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Your purchasing advisor for the Chinese market: reliable, professional and transparent.

Sourceit is the Hamburg branch of the Frisch agency.

Sourceit has been part of the Frisch agency since 2018. Our colleagues in Hamburg will be happy to advise you in a competent, goal-oriented and responsible manner and offer solutions to your company’s business problems. The advice can be given in German or English.


Consulting focus in Hamburg, among others:

– Purchasing in China
– Advice on imports from China
– Supplier search in China
– Production in China
– Negotiations with Chinese partners
– Risks when importing from China
– Quality assurance in China
– Logistics when importing from China
– Sales in Germany and the EU
– Establishment of a company in Germany or the EU
– Full Filment (transport, storage and sale within Germany or the EU)


Agency Fresh
Hamburg branch

Office Manager: Timothy Fresh
Phone: 0 40 422 36 957
info@sourceit.de

www.sourceit.de

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Purchasing in China: This is how importing pays off for your company

Purchasing in China can lower your costs, increase your margins, improve your product, secure and expand your position in the market.

The China Import: What is important?

Through years of experience and thousands of orders, we are one of the leading companies in China import. You have to pay attention to many points that can lead to problems for the inexperienced at first. We’ve summarized some of our methods and tips.

Purchasing in China is also a field where countless pitfalls lurk. Only those who know exactly what they are doing can avoid nasty surprises.

negotiations in China

The decisive cultural difference lies in the importance of an individual person. While the individual is held in high esteem by us Europeans, what counts most in China is integration into groups and structures. Accordingly, a Chinese attaches much greater importance to hierarchies than you are used to. At the same time, relationships are important to him.

 

Accordingly, contact is ideally made via personal contacts or via a suitable middleman. Doing business with a total stranger is irritating to the Chinese. What is important to them is how a potential business partner is socially integrated within their group of friends, family and co-workers. The Chinese prefer to maintain long-term relationships and pay great attention to a balanced mutual give and take over time. Trust has to grow first, it is not automatically given to strangers.

Property rights and contracts are relatively recent achievements in China. This explains the more reliance on the social aspects of a business relationship and less on writing down every detail.

Between formality and fraternity.

 

The strong hierarchical orientation of Chinese society means that more attention is paid to social status than we are used to. Successful negotiations are often only possible among hierarchically equals.

In China, on the other hand, the separation of professional and private life that is typical for us is not known. Interpersonal harmony is seen here as essential for good cooperation. And creating that harmony can take time. In addition to lavish dinners, this can also include visits to cultural or sporting events and private invitations. Anyone who reacts impatiently or tries to shorten this phase has already lost and no longer needs to hope for a satisfactory deal.

It takes a lot of patience

Negotiations with the Chinese are rarely as straightforward as one would like. While Europeans are used to ticking off individual points one after the other on an imaginary list, the Chinese look at the whole thing. Seemingly at random, he jumps from one point to another and tirelessly demands that the same questions be discussed over and over again. It is important not to let this irritate you and not to be tempted into wanting to shorten the process. For example, through thoughtless and unnecessary concessions. Better hold on and join in. The Chinese admire and honor the perseverance of their counterparts.

Even if Chinese suppliers appear extremely cheap by European standards, they also make sure to achieve a good margin for themselves. They fight hard for this, are tireless in negotiations and also use means that are unfamiliar to us, such as demonstrative silence. Here, too, a lot of patience and tenacity pays off.

Incidentally, what you should definitely not miss when negotiating with a potential supplier is pointing out other negotiating partners with whom you are in discussion. While this can anger Europeans, for Chinese it’s a natural part of the negotiation culture and shows that you understand the business.

 

The Risks

“The profit lies in the purchase” as the saying goes. Purchasing is therefore one of the most decisive factors for the company’s success. And so we also understand that many entrepreneurs find it so difficult to let the topic of purchasing out of their hands.

 

Nevertheless, even purchasing in Europe has its pitfalls. But when shopping in China, it is much easier to make serious mistakes. Errors that, in extreme cases, can cost a lot of money or even the existence of the company.

Great distance, great risk

The main reasons for very typical difficulties: long distances, difficult communication and uncertain legal bases in China. The possible legal problems in particular mean that you should only work with partners you know and who you can assess as trustworthy and reliable.

If that’s too risky for you, you’ll want to monitor the entire process. However, this means that you will have to fly back and forth between Germany and China at least 2 to 3 times and may need to use a (trustworthy) interpreter. It costs. Above all time. And even more money.

Doing your own work can be expensive

In any case, it is worth doing the math. For example, you send an engineer to travel around China to find a suitable factory that can make more sophisticated parts. This easily takes a few weeks and costs many euros. Only later will it become clear how many. Because there is a high probability that your husband did not even find the best supplier with the best quality at the best price due to a lack of market and language skills.

Another example: You rely on a local Chinese agent. But he will not only take money from you, but also from the suppliers. And he will probably prefer to bring his friends into play. Finding a reliable agent in China is very difficult if not impossible for German companies.

The consequence is obvious: you want to do everything to minimize the risk. OK. But the best way to minimize risk is through knowledge and the best possible information. sourceit can offer you both.

 

The Risks

regulations? Yes, regulations. Because global trade is by no means as free as one might think. In fact, as an importer, you are forced to observe numerous import restrictions and regulations. In your own interest, because the manufacturer is by no means liable, but rather the person who imports a product into the EU or “puts it on the market” there.

What are you allowed to import?

For example, there are products that are subject to import controls, quantity restrictions or security measures, such as agricultural products, tobacco, weapons and textiles. The relevant regulations must be observed here.

The restrictions and prohibitions that apply, for example, to the import of counterfeit and pirated products may seem logical. The problem: even if you didn’t recognize the fakes or pirated copies as such, you are responsible for them. You are threatened with the destruction of all products (of course without financial compensation) and a court case.

Other restrictions apply, for example, to genetically manipulated organisms, the import of live animals or chemical products that contain certain substances such as mercury.

This is how the European economy is protected

In order to maintain the competitiveness of European manufacturers, import restrictions were introduced, among other things. For example, there were restrictions on the import of Chinese textiles, but these have been completely lifted since 2008. Corresponding restrictions for shoes (in part), porcelain, ceramics, tableware and kitchen items were lifted in 2005.

In addition, further “anti-dumping measures” are imposed against products from China in individual cases. So e.g. For example, customs duties of over 50% are due on bicycles from China due to the imposed punitive tariffs (also known as anti-dumping tariffs).

What’s in the imported product?

Health and environmental protection are two topics that are very important in the EU. For example, there are regulations to limit the nickel content in products that come into direct contact with the skin, such as watches, jewelry, but also jeans buttons.

Since the beginning of 2007, there has been a ban on certain phthalates (plasticizers) in PVC toys and children’s articles. Clothing, shoes and leather items containing azo dyes, which can form aromatic amines, are also prohibited.

The Electronic Waste Act, which stipulates that the importer must guarantee and pay for the return and disposal of old electronic devices, is of interest in the field of environmental protection. Even after many years. Other guidelines prescribe limit values for hazardous substances. It must be taken into account that completely different directives can apply to very similar electrical products.

How can you ensure product quality?

Don’t forget to check all certificates carefully. For example, by comparing the certificate number with the documents at the issuing test institute. It is also important whether the sample provided is identical in construction to the sample that was used for certification. However, the manufacturer’s authorization is required for the test, otherwise the test report may not be viewed.

There are many points to consider.

A suitable Chinese supplier has been found. Just a signature, a little time, a bank transfer and the products are in Germany. Unfortunately, theory and practice often diverge here. Before the products get to you, you have to complete several challenges.

 

Producers in China need an export license if they want to export products. Many manufacturers who do not have the license cooperate with import/export companies that have the necessary papers. It is advisable to identify the producer, because trading companies
add margins to the products. Despite higher prices, trading companies can also offer advantages for newcomers, such as simplified communication, more professional processing or lower minimum order quantities. If you have found a producer without export experience, you should be represented on site and have very good language skills, otherwise the process can hardly be checked.

In China, the only certainty is that nothing is certain.

Despite all assurances and samples, it happens again and again that the supplier drops out before the contract is signed. Either the promised price is no longer possible or the quality can suddenly no longer be delivered. Assuming an existing business relationship, you can point out to the supplier that he does not want to lose his “face” and you as a customer. However, it is unlikely that the supplier will accept strategic losses. Because a good deal in Asia is one from which both sides benefit and make a profit. Strategic considerations usually play no role. Gagging the supplier and lowering the price by another one to two percent can be successful depending on purchasing power, but should not be pursued if you have long-term plans and want to minimize transaction costs. Because in the eyes of the supplier, the rich Western European earns a fortune with the cheaply bought products anyway.

Trust matters more than contracts

When it comes to purchasing, most contracts in China are minimalist. Once you get to know each other, you can rely on each other’s word. However, due to the differences in culture and business practices, this does not mean that one also correctly understands what the negotiating partner means with his statement. Only write what is absolutely necessary in the contract. Delivery times, for example, must always be recorded. Before signing the contract, check that the certificates presented by the supplier are genuine.

A good logistics partner is part of the success

Think carefully about whether you only want to check the shipment from the port of Germany or whether you want to commission a forwarding agent of your choice at the port of China. Large and medium-sized European freight forwarders have long been represented in China with nationwide offices. The forwarder should have an A license, this is the only way he can make bookings on ships directly. In the case of larger quantities, urgent shipments and deadline pressure, the shipment should be checked from the start. Before signing the contract, make sure that the supplier understands what the agreed shipping terms mean and what the costs are.

Relationships as the cornerstone of success

Guanxi is Chinese and means nothing else than relationship. A lot is written about Guanxi, because in China there is a lot more about relationships than in Germany. Unduly generalized, the Chinese are not very sociable, unless they have a personal relationship, in which case they are the most helpful and kind people. Since China’s society is very hierarchical, friendships should be made at the same hierarchical level: boss with boss, buyer with salesman. It’s the same with negotiations to recommend. You build relationships by visiting the supplier, chatting with him and helping him in any way you can. In concrete terms: Give in once in a while.

Direct import from China

Declining margins, increasing competitive pressure from large retail chains and even food retailers pose new challenges for UE retail every day. Direct import from China can be an alternative answer here.

So is direct import from China the solution to secure margins and remain competitive? Provided some prerequisites are met and the resulting risks are properly controlled, the answer is – yes!

Correct purchase quantities

The most important thing in China trade is the correct purchase quantity. Because the suppliers calculate with razor-sharp minimum order quantities, which the importer must exceed. Exactly how much that is depends heavily on the product and its value. Common minimum purchase quantities are 500 pieces, 1000 pieces or even entire containers. $6,000 to $10,000 net is a good guide. With extremely cheap small parts, of course less.

Direct imports also involve risks that entail financial burdens that go far beyond the pure value of the goods. Just think of the new Electrical and Electronic Equipment Act and the resulting Electronic Waste Ordinance and RoHS Directive, which stipulates the restriction of harmful substances in electronic devices. All devices must be registered with the EAR Foundation. For consumer devices, you have to fall back on the public disposal and return facilities and contribute to the costs according to the import volume. Processing fees are of course added. Due to the RoHS directive, care must be taken to ensure that the supplier not only complies with the CE standard, but also fulfills the RoHS directive.

Accessories for beginners

For beginners, importing non-electronic accessories can be an attractive alternative. Laptop bags, camera bags, cleaning agents, lens filters and many other small accessories are much easier to import due to the simpler legal framework and usually also have more attractive margins than the very common hi-tech items, which are under constant price pressure . In addition to the normal additional costs, it should also be considered that additional funds must always be available in the import business. Goods arriving late necessitate an intermediate purchase in Europe in order to honor contracts, or defective goods pose additional costs for returns or litigation. Those interested in importing can circumvent these initial hurdles with an experienced purchasing consultant
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