How to find the right suppliers – a small business guide

When it comes to early interactions with suppliers, make sure you follow this advice.  

As with most things, the search for suppliers will often start online. Websites such as Alibaba, which bring together manufacturers and suppliers, will point you in the right direction.

Start off by requesting samples

These will be free but you’ll have to pay the postage costs. Ben Wilson of e-cigarette company Freshcig got in samples from five different electronic cigarette manufacturers and paid £200 for them to be transported over, but says it was well worth the initial outlay.

Be vigilant in regard to payment

Make sure you get company bank details rather than personal ones. You have to be wary of fraudulent activity. Emails can be intercepted by third parties too and if you are given personal bank details it’s probably a scam.

You also can do some research to try and find the best exchange rate possible. Providers such as banks or PayPal typically inflate exchange rates on top of any foreign transaction fees. Alternative fintech companies such as TransferWise convert your money at the mid-market exchange rate, which could save you up to eight times on foreign transaction fees compared to more traditional methods. Payments can be faster too, which helps when building a relationship with your supplier.

Use a UK-based freight company

Find your own UK-based freight company to get the best transportation rates. They will collect your shipment from China and deliver it to the UK. Chinese companies often increase the margins in a bid to try and make profit on shipping. Communication is also easier if you have a UK-based freight company as they act as the middleman on your behalf.

Ensure supplier accreditation

If you use a company such as Alibaba, make sure the supplier has a good rating, has been trading for some time and doesn’t have any reported issues. They can also have a factory accreditation stamp from the site which is another good thing to look out for.

Be wary of order sizes

Suppliers will often try to get you to place larger minimum orders than the one you actually want to place. If this is the case, then play the waiting game for a few days. It’s likely they will allow you to place the size of order you wanted to in the first place.

Don’t go overboard on stock

Do not over invest initially. Be cautious on doing so before you’ve built a relationship with your supplier. Wilson says he learnt the hard way and placed a larger order than he should have done with a different supplier to the one he has now. He says the products weren’t of the quality he wanted and he was stuck with stock that he wouldn’t sell. It might be wise to invest £1,000 or so to start with; you can then steadily increase this to supply product demand. Also, you have to be conscious of where you can store stock to begin with. Bear in mind that if there are issues with stock sent over from China then they are very reluctant to pay to have it shipped back to them.

Contemplate whether to use air or sea

If an order is less than 100 kilos in weight then use a well know air freight carrier. If the order is more than 100 kilos then use a UK freight forwarding company which give you the best rates. This generally takes between three and seven days to get to the UK from China. If your order is over 800 kilos then the cheaper option is to have it shipped over by sea, but the product needs to have a good shelf life as it can take up to 28 days to arrive. There are generally more issues such as delays with this method, so it can take longer.

Meet your suppliers

Obviously this isn’t something to do at the beginning but once you’re established and you can afford it then it’s worth going out to visit your suppliers and have a tour round the factories. Gaining a deeper understanding can give you a lot of perspective. It also solidifies your relationship with the supplier; you’re not a faceless customer in another country.

Negotiating with suppliers

Negotiations are easy. Only accept what you’re happy with. If you think it could be less expensive as you’ve seen how little competitors sell their products for, then walk away, or at least wait a few days to see if they come back with a better offer. Communication issues do occur as with most that take place between people who speak different languages. Chinese suppliers are very good at English but things can be misunderstood. To help with this, use Skype or WhatsApp, and then you can to save conversations for a later date. Also, tell them if you’re not happy, it’s rare that they will walk away from business and you have more power as a buyer than you think.

Wilson didn’t last long with his initial supplier. ‘The first supplier grew substantially due to selling to many of the electronic cigarette companies around the world and the huge e-cigarette market growth. As a result we became less of a priority and felt we were seen as ‘just another electronic cigarette company’,’ he says. ‘The final nail in the coffin was when our production time went from ten days to five weeks which wasn’t sustainable when we were growing so quickly. You also don’t want to over-invest in stock when you’re trying to predict demand.’

He visited a British expat who lives in China who was already producing a different type of product. ‘He had extensive local knowledge and set up production of electronic cigarettes himself for us which cut production time to just three days,’ he says. ‘It’s also great to have someone who can speak Chinese and knows how business works over there.’

General advice on finding suppliers

  • It sounds cheesy but if it’s too good to be true, then it is so don’t do it. You can get anything for hardly any money but it won’t be of a good enough quality to sell. Start small and build a relationship gradually with your supplier as it will pay dividends in the end.
  • Haggle. It’s expected in business in the Far East. Avoid paying suppliers via PayPal or Western Union as they are more expensive; they have higher exchange rate fees with less security measures in place. Consider providers such as TransferWise who specialise in international money transfers. They’ll always convert your money at the mid-market exchange rate and charge just one, small upfront fee. You could save up to 16 times on foreign transaction fees compared to PayPal as a result. An account is also free to open.
  • Use a well-respected foreign exchange company.
  • Sign up to a few companies to test them, but be wary as they may only give you a great deal on the first payment in order to get you to give them business, but the rest will be higher rates again.

Further reading on import/export

 

Related Topics

Exporting
Suppliers

Leave a comment