Education / Scam Prevention / Chinese Suppliers

 

Lesson 2

Dealing with Chinese Suppliers (and how to avoid getting scammed!)

Let’s be honest: Reselling goods from China is ridiculously lucrative.

Buying goods for pennies on the dollar, then selling them for a 1000% markup? Count me in.

But hold your horses, cowboy. It’s not all roses and butterflies. There are a few serious barriers to overcome.

Things like fraud, poor product quality, and long shipping times, just to name a few.

But don’t worry; In this post, we’ll teach you how to navigate the foreign waters and avoid fraud so you can focus on growing your business and making more money!

Speaking of money, let’s start with...

Safe payment options with Chinese Suppliers...

Let me be clear:

Just because you’re dealing with someone who is overseas and may speak broken English, doesn’t mean they’re all out to scam you.

That said, it does happen. But there are easy steps you can take to avoid the con artists and deal with the real businesses looking for long-term relationships.

It all starts with the way you pay someone. There are three absolute safe payment methods:

  1. PayPal
  2. Credit cards
  3. Alipay

If these are options, use them.

However, that won’t always be the case. Some businesses only accept Western Union or wire transfers. Be wary of these methods.

They are not protected at all. If you send someone money this way and they don’t send you the goods, you’re out of luck. There’s nothing you can do to get it back.

There are legitimate companies that only accept these methods. If you absolutely must pay this way, start with very small orders and gradually up the amount you spend as you build trust with the supplier. Or only use these methods with suppliers you’ve already built trust with.

One final tip: Most suppliers will only take Western Union or wire transfers for larger orders, so you’ll have to use them eventually. Just be sure to build a relationship before you go making a several thousand dollar order.

How to communicate with Chinese suppliers

Next comes the problem of communication. It isn’t easy to talk with someone who barely understands your language.

But it is possible. Here are some tips:

  • Use very plain, clear language when reaching out to them. Many suppliers do speak English to varying degrees of success. Use an app like Hemingway to get your message’s reading level to 2nd to 5th grade.
  • When sending an email or long message, ask as few questions as possible. Make a very clear separation between questions.
  • Use instant messenger when possible. Get their MSN or Skype ID to chat with them.  Having an instant messenger gives you a direct point of contact should you need a fast response.

Remember that many Chinese business owners enjoy talking with native English speakers because it helps them improve their language. They want to get better, so work with them.

Here’s an example of an email I might send:

“Dear [name],

My name is John Smith. I am the product manager of XYZ company.

I am interested in your XYZ fancy widget. I just have a few questions:

  1. 1. How much would it cost to order 40 XYZ fancy widget?
  2. 2. Do you have a minimum order quantity?
  3. 3. How many could you produce in one week?

Thanks for your time,

John Smith

Product Manager

XYZ Company”

Notice how I keep it simple, straightforward, and professional.

I also called myself the “product manager” of my company. I do this to establish credibility and to make myself seem like a legitimate company. While not totally necessary, it will increase the chance of the supplier taking me seriously and working with me.

At the end of the conversation, recap everything you discussed. Don’t assume they understood everything you discussed. Even if you were clear and asked simple questions, repeat your expectations and have them agree to everything again.

Action steps to avoid fraud and poor item quality:

Now you know how to communicate with and pay your suppliers. But that doesn’t mean you’re ready to start working with one.

Here are a few action steps you should still take to avoid any mishaps:

1. Order the product for yourself first.

By ordering the product and having it shipped to your home or place of business, you accomplish three things:

  1. You see how long shipping times are compared to their estimates. If it takes longer than expected, the supplier may not be trustworthy.
  2. You get an idea of their packaging quality. Is it packaged professionally? Does it seem like the product could break easily with this packaging? Do you feel comfortable with your customers seeing this packaging for your brand?
  3. You see their product quality. Use the product how your customers might, and don’t be afraid to be a little rough to see how well it holds up. If the quality is poor, I urge you to consider another option. Product quality is important for long-term success.

Order samples from 3-4 companies to give yourself options and to compare shipping times, product quality, communication, and price.

2. Don’t be obsessed with getting the absolute best price.

Chinese manufacturers are dealing with incredibly low margins. If you try to bargain with them for rock-bottom prices, chances are high they’ll cut corners (and lower product quality) when they ship your products.

Quality has a price. Keep that in mind!

3. When dealing with big purchases, consider getting a contract.

Working on a contract with a supplier will keep them from upping prices, backing out of deals, and anything else that could go wrong.

It’s worth the extra price to hire a lawyer fluent in China law. That way, it’s enforceable in both countries.

This isn’t necessary for smaller orders, but something to think about as your business grows.

4. For long-term relationships, consider visiting the manufacturing plant.

Hear me out! I’m not telling you to fly to China before you make a $5 purchase. But if you’re going to be spending tens of thousands of dollars with a business, it’s a good idea to go check things out.

Why?

Because…

  1. People in China prefer face-to-face negotiations. By visiting them, you’ll let them know you’re really serious about doing business.
  2. You get to see how their production line runs, including how they treat their employees, how efficient their processes are, and how many units they could produce if needed.

While working with Chinese suppliers has it’s difficulties, it’s not impossible.

If you want the amazing margins that comes with Chinese manufacturers, working through the steps in this article will make the process much easier.

Is there anything we didn’t cover? Drop us a question in the comments below!

 

 

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