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Beginner's handbook

How to Determine if a Supplier is Right for Your Ecommerce Store

By on April 24th, 2018 Reading Time: 6 minutes

It’s every ecommerce entrepreneur’s nightmare: your new products arrived but they cost a little more than expected, the materials aren’t quite right and some of them aren’t even fully assembled. Even after speaking with multiple suppliers on Alibaba and Global Sources, and sending them your exact product specifications you still ended up with a subpar batch of products.

This scenario isn’t uncommon, especially when dealing with suppliers overseas. Today more than ever doing your due diligence on a supplier is a crucial step when producing your own private label products.

Now the hard part, how do you confidently vet a manufacturer when they’re located thousands of miles away or even in another country? For decades, many entrepreneurs have hired sourcing agents to help them identify worthwhile production partners, but today there are much more efficient services. For example, automated sourcing platforms have changed the sourcing industry by matching your production needs with already pre-vetted factories without having to deal with a middleman.

Whether you decide to try a sourcing agent, continue sourcing on your own, or to use an online sourcing platform, you should still understand how to properly determine if a supplier is the right match for your ecommerce store.  

Here are 5 factors you should consider when determining if a supplier is right for your ecommerce store.

1. Margin 

It seems obvious that the price per unit needs to be low enough that you have room to take a healthy profit. However, there are many factors beyond price per unit to consider when determining the actual price of your products:

  • Get a shipping quote:  Distance, country of origin, and available shipping methods all have a major impact on the overall shipping price. Before committing to production, make sure you get quotes from your own freight forwarding partner or their internal shipping managers.
  • Calculate customs duties: When importing goods you may be subject to additional fees depending on the country of origin and type of product you’re importing. Of course these fees can be passed on to your customers, but if you’re operating in a price-sensitive industry it could make you uncompetitive. Always make sure you’re calculating customs duties accurately or it could cost you your profits.
  • Pay attention to currency exchange rates: The value of currencies is in constant state of flux. If you’re based in the US and sourcing in the US, the value of the US dollar is always $1 worth of goods, but if you decide to source your production in a country like China, the value of the US dollar may be closer to $0.90 or $1.10 depending on current economic factors. Pay attention to exchange rates as you may not be getting as good of a deal as you initially thought.

2. Reliability

“Time is money,” as the old adage goes, and if you’re working with a factory that’s often behind schedule it could lead to major financial losses on your end. To protect yourself from dealing with a completely unreliable supplier, here are some steps you should take first:

  • Order a sample: Ordering a sample is a great way to confirm the quality on your product and potential turnaround time of the factory. If they quote you two weeks to produce a sample but it takes four, chances are you’ll have the same delays in production.
  • Request factory audits: If you’re happy with the sample you ordered, it may be wise to audit the factory or request a factory audit report. Third party auditing companies are readily available and fairly inexpensive in most countries and can report on production capacity, quality control, turnaround times, environmental impact and much more.

3. Product Offerings

Factories are typically limited to a specific scope of products they can produce. If you’re looking to manufacture jewelry, but the supplier you’re working with specializes in apparel, it’s probably not going to work out. Duh, right? Unfortunately, some factories may try to dupe you when it comes to their business scope, but how do you make sure the factory isn’t lying?

  • Ask for their business license: Requesting a copy of a factory’s business license is completely normal. Not only will it show that they’re a legally operating factory, but it will also tell you the exact scope of their production capabilities. If a factory is hesitant to give you a copy of their license, it’s probably a sign to move on.
  • Analyze their raw material sources: Real factories focus their product offerings on products that stem from the same raw materials. If your supplier is claiming to produce leather wallets and sunglasses, there is a high likelihood they are a trading company. Wallets and sunglasses stem from different raw material sources and most factories only focus on handling one type of raw material.

4. Minimum Order Quantity (MOQ)

As an ecommerce entrepreneur you’ve probably run into minimum order quantity issues when starting to produce your goods. Like your ecommerce business, factories need to make a profit too and sometimes that means only running larger orders. On the other hand, some factories don’t have the right tooling or number of employees to run large orders. This is why MOQs exist. How do you make sure your order size is appropriate for the supplier you’ve connected with?

  • Ask for a list of companies they have worked with: It’s not uncommon to ask factories if they’ve worked with companies similar in size to yours. If they were able to produce successfully for those other companies, it’s a good sign that your production run will go smoothly as well.
  • Ask about the MOQ: Just ask them if they can work with your order size. Save yourself some headache and make sure you ask them as soon as possible. You wouldn’t want to order a sample and request a factory audit if they aren’t capable of working with your order size.

5. Communication and Support

Communication is the key to a successful production run. No matter how detailed your product specifications, mockups and other design materials are, there is always room for interpretation and it may not be what you had in mind. Communicating with a supplier can be difficult, especially if they’re located overseas, but there are a couple of ways you can test it.

  • Email them: Communicate with them via email, and if the emails you’re receiving are coming back in broken English, it may be a sign that they’re using something like Google Translate to understand your request. This isn’t necessarily a bad thing, but you may want to use Google Translate on your own messages before sending them to your supplier just to see what they look like when translated.

Pro tip: Paste the message you intend to send to your supplier and have it translated into their language. Then copy the translation and translate it back to your language. You may be surprised that the translation didn’t come back 100% as you initially wrote it. Tweak your original message until it’s completely clear on their end.

  • Use WeChat: Though relatively uncommon in America, WeChat is the most common messaging application in China. Almost every Chinese person uses it on a daily basis for communication with friends, for payments, and more. It’s basically a more robust Facebook and is often used by companies to communicate more effectively with their factories. If you’re looking to utilize WeChat, simply download it on the App Store and ask your factory sales rep for their username to add them as a friend.
  • Pay attention during the sample order process: When you ordered your sample, did they keep you up to date on the status of your order? Did they send you the tracking number for shipment? Did they follow up and ask about it? If they were attentive during the entire process, that shows that they understand the importance of communication and support.
  • Set up a video chat: We have the technology! Many factories will gladly chat with you over video. Compile a list of questions for the factory specific to your product and their capabilities and see how they answer in real time. Do they understand what you’re saying? Are they clear with their responses? These video chats can be organized via WeChat or Skype.

Never Forget – Shop Around & Be Cautious!

Even with the best due diligence, it’s always recommended that you try a few different factories before committing to a full production run. Before deciding on which factory you work with, you need to get out there to fully understand what you like and what you don’t like about a factory. Don’t be afraid to ask in-depth questions and to get them on a video chat because a production run is a big commitment!

Preparation is crucial. Put together a checklist of your needs before reaching out to factories, otherwise you may not be vetting them as well as you intended. Remain firm in your demands and don’t let a factory pressure you into committing before you’re ready. It’s not uncommon for factories to trick overseas buyers with fake factory photos, hiring “actors” to pose as factory employees and even sending false documentation.

It may take time – but you will be glad you did your research when your next batch of perfectly produced products arrive on time and at the right price. If you’re short on time or want to focus on growing your business instead, then sourcing platforms like Sourcify may be the best option for you.

And what to do once you’ve got your products? Check out Printful’s Warehousing & Fulfillment service – Printful can store, package, and ship products straight to your customers!

Find Out More

Phillip is the Head of Marketing at Sourcify where he focuses on helping others achieve greater success with their ecommerce stores and overseas sourcing needs.

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