• 6 Ways Chinese Suppliers Can Win Customers & Increase Profit Margins

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    chinese supplier improvement

    I’ve spent the last few years, covering every angle of manufacturing in China, from a buyer point of view. Today, I turn things upside down, by seeing things from the supplier’s perspective.

    After all, China is a top 10 country in terms of readers here on Chinaimportal.com, so it was about time.

    I’ve spent almost 8 years in Mainland China, and ever since my first factory visit, I’ve seen suppliers make the same mistakes over and over.

    Truth be told, not much have changed since I first set foot in Shanghai back in 2009. Most suppliers are still highly secretive, and believe transparency to be a weakness.

    Their mentality also highly focuses on price competition, resulting in very low profit margins.

    This may have worked for a while, but something that has changed, is the fact that Chinese factories are no longer as cheap as 10 years ago.

    What worked in the past will not work forever.

    Luckily, most tips I am sharing in this article are ridiculously easy to implement for most suppliers.

    Suppliers that implement these methods can not only acquire (and keep) more customers – but also raise the unit prices above those of the competition, without losing business.

    Trust me, I’ve tried this myself.

    1. Standardize your product specification sheets

    When buyer’s contact a new supplier for the first time, it can take weeks to to understand what the supplier can and cannot do.

    Assuming that I’m looking for a watch manufacturer, I need to know the following:

    • Can you make 316L stainless steel watches?
    • Can you offer sapphire glass?
    • Can you provide Ronda movements?

    In other words, basic information about the suppliers’ capabilities.

    Still, most sales reps have a standard answer to every question. ‘Yes, can make’.

    A few weeks later, the buyer will eventually find out the hard way, that their samples are not even close to matching their requirements.

    This might have worked back in 2001, but not anymore.

    Train your sales reps to be clear about what you can and cannot manufacture.

    Solution: Create standardized documentation, including the following:

    • Product specification templates
    • Component and material options
    • Quotation samples (based on low, medium and high quality options)

    A bonus is that you will save hundreds of paid hours every year, as your sales reps can spend more time getting new leads – and stop wasting time on letting the buyer’s guess what can be manufactured.

    2. Don’t make promises about deadlines and quality you can’t keep

    Don’t tell a customer that you can complete an order in 20 days, when you know it will actually take 40 days or longer.

    A serious buyer will not select a supplier based on an artificially low production time – so you got nothing to gain by giving buyers a shorter lead time.

    The same thing can be applied to product samples.

    Product samples are rarely a full representation of the final product. There may be differences in terms of colors, plating or prints.

    Make your customer understand this, before you start production.

    If they don’t, they will not accept your (possibly legit) excuses later on. Instead, you will end up in an endless money and time wasting cycle of making new (ever imperfect) samples.

    That way you lose both your own time, and the customer.

    Suggestion: You need to manage expectations if you want to keep your customers. You don’t win anything by making promises you can’t keep (or failing to manage expectations).

    3. Update your customers on a regular basis

    There are few things that piss me off more than suppliers that disappear or stop sending updates.

    Repeat the following rules every day:

    a. Did a subcontractor delay a component so you can’t finish the sample / mass production on time? Inform your customer immediately, explain the reason and give them a new deadline.

    b. Holiday coming up? Let your customers know at least a week in advance. Don’t wait until the night before.

    c. Send weekly updates (preferably on Monday and Friday) to your customer to let them know what’s going on. Show them some photos from their ongoing production, or show them new products that you are working on.

    Keeping your customer in the loop is probably the easiest way to build strong relationships with customers that will keep coming back.

    Yet, so many suppliers don’t even bother to respond to customer emails or pick up phone calls.

    4. Learn the basics about product safety and labeling in your customers’ countries

    Product safety is serious business these days.

    The European Union is finally getting serious with enforcing product regulations, such as REACH and the Low Voltage Directive – in order to ensure that unsafe products are seized and destroyed.

    This may happen during customs clearance, or months after the goods have been sold.

    Amazon is even stricter in enforcing compliance. Sellers listings non-compliant products are getting shut down.

    Harsh indeed, but a necessary sacrifice to ensure that toxic toys and self-exploding hoverboard sellers are kept out of the marketplace.

    In short, Importers need to take product safety seriously or prepare for financial ruin.

    Yet, most Chinese suppliers don’t know jack about compliance.

    At best, manufacturers have a vague idea that their customers need a ‘CE certificate’, which is a document that doesn’t even exist.

    The problem is that many importers, from startups to purchasing managers of major retailers, are almost as clueless about compliance.

    Imagine how impressed your customers would be, if you could explain that they need to ensure EN 71 compliance in the EU, and CPSIA in the USA?

    Imagine how impressed they would be if you had a few document samples (which are actually really easy to create), some label templates and basic checklist?

    Imagine how scared they would be if you told them that none of your competitors know anything about product compliance.

    This trick alone has generated tens of thousands of dollars in sales for us.

    Why don’t you use it?

    Suggestion: Start learning the basics of product compliance in your main export markets. Create a few label templates and document samples. Tell your customers to check if your competitors know as much as you do about compliance (they don’t).

    You should also state on your Alibaba.com or Globalsources.com page which regulations you can comply with, and upload test reports directly on your page. That can win you a lot of qualified customer leads with basically no effort.

    How hard can it be?

    5. Standardize the entire order process, from quotation to quality control

    You’ve provided a quotation, and the customer is ready to get started.

    Now what?

    For starters, you need to make a product sample. Provide the following to your customers:

    a. Sample order terms: Payment terms, lead times and certain ‘non-perfections’ that the buyer should expect once they receive the sample:

    b. Product spec sheet: Reconfirm the design, materials, colors and labels before you start making a sample. Tomorrow it’s too late.

    Once the sample is completed and approved, you shall provide a sales contract template, including the following terms:

    • Payment terms
    • Lead times
    • Product spec sheet
    • Definition of defective product (you don’t want to argue about this later)
    • Shipping terms
    • Bank account details (avoid payment frauds)

    All serious buyers will only pay 30% upfront, and do a quality check before the remaining 70% is paid.

    Don’t try to stall this, or argue that the customer should not bother with a quality check.

    Buyer’s are, thanks to us and other websites, more educated than ever.

    6. Start asking for customer references

    It’s rare that suppliers are willing to share customer references.

    Perhaps you are worried that they will give you a bad name, or that your competitors will somehow manage to steal them.

    What you should be worried about is losing business, based on the fact that you are unwilling to share something as basic as a customer reference.

    Suggestion: Start asking for customer references right away. Simply ask them if you can refer to them when new customers are coming in. This is another way to stand above your competitors.

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