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How to Source Products from China for Amazon

with Ash Monga of Imex Sourcing

When sourcing Amazon products from China, do sellers/retailers need to have  staff on the ground in China?

Do you need to have a native Chinese speakers and contacts?

If so, how do you know who to trust?

When you source products from China for Amazon, it does make a huge difference if you have native Chinese contacts – the majority of QC issues are down to communication issues.
Communication is not just language, it’s culture and expectations as well.
Having people on the ground does help.
In low-trust countries like China and India, people like to do business with people they know.
Trust in the legal systems is lower.
Going to suppliers and presenting yourself and showing you have an established business.
Price and credit terms are often improved. Suppliers like to visit offices – esp. those running small to medium sized factories.
Their due diligence is knowing you in person and making a judgement call.

How can you tell who works directly for a factory and who is an agent when you source products from China?

Again due diligence is the key and being on the ground makes a difference.
Imex also does this as part of ad-hoc company verification.
When you source products from China, verify an individual to see if a person is actually employed in China when you source products for Amazon (or any other marketplace).

• They just call the factory.
• In the early days, one guy sat somewhere trying to convince someone is the boss
• Someone also claimed to be a manager but nobody recognised him!
• Factories have great relationships with trading company

Does it even matter if someone is an agent?

Yes it does, but if you’re a small buyer, it might not make a difference.
The trading company does add value – eg speaking English

Does it make a difference to price?

Yes it does make an impact on pricing

Does it affect quality?

For Imex, it does make a difference to quality control

How to source Amazon products from China Yourself

Do I need to visit China?

There are different views on this. Traditional importers are big on doing this.
It comes down to ROI – for a $5000 order, there’s no point in spending $5000 on flying in and hotels etc.
As volume increases, it makes sense.
However these days you can do a lot online.

What are the best ways to source from China online?

Do due diligence – ad hoc supplier check from Imex $200-300
25 pages, supplier’s IP, financials etc.
Put contract in place
Have a solid QC
As a minimum

• Have a Pre Shipment Inspection
• Get a carton of random products pulled out and shipped to you

It adds a week or two to your supply process, but you keep control.

How do you deal with contracts?

Anything that goes wrong eventually translates into the contract – have 25 pages.
It’s a great negotiation tool- Imex has a good track record of recovering money from suppliers when things go wrong.
An English contract is better than nothing at all.

Is it more powerful to have things in writing?

Yes, it is a better negotiation tool.
Send 5 page contract to some suppliers and it’s returned within 5 minutes stamped, so they don’t really read it unless things go wrong.

Is it possible to get a lawyer draw up a Chinese contract?

You can draw these things up online.
If your goal is just to get the supplier on the same page, a simple contract in English.

How should Amazon sellers outsource their sourcing from China?

It’s very fragmented.
Imex does full supply chain management

• Production management
• Contracts
• Supply chain management

It comes down to something that is a fit for your needs.
Recently a client just starting out who wanted someone to visit factories for 2 weeks
In this case freelancer is best.
Whereas if you’re looking to scale the business, you should consider outsourcing the whole business to someone like Imex Sourcing.
Contact:
Imexsourcingservices.com
Ash: facebook Ash Monga ash@Imexsourcingservices.com
For notes about Quality Control in China with Ash Monga, click here

TRANSCRIPT

Michael Veazey 0:56
So let’s come back to them. Let’s zoom back out then, from the details testing to the bigger picture of how Amazon retailers or sellers deal with the whole sourcing in China thing. The first question is, do people need to have staff on the ground in China or contacts on the ground in China? Because that’s a discussion that goes around amongst the more serious sellers? I know, do you have to have a native Chinese speaker and contacts? And how do you go about finding and trusting that kind of person,

Ash Monga 1:22
I personally think that definitely makes a huge difference, because that is, so firstly, when we talk about quality issues, I believe, majority of the issues are down to communication issues. And when things go wrong, suppliers are normally like you said, this could be understood this, and that’s why this happened. So communication issues, it’s just not the language itself. It’s also the culture, the expectations and stuff. And obviously, when that’s all being communicated in the local language that helps, but also through a professional mechanic, for example, and we talk about putting everything in a contract and QC interest. So that helps, again, having people on the ground helps in terms of negotiation itself. You know, in low trust countries in general, like China, like India, a lot of the developing world, people like to do business with people that they have seen, and somehow are connected to to the network. And the reason for that is because the trust in the systems is lower, you know, the legal systems. So people tend to do business with people they know. And, and that’s where being on the ground, being able to visit the suppliers, present yourself, show that you have an established base, I think makes a difference in terms of pricing as well. So yeah, I think it definitely adds great value if you have people on the ground.

Michael Veazey 2:48
Yeah, that makes sense. I think, particularly if you have an established business that you may as well showcase that. I mean, there are some people that there’s a couple of members in the tank, a collective, for example, you have who can from multi generational family businesses, and I think that gives us a sense of reassuring us and I think sometimes people are very, they kind of almost hide it, like they’re ashamed of it, because it’s old fashioned or something. And when it comes to other sellers, there may be everyone’s thinking about the latest Facebook ad hack or whatever. But when it comes to suppliers, I think that very conservative, we’ve been around for several generations, and we own a building or a factory or something substantial, I think really helps to communicate and reassure. Would you say that is true in your experience?

Ash Monga 3:29
Yeah, absolutely. I think just being able to, I mean, a lot of things, you know, when we talk about credit terms is Jeff and our suppliers. They like to visit our office, they like to see how long we have physically been in their office. Because still a lot of specially people who are running small to medium sized factories, they, they instead of having access to technology, tools and stuff, their due diligence is knowing you in person, and making a judgment call on how much they can try you with stuff like credit. And also, you know, that’s where these little things do make a difference. I think I mean, to be honest, I’ve even seen that in the Western world, it makes a difference. But in the developing world, it’s even more important because the low trust environment.

Michael Veazey 4:15
Yeah, I think that’s true. And that there is something about an in person, the thing that always builds trust them. And this is why I run the masterminds and that’s what the 10 k collects and podcaster to point people towards if they’re based in in London or Europe and can fly to meetings, because there is no substitute for meeting in person. So you can have a conversation and having a conversation with one of the 10 k collective members later, to see if we can help me with an issue I’ve got with we’re going to get in the podcast launch because he’s got an expertise that helps me but the point is, we made a strong connection in a room in person, and now we’re happy to talk digitally continue the conversation, but there is I think there is no substitute for for meeting people. So now another question that always comes up if people are in touch with people, if sellers are in touch with people in in China, I should say. The other classic question, how can you tell who works directly for a factory and who is an agent because I’ve heard of people I have a friend of mine lives out in China, his girlfriend’s Chinese and actually are Chris Davey has in fact, somebody I should probably get on the podcast as well, interesting job. He said his girlfriend at one point is working for as an agent, and she would even have a uniform for one of three different factory she works with them would line up with the other factory staff. So she went to massive lengths to pretend to be in the factory, even though she was actually an agent. So how was your experience about that?

Ash Monga 5:34
So I think, again, you know, due diligence is the key. And this is where actually being on the ground also makes a difference. So so for example, just to give you a very simple tip that anyone could use, this is something we also do, as part of our, you know, the ad talk company verification service that we do is we not only verified that the company’s legit and whether they’re a supplier, but we also verified the individual that client is talking to, to see if they’re employed or not. So we would just give them a call call and ask for that employee, and check with other employees, whether they actually employed there. And it’s something very simple takes us five minutes, but allows us to see if they’re actually employed by that company or not

Michael Veazey 6:18
qualified for Yeah, okay, that makes sense. We just call the factory, I suppose it’s like you would do if you’re getting landlords reference, if you’re renting a property to somebody, you might just phone their previous landlord to get a reference and then for their employer, and just double check a they do actually work at Pizza Hut or whatever it is, and be that, you know, they’re still employed there.

Ash Monga 6:36
So yeah, and you know, I couldn’t I could get into other hacks where, literally, I’ve been to a factory with someone that this this is a when I was in China in the early days. And they, they went into the factory, and then they literally sat at the boss’s chair, trying to convince us that, like this guy was the boss. And eventually when we were trying to go out, and I was like, Where’s the toilet, and they were kind of confused and looking around. Now, the other thing we noted was when this guy, and I’m sorry, this is this is a different case, I went to a factory with this guy, and he walked in and everything. Again, he came to be a manager, but no other vocal recognize him while we were with him. So there’s a lot of these little cues you can pick up on. And you know, you just have to understand China for that. But yeah, these things are very common in China, factories, have great relationships with traders and trading companies. And they would be more than happy for them to be the boss for a day, if that helps them get more business. Yeah.

Michael Veazey 7:36
So my other question then is about all this people spend a lot a lot of time stressing about this? Does it even matter? Does it affect price, and does it affect quality?

Ash Monga 7:45
I personally think it does. But I think if you’re a smaller buyer, it might not make that much of a difference. So for example, if you have got no one on the ground, and you know, employing your sourcing company, it might actually make sense for you to work with a trading company, because they do believe in some value, like being able to communicate in English, it’s it’s, it’s going to be very hard for someone with no resources in the ground, to be able to manage a Chinese factory, that’s not very international. So in that case, that working with the trading company would be your best option. For us, we prefer to work with factories, because in terms of QC is it gives us a lot more control, you know, when we have issues, we can give solutions to the factory, and we can get them to try those out. Whereas with the trading company, you have another layer of communication that makes problem solving more challenging. And it also obviously, if this person is in the middle, they would mark up the product. So that would definitely have an impact on pricing. If you have the scale, and the resources and going direct to factory gives you more value. But there are use cases where working with the factory, my mic over the trading company might make more sense.

Michael Veazey 8:50
Yeah. So if it’s quite small anyway, and you don’t have the money to pay for a sort of somebody to do things properly. If you’re on the ground, I guess and I can understand the I would make a difference to quality control. If there’s a problem, then direct communications always best ready. So let’s just talk a little bit more about that then. So if you’re sourcing yourself, assuming that you’re, you’re not outsourcing somebody, what’s the best way of doing it? Do you need to visit China is one question that comes up?

Ash Monga 9:16
I am again, you know, I think there’s different views on this. And I’ve had this discussion a few times. And a lot of the traditional importers, they’re really big on visiting China for everything they do. My take on this is it all comes down to the ROI. If you’re placing a $5,000 order, I wouldn’t spend another $5,000 and traveling to China plane tickets and hotel. Yeah. Because it messes up the ROI. But there are other ways of doing a you know, that’s the beautiful thing about the age we live in, you can do really high quality due diligence and QC and stuff sitting at home. So I think as the volume start increasing, it starts making sense. But again, there has to be a business case for it for me personally, for it to be feasible to travel.

Michael Veazey 10:02
Yeah, that makes total sense to me. And I think it always surprises me when you get these courses, where will people will go on sourcing visits with with, you know, for a large amount of money that’s paid five or $10,000, just to kind of get taken around China and little tour, which seems to me, okay, well, you could do that whilst actually making some useful business. But a lot of the time that’s for half the people on these trips, I haven’t spoken to people who run them or other people who’ve been on them are actually real beginners with no products in the market. And I just find that a very strange use of money and time. I mean, sort of like tourism only not ready to travel to places. So yeah, I think the business case thing has has to come first and ROI, as you say. But as you say, you could do a lot of things online. So what things can you do to be still very professional, we’ve talked an awful lot about the importance of doing things properly. And I couldn’t agree more from my personal experience. And those of people who’ve done things in amateurish way and PPC things well, and the contrast is huge. But the worst case scenario, just to give an example is somebody who’s very new and had just sourced I think some electronics from China had just ordered $20,000 worth of for a second order, and then had all her listings, but one suspended by Amazon because there was some massive defect rate. So this is your typical horror story where we don’t want to be. So we’ve got to do it. Well, how do we do it? Well, online, that was one of the best things that we need to be doing. And you mentioned quite a few Well, let’s just sort of summarize that.

Ash Monga 11:25
Sure, yes, I would kind of go back to what we discussed previously, in terms of putting down the QC process. So to summarize it, you know, start with doing a due diligence on the supplier. So again, it’s something that can be done, like, for example, adult services we have, it’s from hundred to $300, you can literally know everything about us supply, we literally, you know how this 25 page report, which covers everything, all the supplies, IP, financials and stuff, then I would again, put two contracts in place with the supplier, how a solid QC checklist, as amended, carry out and pre shipment inspection, and even get random samples drawn from the inspection and send back to you as I mean, you could send back a couple of samples, or you can even send back the carton, and you come back. And once you’re satisfied that the final production meets your standards only then ship it out. So it adds another week or so to the process. But you know, like I said before, you have to support issues while the goods are still in China. And while you haven’t paid the balance to the supplier, there’s a lot that can be done at that stage, once the goods are on the sea, then the equation changes completely.

Michael Veazey 12:38
Yeah, that makes a lot of sense. I like that. So it’s very simple stuff that anyone even a beginner could do. But certainly an owner who’s been in business for a while should be doing that. So the contract, do you work with the Chinese lawyers? Because obviously, having a contract in Chinese is quite not in most people’s abilities for legal and linguistic reasons.

Ash Monga 12:58
Yeah, so we have, I mean, you know, that’s actually the contracts one of our biggest levers that we use, because we have a, you know, more than 12 page contract now. And we’ve refined that over a period of time, depending on our experiences, everything that has gone wrong, eventually translates into an upgrade of the process and the contract. So having done that over the years, and it’s been, you know, the contracts never really been a legal tool for us till date. It’s always been a negotiation tool. And it’s really helped us I mean, we have a pretty good track record of being able to recover money from Chinese factories when things have gone wrong on the back of the contract. So, yeah, that’s that’s, I mean, but you know, if you were doing this yourself, and you didn’t have the budget for a sourcing company and stuff, you could still come up with something basic, at least have an English contract, that’s better than not having a contract to talk, you know, because at least when things go wrong, you could go back to the supplier and say, This is what it says on the contract. And if you can communicate with me in English, then I’m sure you can read what’s on the contract.

Michael Veazey 14:02
Yeah, I mean, it may not have legal power, but at least it’s it’s got some kind of negotiation or appealing to their, their good sense or their their sense of honor, possibly. I’ve heard that the Chinese will respect it’s written contracts a lot more than just verbal agreement. So that kind of makes sense for any culture. But I’ve heard that there are particular respect for the written contract. Is that true? Or does it really depend on how its framed and how much legal teeth it has?

Ash Monga 14:32
Yes, a very interesting question that I have to differing opinion on that. I mean, the first thing is, yes, we have found that when things are in writing, the negotiation becomes a lot easier. And once we show them the surprise, are willing to accept, you know, where they’re wrong and fix things. So that’s definitely true. On the other hand, you know, we’ve had suppliers where we send them a 12 page contract, and five minutes later, they sent it back to a stamped and everything. So we know a lot of them are not even reading it. They only redid when things go wrong. And when something goes wrong, so I know this to be true for a lot of the factories. Yeah, but he has chill. I mean, you know, going back to the first point, it’s been a great negotiating tool, because I have seen suppliers respect the written word, when there’s disagreement over what was agreed.

Michael Veazey 15:19
Yeah. And but presumably, those are contracts written in Chinese by Chinese lawyers. Is that right? That tells you the contracts you’re referring to.

Unknown Speaker 15:29
Right? Yeah,

Michael Veazey 15:30
yeah. So that that doesn’t make the difference. So I guess that is that’s presumably going to be pretty difficult for people to achieve if they’re not actually in China.

Ash Monga 15:38
I mean, you can always hire lawyers online. But I think it’s, I mean, the language makes a little bit of a difference. But only if you were planning to actually take the legal route, you know, if your goal is just to get the supplier on the same page, I think a simple contract that lays out the specification and agreement is still a good negotiating tool. It’s still better than nothing. Yeah,

Michael Veazey 16:04
yeah. So you talk about a simple contract in Chinese.

Ash Monga 16:08
In English, in English,

the minimum possible thing that you can do is having an English contract. Cool. Alright.

Michael Veazey 16:16
So that we talked a lot about the the way of doing things, just yourself, obviously, you deal with doing things on behalf of your clients. So we’ve been sort of stepping politely around that. But obviously, that is something that people might want to explore. So just briefly, let’s talk in general, first, how should people go around finding a business to outsource their sourcing to So in other words, who’s going to handle or manage the process? It’s a big question, but let’s just deal with the simple basics of it in this episode, and we’ll get into this in detail in future episodes.

Ash Monga 16:52
Sure, so I mean, I, you know, sourcing is a very fragmented industry, you got sourcing companies in all shapes and sizes, is you got the freelance sourcing agents, or individuals who probably worked in sourcing companies before, and then went freelance, you got companies with three to five people, you know, companies like us, that is more of like a whole supply chain management thing. So sourcing actually takes us about 15% of our time and effort. 85% of it is other stuff like production, management contracts, negotiating exclusivity rights, payment terms, stuff like that. So it’s much more of a full supply chain management, we’re even in the process of considering to kind of change your business name, you know, as we discussed when I was in London, because sometimes people get misled by a name. But there are different options out there. And it all boils down to finding the right fit for your needs. For example, recently, a client reached out to us and they said they wanted someone, they were going to be in China for two weeks, and they wanted someone who would be with them for two weeks and traveled then the factories and south and and, and they were just starting out. So in that case of Freelancer would actually make more sense. Whereas, you know, if you’re dealing with slightly bigger shipments and you compliance is important for you, payment terms are important for you. And and you looking to launch a lot of products in a short period of time and scale the business, then a company like ours will be able to add more value. So it’s it, it’s all about identifying your needs and finding a partner that can can fulfill those needs. And of course that works for you.

Michael Veazey 18:35
That makes a lot of sense. So I guess yeah, it’s no point in having a sledgehammer to crack a nut, as we say in the UK. So it’s, it’s a question of not using a massive, you know, your company, which is now pretty sophisticated abilities for something where you just need somebody to help you out. But yeah, if you’re looking to scale the business, and yeah, and I guess we’ll also, from our conversation today, prove yourself, your business and against future problems, possibilities of problems like QC issues down the line compliance issues, not having the ability, should there be a problem in future even if there isn’t one now to go back to supplier with a robust contract, all that kind of stuff? It sounds like, you know, there is an increasingly strong business case, as you put it to be using a company like I met sourcing. So that makes sense. Well, we’ll have you back on the podcast at some point to discuss in detail how to work with an outsourcing company, because it’s obviously a huge area. But for anyone who’s interested in working with you guys, or finding out a bit more, for example, about the ad hoc, would you call it the ad hoc supply intelligence or due diligence service, then how do we how do people contact you?

Ash Monga 19:40
Sure. So our website is I mix it’s i m e x, sourcing services with an S at the end.com. So that’s one way of reaching out to us if you want to reach out to me personally, I’m quite accessible on Facebook, if you just search for ash maga, or my email is Ash at I’m at hosting services.com is OK, cool.

Michael Veazey 20:02
So just reach out and have a chat. So yeah, lots of things that we’ve learned today. I think that’s that’s been a very, so that sounds a bit like I can’t help sounding like a teacher, sometimes it comes out and see my blood. My mom was a teacher, so is her mother. But yeah, certainly a lot of things that I’ve learned put it that way. And, you know, I’ve obviously been having conversations about these foods, you know, for whatever years now. So there is a lot that goes into sourcing. And I think if nothing else, this has been an eye opening, hopefully even for quite advanced sellers, that to think about the issues that you can hit, but also some possible solutions. So really great to have you on, we’ll definitely get you back house, because it’s an area that everyone needs to understand in detail, and is obviously the most complex area, I think of anything that we do as marketers, especially if you’re marketing focused. So thank you very, very much for coming on. Have you got any last, any sort of summary tip that you would like to leave us with? I know, it’s a hell of a thing to ask now as complex as sourcing one or two things that people should think about that they don’t tend to?

Ash Monga 21:06
Yeah, I would say, you know, again, I re emphasize what we discussed earlier, this is something so basic, but probably the biggest cause of all QC issues, which is really know your product before you start the sourcing phase. You know, the standard negotiate the standard sourcing process for most sellers is going Alibaba get 20 codes, look at best three, and then talk about specs, you have to turn that process around and define your specs and a lot of detail, then start the sourcing process, find the top three suppliers that can meet that spec, and then talk pricing. And this makes all the difference in terms of avoiding QC issues further down the road. Because with the first process, you’ve eliminated good suppliers very early in the process. And then you’re trying to find the best among the worst. So yeah, that would be the most important thing I’d say.

Michael Veazey 21:57
Trying to find the best amongst the worst. I like my thing. So yeah. In other words, think about the thing that you want as the end result of the process before you start the process, I guess to put in simple terms, right?

Ash Monga 22:07
Exactly, absolutely.

Michael Veazey 22:09
Makes 100% sense to me. But still from the horse’s mouth. I mean, a man who’s been in China, and running a sourcing business for nine years. This is definitely worth noting. So thank you so much for coming on. We’ll definitely have you back on. But for now, many many thanks for coming on the show.

Unknown Speaker 22:24
Thanks, Michael. Really appreciate that. And good luck to everyone.

Transcribed by https://otter.ai