You can find a supplier for anything on Alibaba.com. There are often too many supplier, rather than too few. As such, you might find yourself trying to navigate between hundreds of different suppliers in the same product category – all with varying levels of expertise (or lack thereof).
Rather than flying to China and visit 200 suppliers, you need to use information available on Alibaba.com, to identify the supplier that is the right choice for your business.
And that is exactly what this interview with Gary Huang, founder of 80/20 Sourcing in Shanghai, is about.
Gary, tell us a bit about yourself and how you started 80/20 sourcing
I’m originally from the US and born and raised in Los Angeles. I’ve been working and living in Shanghai since 2008. Some people say the sourcing is like a black box.
Since I am a 2nd generation Chinese American and being culturally and linguistically fluent in both cultures and countries – I have an unfair advantage in being able to do better business between China and the US.
I started 80/20 Sourcing because I saw that a lot of online Sellers and small business owners were struggling with sourcing products from China.
So I decided help online sellers and small business owners save time and money when sourcing products from China and to scale their online businesses. 80/20 Sourcing offers video courses, webinars, coaching, and free articles which can be found at www.8020sourcing.com.
Sourcing suppliers on Alibaba can be overwhelming. What is the first step of the process to filter down the number of suppliers?
My first step is to see how common this product is. Is it something as simple as an iPhone case where there’s probably hundreds of suppliers on Alibaba? Or is it something more unique where you may only find a few suppliers if any at all.
If the former then I would cast a wide net first and contact a broad set of suppliers and then narrow them down by sending an RFQ and monitoring their replies.
Honestly certification such as ISO 9001, BSCI, Etc are great for certain countries and industries.
However, in China, as you know what you see is not necessarily what you get. So I would take certification like this with a grain of salt. I’ve known many instances where ISO certifications can be bought.
Moreover this is especially true for small business owners who may not necessarily need extensive certifications but simply the right supplier that makes the right product at the right price.
Some questions I like to ask include which countries you export to. I call this the “Country test.” And I find that this is a quick way you can sum up a supplier’s past experience and exporting as well as their general quality levels.
For example suppliers that export to the US, Western Europe, or Japan typically have higher quality standards then factories that export mainly to Middle Eastern or African countries.
Rather than focusing whether a supplier is a Gold Supplier or not, I dig a little deeper.
I look at the number of years that a supplier has been a gold supplier on Alibaba. Obviously a gold supplier is a marketing tool sold by Alibaba. So just because a supplier has a Gold Supplier badge doesn’t necessarily mean that they’re better.
However if a supplier has a track record on Alibaba for a long period of time for example 5 to 10 years then that’s a plus in my view. However the review process is ongoing and there is no one single indicator that would green light a supplier in my view. It is both an art and a science when searching for the right supplier.
Once you get to a suppliers company page, what do you look for first?
When I look at a suppliers company page, besides the number of years they are a gold supplier, the first thing I look for is the “common thread test.” I ask myself do I see a common theme or common thread running through their product catalog?
For example if I’m looking for a silicone iPhone case, then in their product catalog do I see silicon iPhone cases, silicon watch bands, and other silicon products? If so then there is a Common Thread that runs through them (silicon material) and it’s more likely that they are a factory.
On the other hand if I see in their product catalog selfie sticks, power banks, and fidget spinners then they’re more likely a Trading Company. The reason is no one factory can make such a broad range of products made out of different materials, different procedures, and using different types of equipment.
What are some signs of a ‘bad supplier’ I should look out for on the Alibaba supplier page?
If I see a supplier offering everything under the sun then they probably make nothing and they are a Trading Company. I’m not saying all trading companies are bad but I prefer to work with direct factories.
I get emails all the time about buyers who got burned, ‘despite’ the fact that they ordered from a Gold Supplier. We both know that you must go deeper than that when sourcing suppliers. So, what signs are irrelevant when sourcing suppliers?
When initially looking at the Gold suppliers product page on Alibaba I find that the asking prices are irrelevant. These are merely opening bids and not reflecting upon the final price.
The buyer would have to send a detailed a detailed request for quotation with specifications and pictures in order to get an accurate quotation.
I like to think of it similar to a street market or bazaar. This is the type of mentality when should have when approaching Chinese suppliers initially. the opening price is only that and you are expected to negotiate.
A supplier may tick all the boxes, but still not be a good fit for your specific product. How do you assess that they are?
A bad fit supplier may be a good manufacturer but not the right fit for you. Just liking dating, one man’s Barbie maybe another man’s Medusa. If you’re looking for high-end products but you find a supplier that only makes cheap products then they are not going to be the right fit for you.
It’s very difficult to bring a supplier up or down in the value chain.
This is because their entire supply chain from sourcing while materials to worker training, to equipment, to assembly, to packaging, etc is all calibrated to a certain quality standard so it is very difficult to change the entire supply chain according to your needs.
A bad supplier obviously is one that has serious problems either with quality, service, responsiveness, trustworthiness, among other factors.
Once you have a few supplier options, it’s time to get in touch with them. How do you establish the first contact with the supplier?
I established first contact by emailing them a detailed request for quotation. I find it this is the most effective way to quickly contact and cast a wide net of suppliers initially
In the first email I would make a short introduction of my business which Marketplace were in and some of our strengths. This kind of breaks the ice and help the supplier understand who we really are.
Next I would send a detailed list of specifications of the product that we’re looking for.
I try to be as detailed as possible. I also try to include photos because a picture says a thousand words. You have to remember for most Chinese, English as their second language so some things will get lost in the translation. So pictures are definitely recommended.
I would also mention are expected order volumes to give them an idea of our scale and to see if they are interested in doing business with us.
Many established suppliers can get a large number of new enquiries per day. What can I do to make sure that I get a response from a supplier?
I once attended a panel of Chinese factories and they were asked this question. I remember one of their responses was they pay more attention to buyers that they feel are serious. How can they tell if a buyer is serious? One way is by how knowledgeable they are about the product.
Do they include specifications of the product such as the lengths, the width, the height, the color, any material specs, any packaging requirements, tolerances, etc.
Also do they mention volumes or are they only talking about MOQ?
Be specific introduce your company briefly and try to pique their interest. Don’t just say give me your lowest price and what’s your MOQ? Questions like these are likely to get ignored.
Once you have established contact, what tools do you use for sending file packages and managing day to day communication?
I use a combination of different communication methods. I find that email is good when I want a written record of our Communications. Most of my communications will be through email.
WeChat is a great way to get a quick reply. In China, WeChat is the king of social media.
Everybody and their mom is on WeChat. Oftentimes sending you a short message by WeChat Cook a reply then by email. It’s also good for sending pictures and short videos when you want to demonstrate something. For example if I want to show them how I want to package a product I can literally send a video and explain over WeChat. It works really well.
However we chat has a week chat history function. Often times it’s very difficult to track down who said what on a certain day. So I would not use it for important communication where I would need a written record of what we discussed on a certain day. That is left for email.
I’ll also pick up the phone and call suppliers as needed as well.
Obviously it helps that I’m fluent in Mandarin Chinese so I can speak their language and quickly diagnose problems and try to find answers. A lot of times it’s difficult to articulate problems in writing and you can get a better read of people over the telephone by their tone of voice and their language.
Email only may work for some but sometimes emails may get ignored if they’re busy and some people feel it’s too late to get back to them (I’m guilty of this!). I do agree with this and I feel that sometimes you do need to push them a little whether it’s through a telephone call or even a factory visit.
Alibaba is also offering a range of services, such as Trade Assurance and Escrow payments. Do you use these services in your business?
I do not use any of Alibaba’s range of payment services. They may be a good way of protecting your money when initially contacting a new supplier.
But I find that a combination of properly vetting a supplier, building a trustworthy relationship, and eliminating any suppliers that raise red flags, as well as negotiating proper payment terms will adequately protect you in case things go wrong.
Of course there is no 100% Fail-Safe solution but in my years of sourcing we have not had any drastic problems in terms of payments (knock on wood).
From some of the sellers that I talk to that have used Alibaba Trade Assurance, if problems that arise, getting your money back via Alibaba Trade Assurance for escrow is not so simple. It may require a lot of back-and-forth emails to document the evidence to Alibaba and it could be a time-consuming process.
Thank you Gary. How can 80/20 Sourcing help startups and small businesses find the right suppliers in China?
80/20 Sourcing offers training courses to help small businesses an online sellers source products like a pro, avoid common mistakes, and apply the 80/20 rule to maximize your business so you can grow that 7-figure business. I’ve put together a free sourcing bonus pack for ChinaImportal’s audience:
1. The Art of Alibaba Worksheet summarizing the steps to finding a good supplier
2. Warning signs of a bad suppliers to avoid
3. Request for Quotations (RFQ) script that you can use to save time, build trust and increase response rates when contacting suppliers
You can download at this link: www.8020sourcing.com.com/chinaimportal