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What You Need to Know about Sourcing Products from China

By March 9, 2021 March 16th, 2021 Blog, Manufacturing
March 9, 2021

Why You Should Be Sourcing Products from China

If you are an eCommerce reseller, you know the end goal is to find products you can sell at a healthy margin to fuel your business. While many sellers like the idea of sourcing their products from American manufacturers, the U.S. still can’t compete with China when it comes to the cost of goods. As far as price goes, sourcing products from China will win every time.

China and many other countries can simply make products for less, helping online resellers expand their margins for greater profit. Their labor is less expensive, they have fewer regulations and oversight, and they have access to cheap raw materials. And as much as “Made in America” matters, people still care about price. 

Harvard Business Review referenced the conflict between buying more local versus buying a Chinese product. “If an N95 mask is sitting on a rack at Home Depot that is made in China looks equivalent to an adjacent higher-priced one made in the United States, consumers typically opt for the less-expensive one.” This is especially true for products that buyers don’t care about the brand. 

We can take this example to Amazon, where there are no shortage of Chinese products, yet few are overtly advertised as so. What ends up happening is a user searches for a product and pages of options pop up. Besides free shipping, Amazon shoppers consider price more than any other variable, with 64% of all Amazon shoppers saying price is their top purchasing motivator. And when asked which of various factors would prompt them to purchase from another online or offline retailer rather than Amazon, 81% said price.

As a reseller, if you can’t get your product prices down low enough to compete on your online platform of choice, you are likely going to lose to the guy or gal who can. Sourcing products from China gives you a fighting chance.

What Products Are From China?

According to OEC, China was the number two economy in the world in 2019 in terms of GDP and the number one in total exports. China has manufacturing down to a science, able to quickly access parts and raw materials to keep production humming around the clock. Even U.S.-made products typically contain at least some Chinese components.

The top exports of China are broadcasting equipment, computers, integrated circuits, office machine parts, telephones, models and stuffed animals, and light fixtures. Not surprisingly, the U.S. is their number one customer, many of which are manufacturers that are sourcing products from China to build and sell their own products.

This is, of course, not a complete list of Chinese exports. Home decor and furniture, children’s toys, pet supplies, clothing and fashion accessories, electronic gadgets, and kitchen supplies are among the most popular products to source from China, particularly for online resellers. They also happen to be among the most searched for on Amazon and other online platforms.

How Do You Source Products from China?

The first step in sourcing products from China is to do your research before you invest a single penny into purchasing products. Amazon, eBay, etsy, and other platforms have made it so easy to resell products, everyone it seems is putting their hat into the ring. Competition is fierce, with Chinese manufacturers often playing the game, along with Amazon. When they see an opportunity to sell lower and win a product category, they take it. And they win.

Research will help you identify untapped markets and how to reach an audience, products that have the best worst opportunities for you to make a play, how to price your product to beat your competition, and whether you can be profitable with that price. The goal is to find a “hole in the market,” but beware. Your market reign may not last long. As soon as others see you are succeeding without much competition, you can be sure they’ll be invading your territory at some point. 

Related: Research and Product Development: How to Research and Vet a Product Opportunity

Types of Product Research

There is much that goes into product research, at least if you do it right, so you will need more than online skills and a few basic tools. For example, you’ll want to look at Search Frequency Ratings (SFR) to determine how many people are looking for a particular product on a regular basis. You may think you found a fantastic product to sell, but if there aren’t enough people looking for it, is it worth it to invest?

You should also consider data on pricing distribution and pressure. This will help you determine what you can likely sell your product for and whether the margins will support a profit. Understanding how products are priced over time will also allow you to identify important trends. For example, if the price for a product keeps dropping over time, it could be telling you that too many people are vying for market domination. Each seller is lowering their prices to compete for buyers, leaving little room for you to make any money selling the same product. Move on.

Rankings and reviews matter, and they are correlated. Higher-rated products get better page positioning, but that doesn’t mean you can’t spot an opportunity on page three, for instance. Many products simply need refining to get a bump in ratings. You can win a product category by working with a manufacturer to make slight modifications that make a product more attractive to the consumer. In doing so, you can build your own brand selling products you own and manage. 

Related: How Custom Manufacturing Products Increases Company Valuation

Finding a Chinese Supplier

There are many other metrics you will want to consider before you land on the right product to sell. Once you do, sourcing products from China will require you to find the manufacturers of that product (yes, there are likely more than one) and understand how factory pricing impacts your ability to turn a profit. You will need to negotiate a deal where you have assured inventory at a price that allows you to effectively resell the product for a big enough margin to justify your efforts and investment. 

Keep in mind that before the manufacturers give you a quote, they will want to know you can sell enough volume to make it worth their while. They are in it to make money as well. Make sure you have the cash flow to order enough inventory to keep the manufacturer on the hook. They will likely have other resellers knocking on the door, so if you want to stay competitive, you have to play the game.

Before you order your inventory, however, you need to see and touch a sample product. This is a good time to compare manufacturers beyond price. If the product doesn’t live up to your standards, move on. Chances are, if you don’t think it’s high enough quality, either will your customers. They’ll quickly move on to a competitor, and you’ll be stuck with inventory you can’t give away.

Dropshipping is an option to reduce your risk of holding too much inventory, but it comes with its own risks. For instance, without any stock, you are at the mercy of your supplier. If they can’t get you the product your customer ordered quickly, you’re the one who has to deal with customer service. If you are sourcing products from China, how quickly can you fulfill a customer order? And what happens if your Chinese supplier hikes their shipping rates after you’ve promised your customer a set rate or free shipping? You have to choose between absorbing the loss or dealing with an angry customer.

While Chinese products are relatively inexpensive, sourcing products from China is not as easy as some make it out to be. Work with a reputable product development company that has vetted Chinese suppliers and can guide you through a proven process. Want to learn more? Contact Gembah to see how you can find the right product and supplier to make a meaningful profit.