The first thing you must do before trying to negotiate any pricing is to get multiple quotes, ideally from three or more suppliers. This will tell you what the normal cost of your desired products is.
Order several samples and try selling them on Amazon before committing to a larger order.
In China, there is a golden rule: quality is directly related to price. Exceptionally low priced items normally mean exceptionally low quality. Another reason for a low price can be:
● The quality is significantly lower than others
● Different shipping terms (i.e. EXW instead of FOB)
● Significantly higher minimum order quantity (MOQ)
Once you determine what a normal cost is for your items you can try to negotiate pricing. However, prices in China are becoming more and more fixed and negotiation is becoming more difficult. A 5-10% discount off of quoted prices can often be significant.
Where you can negotiate is minimum order quantities (MOQ). Like I mentioned, often you can negotiate the suppliers quoted MOQ down by 50% or more.
In the future, when you start to place larger and larger orders, you can start to negotiate more on price. In the beginning though, you don't have a lot of leverage.
Payment Terms and Making Payments
When you are arranging payment terms with your supplier, the most common terms you will come across will be 30/70. That means you pay 30% when the order is placed and 70% upon completion. Never accept an order requiring a 100% deposit unless the order is small (less than $2000).
If your order is relatively small, under $2000 or so, your supplier will normally accept payment via Alibaba's payment solution called Alibaba Trade Assurance. This payment method gives you pretty good assurance your supplier will actually ship your products – it won't protect you much on quality issues though.
Once you get to larger orders ($2000+) payment is almost always made by wire transfer or sometimes referred to as TT (telegraphic transfer). Payment by credit card or PayPal is generally not accepted for orders larger than $5000 or so.
Payment is almost always in US dollars.
How to Ensure You Receive High-Quality Products
Your biggest concerns when importing from China will be to ensure that you're getting quality products.
Quality standards are the biggest difference between Chinese manufacturing and Western manufacturing. Western countries (such as Amazon buyers) have much higher quality standards than in China and Africa .
The first shipment of products you receive will probably be some of the best quality products that that factory produces. Over time the quality can fade if you're not careful. Your supplier will start to substitute materials for inferior materials. This is why you want to specify in your Purchase Order the core components of your product as much as possible. For example, if you're selling t-shirts you want to specify exactly what type of fabric should be used. If you're selling a cutlery set, specify exactly what type of stainless steel should be used. Here are some other examples of materials you want to specify:
● Fabric type and weight
● Button type
● Critical Dimensions
As long as you tell your supplier exactly what type of materials they should use in your product, they normally won't substitute them. If you don't tell them, they'll assume it's not important to you and substitute materials at their own will.
Air Freight and Sea Freight differ vastly from air courier (FYI there is no such thing as sea courier). These services are arranged through a freight forwarder and typically are quoted from China to some airport or sea port, i.e. to the sea port of Long Beach (near Los Angeles) or Los Angeles International Airport (LAX).
You will either have to arrange to have your goods picked up or ask your freight forwarder to arrange to have them shipped to your final destination (which will involve a significant surcharge). They will not provide customs brokerage (at least not for free).
Air Courier | Air Freight | Air Courier |
● 150 lbs or less ● $10/kg+ ● 2-5 Days Normally quoted door to door. No custom broker needed (although courier will charge you if shipment is over $800). | ● 200-500 lbs ● $5-7/kg ● 2-10 Days + 1-5 Days for Custom clearance Make sure shipment terms are FOB. Quoted port to port (not door to door). Expect $200-300 in documentation fees + $150-200 customs brokerage fees. | ● 500+ lbs ● < $1/kg ● 14-35 Days + 1-5 Days for Custom clearance Make sure shipment terms are FOB. Quoted port to port (not door to door). Expect $200-300 in documentation fees + $150-200 customs brokerage fees. |
Shipping and Logistics
In my own personal experience and after helping other first-time importers, having your goods shipped to you and receiving them is one of the most stressful and most challenging aspects of importing.
Three Ways to Ship Your Products: Air Courier, Air Freight, and Sea Freight
There are three ways to ship your items from China: air courier, air freight, and sea freight.
Air courier is simple for most people to understand. UPS, FedEx, and DHL are air courier services. This is what they call a door-to-door service. Your supplier ships your products and they arrive wherever you want them to arrive, i.e. your home or Amazon warehouse. The courier also has customs brokerage services, to help you pay your duty, so you don't need to worry about getting a customs broker.
Conclusion
China still remains the factory of the world despite increased costs and sometimes increased tensions with the West. And despite its reputation for poor quality products, the quality of most products from China is still fantastic. Competition amongst private label sellers, especially on Amazon, has increased significantly over the last several years, but there's still a huge opportunity to develop a brand and real business around importing from China.
Do you have any questions about sourcing products, importing, or shipping your products?