3 times cheaper than from other wholesalers for your Amazon business. But working with foreign suppliers is a complex transaction from the first contact to customs clearance and currency control. Let’s see how to optimize products supply from China and start making money on it.
How to optimize products supply from China?
1. Choose a tax regime for working with China
It would seem that you need to start with the search and verification of suppliers. But no. The first step is to assess tax risks. Importers pay VAT for each product from abroad. Patent, imputation or simplification – it doesn’t matter. All businesses pay taxes.
Before importing goods from China, try to calculate how much taxes you will have to pay under your tax regime. Consider the entire turnover, not just imports. It may be more profitable to pay VAT on imported goods, and pay only 6% on other income.
2. Find Chinese suppliers online
To find Chinese manufacturers, it is not necessary to go to markets and exhibitions in China. Here are three ways to find suppliers online:
- Wholesale B2B platforms.
These are bulk order aggregators that work in a similar way to Aliexpress. The most famous are Alibaba (owner of Aliexpress), DHgate and Global Sources. The sites have supplier directories, testimonials, and private messages. They will help you find trusted companies and contact them directly.
Alibaba is a wholesale trading platform. Suppliers work on the principle of “many goods for one buyer”. The buyer here is not just an extra: he communicates with the supplier, handles customs clearance and is responsible for delivery within Russia. But wholesale prices on Alibaba are 30%, 40% and even 60% lower than on Aliexpress.
Wholesale platforms are a good option for entrepreneurs who are just starting to import goods from China. There is no need to conduct lengthy negotiations, and the platform will take responsibility in case of problems with delivery or payment.
- Catalogs of suppliers.
Catalogs help you find the right manufacturer by type of product or industry. For example, Check In China is a catalog of 20 million companies in Russian. The site has contacts and websites of manufacturers. If you wish, you can check the company for a fee according to Chinese state registers.
- Trade show sites.
There are many B2B exhibitions in China where manufacturers showcase their products. On the websites of exhibitions, photos and descriptions of goods, information about the manufacturer and his contacts are placed. For example, you can search for suppliers on the websites of the Canton Fair or the Hong Kong Trade Council.
3. Check supplier status and documents
It is necessary to check the reliability of Chinese suppliers in stages: first, publicly available information, then from official sources. So you can weed out unscrupulous Chinese without a deep check of the company’s documents: this will save you time and effort.
- Search for supplier reviews on the Internet.
For example, look at reviews in company profiles on Alibaba, DHgate or Tradesparq: they have a convenient search and detailed information about each company. And it’s also worth looking into the “black lists” of Chinese suppliers. So you will avoid unscrupulous contractors.
- Request legal documents.
Here is a mandatory package of documents for each exporter under Chinese law:
- business license;
- certificate of registration;
- export license;
- a document confirming the authority of the director;
- product quality certificate.
- This list is approved by the General Regulations of Civil Law of the People’s Republic of China and the Law of the People’s Republic of China on Companies.
If the supplier insists that the product is one and only, ask for a trademark registration certificate and a patent registration certificate.
There are suppliers who are ready to provide documents only after the conclusion of the contract or payment. It is better not to continue the dialogue with such people.
Check documents
China’s public registers are maintained only in Chinese. Therefore, you can check documents in two ways:
- With the help of legal translators. They will study the company’s documents and check against the registers of the Office of State Supervision of Markets and the Chamber of Commerce and Industry.
- Through the services of checking Chinese counterparties. For example, you can contact Check in China or the branch of the Russian Chamber of Commerce and Industry in China. Full verification of documents costs from 7 thousand rubles.
- Order product samples.
This is how you check the quality of the product. For example, on Alibaba or DHgate, you can place a test order of several samples on behalf of an individual. It will compare to buying on Aliexpress. If you find a supplier offline, ask him to send some goods by mail or courier.
4. Negotiate with the supplier and conclude an agreement
Before you pay for a consignment of goods, you need to conclude an agreement with the supplier. It is compiled in two languages: Chinese and Russian. The contract should not be a legal fiction: include in it all the conditions on which it was possible to agree with the supplier.
Negotiating with Chinese counterparties is more difficult than with European ones, due to the special business etiquette in China. The Chinese love to build business relationships on trust in business partners. If a Chinese supplier does not trust you, he will deceive you in good conscience – this is unpleasant.
In order not to be left in the awkward position of a deceived buyer, build relationships in the world of Chinese business culture.
Here are some tricks that will help you quickly find a common language with the Chinese:
- Tell your partner that you’ve heard good things about their business and products. For example, say about the reviews of Chinese buyers – the opinion of fellow citizens for the Chinese is more important than buyers from Europe.
- Do not speak openly about shortcomings. It is important for Chinese businessmen to “save face” in the eyes of buyers. It is better to tell in personal correspondence: the Chinese will most likely try to correct the mistakes.
- Don’t refuse offers directly. The Chinese take a direct refusal as an insult. Politely offer your terms or take time to consider the offer.
- Praise the supplier on online platforms or social networks. For example, write a positive review on Alibaba, Facebook or Weibo. Chinese manufacturers follow all the reviews.
If you buy on online wholesale platforms from trusted suppliers, negotiations fade into the background.
Everything is easier on wholesale platforms:
- place an order through the website
- agree with the supplier on the details: the order of payment and delivery,
- conclude a standard contract,
- wait for the delivery of the goods.
The electronic platform assumes obligations to protect the transaction and make payments. Therefore, sellers communicate little with buyers and agree only on the details of the transaction.
5. Pay for goods to the supplier
The main rule of payment: advance payment – before sending from China, the rest of the amount – after receiving in Russia. The advance payment should not exceed 50%, but Chinese partners agree to work for 30%. If the supplier asks to pay for 100% of the goods immediately, there is a risk of running into scammers. It is better to refuse such “partners” before the conclusion of the transaction.
A separate case is payment on electronic platforms. They work on a 100% prepayment, but the platform itself acts as a guarantor of the obligation. In order not to worry about your money, use secure payments. For example, Alibaba has a Secure Payment feature. When paying, the money is not transferred immediately, but is frozen in the account until delivery is confirmed.
Other steps we will discuss in the next piece!
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