How to source products from overseas (safely)
Read this guide before choosing an overseas supplier in 2020
Reselling products from overseas is a great way to maximize your profit margins, but the process of locating the perfect source and then finalizing a seamless product supply can get very stressful.
In this post, we'll outline the different options for sourcing overseas products and give you tips to help you get the best deal possible.
Choosing a country to source products from
China's disruption to the global logistics network amid the Coronavirus outbreak highlights just how fragile a supply chain can get. You shouldn't keep all of your eggs in one basket, or in case of product supply, you shouldn't rely on a single supply source.
Luckily, there are multiple overseas countries you can source your products from. Here is a list of the top 10 manufacturing countries in 2020 according to Industry Weekly:
1. United States
6. South Korea
The primary reason why businesses choose to source their products overseas rather than from the United States is because the manufacturing labor costs are much cheaper.
Manufacturing labor costs per hour by country in USD - Source: statista.com
But before choosing a country based on profits alone, you should consider the trade relations between that country and your own. You don't want to finalize a supply arrangement, sign a contract and make a deposit only to eventually discover that your shipment of goods has been seized.
If you're located in the United States, you should read the background notes and the country commercial guide for your supplier in question before signing anything. If you have any doubts, consult with a lawyer.
Your choice of supplier also depends on whether you are manufacturing a new product from scratch or reselling existing products. There are alot more variables to consider if you are manufacturing a product from scratch.
Finding a manufacturer for a new product overseas
The first thing you'll need to do is get a single prototype developed so that you can gauge the machining quality of each manufacturer. But first you'll need CAD models created so that your prototype can be developed to your exact technical specifications.
If you don't have the skills (or the expensive software) to create these CAD models yourself, hire a freelancer to do it for you.
WIth your manufacturing specifications in hand you can then start contacting different manufacturers to glean quotes and get prototypes made. You'll need to provide your CAD models to each manufacturer in order to receive an accurate quote, just make sure you sign an NDA before handing over any sensitive information.
You can find a list of manufacturers in each of the aforementioned 10 countries by following the links below. The links to do not lead to an exhaustive list, but it should be enough to get you started:
List of manufacturers in United States
List of manufacturers in China
List of manufacturers in Germany
List of manufacturers in Japan
List of manufacturers in India
List of manufacturers in South Korea
List of manufacturers in Mexico
List of manufacturers in Taiwan
List of manufacturers in Canada
List of manufacturers in Singapore
Thomasnet.com is a fantastic supplier database worth highlighting separately. You can search for suppliers, products and even CAD models to help you digitally reconstruct your product.
Key attributes to look for in manufacturing factory
Some manufacturers may handle a prototype request with premium attention to detail but then lapse their dedication to quality once a contract is signed. So your final choice of manufacturer should be dependent on more than just a clean prototype.
Here are some questions to answer when considering a manufacturer:
Is the company ISO certified?
This is a very important question. An ISO certified company meets quality standards. A manufacturer should be able to provide you with their ISO documentation upon request. Ideally you should run it by a lawyer to verify its authenticity.
You should also ask to view their business license which is proof that they are an actual registered business.
Does this manufacturer have a good reputation in its industry?
You may receive daily emails from overseas manufacturers selling their services to you. You should never solely rely on the promises outlined in such cold emails because they are likely to be a scam. You can investigate the reliability of a business by reading their reviews on Google, Facebook and Glass door.
If a manufacturer lists their clientele on their website, do some research to verify the authenticity of each listed client. Take a look at their websites and online reviews. If you reach a brick wall and are unable to find the listed businesses online or their reviews, it should set off some deafening alarm bells.
Will the manufacturer consent to a video call?
Don't only communicate via email, ideally you should also organise a video conversation. Since the Coronavirus outbreak, almost every business globally has integrated a video conferencing solution, so you shouldn't have any pushback for this request.
If a prospective manufacturer denies a video call, they're trying to hide their identity and you should avoid them at all costs.
Can this manufacturer keep up with product demand?
Your supply chain should never be interrupted. An ideal manufacturer should be able to adjust their output to your seasonal demands. Another way of finding the answer to this question is by asking for their average turnaround time per order.
Estimate the maximum number of units you might need during your most demanding period, then increase that number by 30% as a safety margin. If the supplier is able to accommodate this amount, you should be in safe hands.
But don't just take their word for it, ask them to provide proof of their output capabilities.
Sourcing existing products from overseas
Sourcing existing products to either resell and ship yourself or directly dropship to customers is a slightly simpler process but still requires diligent scrutinization. The above fraud detection framework can also be applied to existing product suppliers.
Here is a list of some of the most popular global suppliers of existing products.
Follow these tips to help you choose the most reliable and trustworthy overseas product suppliers.
1. Have a clear pricing benchmark.
Every supplier is willing to negotiate, so you need to have a pricing reference point to anchor your negotiation efforts. Research product pricing from multiple suppliers to get an idea of the industry average.
Choosing your percentage profit for your dropshipping product is a delicate balance between not exceeding the perceived value of the product and not setting yourself up for failure. Some dropshippers increase $10 items but 50% and $500 items by 15%, but it all depends on your unique overheads. You can test whether or not your pricing is too expensive by running your products by your friends and asking whether they would purchase it at its pricing.
Keep in mind that acceptable pricing is a matter of perception, so it can be influenced. By working with a talented writer and a clever graphic designer, you can manipulate the perceptions of great value and sell any product.
You can discover ultra competitive pricing at 1688.com. The entire site is in Chinese though, so you'll need to run the product names via Google translate. If you find your product listed on this site for a lower price, you can show it to your prospective supplier and ask if they can match it.
On Alibaba, you can submit an RFQ request (request for quotation) via their dedicated quotation portal. Once submitted, suppliers will reach out to you with their best offer.
2. Find out if there's a MOQ
MOQ is the minimum order quantity. If the minimum order quantity is too high, you'll need to set aside a higher investment amount to get started. Also you don't want to store too much inventory. To run your business intelligently during the recession, you should aim to keep inventory levels as low as possible, without disrupting customer demands.
3. Ask for a product sample
Never base your decision solely on photos and videos, they're always strategically captured to maximize aesthetic appeal (remember how perception of value can be manipulated?). You need to always physically handle the product yourself before making a decision. You may be required to pay a small fee to cover shipment of your sample. If a supplier refuses to provide you with one, or pushes you to order an unnecessary number of minimal sample units, walk away.
4. Only use secure payment methods
Handing over money to a new supplier for the first time is a very scary experience. Even if they accommodate a free sample and their communication is outstanding, you never really know whether you can trust them with your initial large order of products.
While using a payment gateway like Paypal is a secure method, you are never guaranteed to receive the products you purchase.
You should always, therefore, aim to only transact via escrow.com. Escrow.com only releases payment to suppliers when you confirm that you've received your purchased goods. In the meantime, your funds are held securely in escrow so that they can be readily recalled in a fraud incident.
5. Read the supplier contract carefully
When you've finally narrowed down your search to a winning supplier, and you've verified their trustworthiness, resist the urge to quickly sign a contract to get your business in motion ASAP. Always read and re-read any contract meticulously before signing.
Ideally you should always run any contracts by a lawyer prior to signing them.
A key clause to look out for is a termination or break clause. Check for any additional fees and any minimal contract terms. Some suppliers may be weary to disclose these details during negotiations.
Not all contracts are binding either, so if you're not happy with the service of your suppliers, you could be eligible to walk away at any time. Again, this can only be confidently ascertained with the assistance of a lawyer.
Sourcing products from overseas via a freelancer
As you may have noticed, sourcing products from overseas is not easy. It takes hours of research and highly skilled negotiation efforts.
If you don't have the time or the skill sets to choose an overseas supplier, consider hiring a freelancer to do it for you.
If you are manufacturing a new product, a freelancer can help you finalising your manufacturing documents, complete market research to find the best manufacturer for your unique product and also negotiate the best possible supply arrangement on your behalf.
If you want to resell an existing product, a freelancer can work alongside you to identify the hottest selling products, source the best possible supplier for these products and finally negotiate the most profitable supply arrangement for you.
Sourcing products from overseas requires thorough research and tactful negotiation. To alleviate the pressure of having to do all of it yourself, work with a professional freelancer to help source your overseas products today!