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Old 05-08-2009
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Default Dealing with the Chinese (Good Read)

DEALING WITH THE CHINESE

There is a popular misconception that a majority of Chinese sellers are scammers. I am going to try and expel this myth with my experience and my little knowledge. I do not claim to be an expert on international trade but I can share my experiences and hope some of this information will of help to someone out there!

THE GOOD OLD DAYS

This makes me sound old! I am probably not much older or younger than most users here. Now in these good old days there was no internet as such, that came a few years later. You would do all your business by phone, a fax machine and a (borrowed in my case) Global Sources publication which back then really was a bible. Some people really do not know how lucky they are now, you have everything at the end of your broadband connection!

With a little bit of courage I started importing at a young age from my bedroom in my parent house. My very first product was a mobile phone battery. Not an ordinary one though. It was a NiCad battery (all batteries were NiCad 12 years ago). NiCad batteries suffered from ‘Memory Effect’ whereby the more you charged them the less charge they held between charging cycles.

This battery I found had a built-in discharger! But not only that, it also had a ‘test button’ which when pressed would light up a series of LED’s which would let you know how much charge was remaining. The standby was also increased as they were rated at 1800mah instead of the usual 800 – 1200 mah.

To cut a long story short. I blagged 30 batteries from a Taiwanese factory (MOQ 1000pcs per model) launched them into the UK and sold them retail/wholesale (as I was in that business at the time). I got quite a lot of exposure thanks to my marketing abilities and they even were awarded ‘What Cellphone Award of Excellence’ (a mobile magazine at the time).

I went on to import and sell many of these and ultimately handed the product over to a big distributor, but to my peril I only earned 10% of what I should have due to my own fault and little knowlwdge of distruting agreements. However they went bust in a big way about 7 years ago (people in the mobile industry will know who there were) so that was a small consolation.

Updated: A quick search and I'm amazed I found a copy of the actual published review from 1996!

WHY TAIWAN AND NOT CHINA?

It was not uncommon at that time as anything technology/electrical/computer related was produced in Taiwan as the Chinese were famous for poor quality elecronics (to my knowledge plastic and textile products was their speciality at that time).

To get round this and to increase credability many Chinese factories manufactured electronics, shiped the components to Taiwan and assembled them in a third party factory just so they could put ‘Made in Taiwan on them! You still will find much higher quality electronics in Taiwan to this day, but China will offer a similar product cheaper. You make the choice!

CHINESE BUSINESS MEN/WOMEN

They are not all scammers. You build a working relationship with one and you have a friend for life. I personally have visited factories and the owner or senior manager would put me up in his own house with his family. They are offended if you stay in a hotel. Now tell me they are scammers? If you could smoke on flights I would visit China more regular .

Fortunately I am now in a position where I have people in China who can audit new suppliers by visiting factories and send me back a report a few days later. Only last Saturday (26 May) I had an audit arranged on a new factory and will publish some the actual photographs taken (for confidential reasons I can not post the actual report).

HOW IT WORKS

As my experince tends to be involved around consumer electronics my experience is that you have 4 types of supplier in China. The factory, the trader, the broker and the scammer. Obviously you are best to deal with a factory. The higher up the food chain the better your chances of lasting. Tip: the higher the MOQ (1000pcs is not uncommon) usually the better quality the item produced.

FACTORIES: Factories (or could be classed a s a manufacturer) produce the final product and normally have a strict MOQ of 100/500/1000pcs of each item.

Although they are a factory/manufacturer they do not necessary produce all the components. It is very common they at least they will produce the main circuit boards using a SMT Machine (Surface Mount Technology). Even the main electronics could have been designed by someone else and they just replicate it (sometimes under licensce and sometimes not!).

They have rows upon rows of production lines where humans assemble every part until you have the finished packaged product. Much the same way cars are manufactured. Usually, cases and other plastic parts will be bought in from a case manufacturer. Stickers will be purchased from a printer. The packaging will be bought from another printer and so on. The bigger the factory, the more components they produce in-house.

You will have noticed this with generic MP3 players for exmple. They tend to look all the same because the factories have all purchased the casing from another factory that just produces plastic components. To make a simple plastic MP3 player casing can cost £20,000 or more just in development and tooling (essentially the mould to make the cases from) design and CAD costs and that is before you have actually produces a single platic case or component!

So to keep costs down, the factories buy cases and other plastic components in from another factory for a few cents each. A saving upwards of US$250,000 on injection moulding machines, staff, design tools and tooling costs.

TRADERS: Tend to deal in much lower MOQ 100pcs is common and tends to be more flexable. They will either purchase 1000pcs from the factory and then break them up into smaller MOQ. This is not a bad thing as they will physically house their stock. Be aware that a lot of traders pretend to be a factory and will display photos of a production line and certificates on their website etc.

BROKERS: Will not hold any stock and will purchase as per your order, sometimes gambling using your money. The same applies, they may pretend to be a factory also.

SCAMMERS: Goodbye money! Yes there are scammers in China. Do you realise when you T/T US $1800 to a person you have never met before that is the equivalent to a YEARS SALARY to the average Chinese factory worker!?!? Can you imagine someone T/Ting you £20K? It amounts to the same thing! Becareful, no one is safe. I admit I have lost a few dollars over the years, but to-date they have only been a small amount 'gamble money' as I had a feeling something was not right. Gut feeling accounts for a lot in suppliers, buying and selling.

THINK OUTSIDE OF THE BOX - USE CHINA TO YOUR ADVANTAGE

At the time of my first international experience I had a much older friend who owned a massive mail order computer business. He had been importing for years. One of his greatest achievements in my opinion was a mouse. What he did was pure genius.

He went to a Chinese manufacturer, bought a basic 50p mouse, put his logo/brand on it, bundled it with some OEM paint programs, put it in a very well designed and attractive packaging all for around £3.00. They were sold into distributors and ultimately could be bought in Dixons, Argos or any other high street retailer for £34.99. To me personally, that is what importing from China is about, not looking for branded electronics and trying to squeeze 10% margin!!!!

Tip 1: If you wish to sell electronics directly to retailers they expect to work on a 40% margin.

Tip 2: If you wish to sell directly to big retailers/high street you will have to sell to a distributor who supplies the big retailers. They expect to work on a 20% margin.

Tip 3: When working out Retail prices remember they will include VAT @ 17.5% so work backwards when establishing your lowest selling price.

PICTURES FROM A REAL FACTORY

As mentioned earlier in this article, I recently had our China based agents perform a Factory Audit on potential manufacturer in Shenzhen. This is a typical 'larger' style factory which would have a MOQ of 1000+ pcs of each item and mass produce electrical items and of a high standard. So much so, well known brand name products you would find in the high street would be manufactured here on an OEM basis.

I hope these photographs give you an idea of what and where your products are made:

Links to the other photographs:

Reception and Showroom

Production Line(s)

SMT Machine Room (Surface Mount Technology)

RoHS Tesing Machine

Vibration Testing Machine

Salt Spray Testing Machine

Age Test Room
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  #2  
Old 05-08-2009
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nice post. unique!
similar to what Sir Alan Sugar did back then when he was manufacturing/ importing the radio cassette players, AMSTRAD PC's and satellite dishes.
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Old 05-08-2009
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Very nice post. I also agree with your "friend for life" comment in the begining. I have met several contacts over there, that go far and beyond my requests to ensure I'm taken care of.

In contrast; I have been taken before as well, but it was a smaller amount as well. Gut feeling told me something was up, so I cut my order in half.

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Old 05-08-2009
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yes, you are correct 100% in your article. Once you find 1 loyal supplier for a particular product, you have a friend for life. They know you will continue to order and they even send you free gifts from time to time!!
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Old 05-08-2009
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So true!

There are 3 contacts I have been using in China for quite some time and they are very loyal. I occasionally branch out into different markets and they help me to find an honest factory to work with.

Do you have any suggestions on a couple factories you currently or have worked with in the past?

You can pm if you like.

Thanks for your post!

TRIG
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Old 05-08-2009
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Good info. I've definitely been scammed by China. No worries, I've learned from my mistakes. Since then, I've found a very reliable source and am completely satisfied. I appreciate all the detail you put into this post, especially breaking down the four types of merchants- it makes it clear as to what we should be aware of.
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Old 05-08-2009
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Is anyone buying real stuff or all just ⊗⊗⊗⊗ though? Not trying to be sarcastic...I'm actually curious.
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Old 05-10-2009
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I have a good contact there now too and have also been scammed 1200USD by a previous *******.

He's still on my list of people to go mess up when I have more cash
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Old 05-10-2009
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NEVER been scammed..Been dealing with suppliers over there for years.


Number one thing I can say is when first meeting with suppliers ask them a TON of questions if they are scammer they will get frustrated and just stop talkign alll together
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Old 05-10-2009
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I get toothpaste and pet food from China real cheap, good deals.
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Old 05-11-2009
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I get that good milk from china thats been killing everyone.
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Old 05-11-2009
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anyone buy cheap ms software in china?
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Old 05-12-2009
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Any software from China is ⊗⊗⊗⊗.

Someone purchased adobe software from china and it came saying made in usa.
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Old 05-12-2009
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Quote:
Originally Posted by Orion View Post
Any software from China is ⊗⊗⊗⊗.

Someone purchased adobe software from china and it came saying made in usa.

does it work?
how real it look?
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Old 05-13-2009
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I will let you know in a day or two
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Old 05-13-2009
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One has to be pretty clever to successfully sell ⊗⊗⊗⊗ software.

Let me rephrase that. You must be pretty clever to sell software that checks their authenticity.
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Old 05-13-2009
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Quote:
Originally Posted by Orion View Post
Any software from China is ⊗⊗⊗⊗.

Someone purchased adobe software from china and it came saying made in usa.


That is funny, but I've got one better...

When I first started; I got some hats from China that said "Made in USA". So I went to the mall to do some comparisons. I found the EXACT same hat (design, tags, stickers, etc.), except the tag said "Made In China".



Figure that one out.
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Old 05-13-2009
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in one of my last businesses to die we were producing a product 100% made in US. when the oil prices went up the company producing our fabric stopped producing it because it was going to double the price and everyone else went overseas for it. my partner wanted to stay 100% USA because we had advertised it that way. I said we could just get it out of china and lie on the tag and then found a reputable company in china with offices in the US that was willing to do it for me never followed through with it as we ended up folding the company anyways.
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Old 05-13-2009
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Quote:
Originally Posted by Orion View Post
One has to be pretty clever to successfully sell ⊗⊗⊗⊗ software.

Let me rephrase that. You must be pretty clever to sell software that checks their authenticity.
Quote:
Originally Posted by nobody999
does it work?
how real it look?
That is contingent upon who the source is. Some works fine and looks very close to perfect. Some won't read when you insert the disc and looks like it was labeled with krylon and wiped dry with an old newspaper.

Just do a web search for cou_nte_rfe_it ado_be & cou_nte_rfe_it mi_cros_of_t (minus the underscores). Plenty of examples showing high or low quality. Either one you choose will land you in a wee bit 'o' trouble if you keep it up long enough.
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