Leveraging The Chinese Supply Chain, From Drop Ship To Private Label

Michael MicheliniBlog, Business, Case Studies0 Comments

Looking to build your own brand? Starting from scratch today with a blank notebook!?

Well, you’re in for a treat today.

I’m going to give you some outline and structure for how you can leverage the current Chinese supply chain. Save up front costs and build a long term brand for your international business.

Take It Step By Step – Start Small

The trickiest thing of all is picking the right product, the right niche, at the right angle.

My main point is, don’t chat to a factory on Alibaba or Global Sources, hear their MOQ (minimum order quantity) is 1,000 pieces and then jump in head first to the deep end of the pool! There are other ways to start buying from China without having to invest in a one thousand piece manufacturing run. Do that later once you have confidence you found the right product and are ready to invest.

So many people I talk to (myself included at times) get in over their head. We have invested tens of thousands of dollars on inventory when they’re not totally convinced its the right product. As an e-commerce seller or import/export trader, knowing the market and the customer is your key to success.

Living in China? Consider Living Near a Marketplace

As mentioned in other guides on the blog, when choosing a place to live in China – think about factory and marketplace location.

What’s a marketplace? It’s a place where they “claim” they are factory sales reps, but most of the time they are “middle men” who have small wholesale lots of production runs from factories. Not sure why everyone is so passionately against a middle man, they sometimes can add value to the supply chain.

And here is a time you can leverage these “middle men” to your advantage. Visit them and spend a couple days combing through the markets. See if they have a list of their products in Excel with photos and other details. Maybe budget to buy samples of ones you really like. Test out the quality, make sure they are acceptable standard for you to sell to your market.

Just be careful, it is you who are selling them in the overseas market. So take time to test them, and ask a quality control company to be the most confident. Especially when you’re selling electronic goods. I have heard all too many people getting their businesses crushed when they were selling countless mobile phones. The quality was horrible, that just fell apart days after the customer received it.

So again, step by step. Pick one or two products you really are confident about. Get to know this vendor well. In a way, they are your partner for this venture. Don’t just treat them like a low cost supplier, but instead as an integral part of your product based business.

It’s all about respect, and mindset.

And then, get these products listed online. Probably Amazon is a hot one to try now. Maybe set up your own Shopify shopping cart. Some even list on Facebook pages and get sales.

But really, you should understand your product well and be confident it will be a quality product for your customer. That is the value you are adding to the supply chain process.

Test More Products, Grow Your Experience & Confidence

Once you get a few products online and selling, consider adding more product. You’ll probably also find products that are not effective and not selling well. Drop them. Be ruthless about focus. This is a lesson I learned the hard way – by stocking too many products, it will hold you back. Focus on the 80/20 – the popular products that are bringing in the best sales and margins.

Continue to master the product. Know it inside out. The components, the supply chain. The future editions. Visit the factories, even if you’re not ready to buy direct from the factory.

Keep that relationship with the marketplace vendor in good standing. Try to understand if they are really representing the factory, or a third party seller. Consider your long term relationship with them and plan your expansion.

Business is business, but you should be careful on how you expand in the supply chain. Try not to burn bridges and yet keep your cards close to your chest. This is something hard to explain in an online guide. You just need to feel out the relationship with your marketplace vendor, potential factories, and pricing margins. Think what you want to do long term. Maybe just accept a lower margin and always deal with this vendor.

Once You Have Confidence – Consider Tweaking And Making Your Own Modifications

After some time – NOT RIGHT AWAY (speaking from personal mistakes here) – start to make some modifications to the product. Especially if this is your first product, keep things simple. We always want to get fancy and make our own product and design. Don’t want to discourage you from that – and respect your guts and passion to make something new and creative.

But get some sales in the door first, get some experience dealing with the supplier, with your customer base, and the entire supply chain from front to back. Once you have some confidence in your supplier, in the process, and know your customers a bit – then you can venture off to more creative products and business models.

Here’s where I recommend reading “The Lean Startup” by Eric Ries. The key differentiator from you as a “trader” and your factory supplier is your knowledge of the market you are selling in. Know your customer inside out, what they want, what they wish they had, and what they wouldn’t pay any attention to in the market.

To survive long term in this game, you need to be a master of your market and your target customer.

So maybe after about 6 months of front to back supply chain of an existing product, with money coming in the door, start to experiment with your own product.

You could go crazy and go right to Kickstarter and launch it. Or you can start a bit more simple and taking the next step which is to make some slight modifications to an existing product. Sure, that may not sound as sexy – but it is still a challenge and a learning process.

What we think is easy and straightforward is always a challenge, especially in China and dealing with international business. So don’t underestimate even the slightest c change to your product. Again, from experience, I changed the sticker top of a table thinking it was easy. But temperature limits had the glue on the sticker melt, bubble, and crack. So don’t think this is “just” adding a sticker to an existing product.

Know your product well, and for each adjustment, try to get expert advise on the reactions this change may have in how the product functions in the market. I am trying my best here to make you aware and alert. Slight changes can have big implications in the “big bad world” of the consumer market.

Build Your Brand – Register a Trademark in China and USA

Maybe this should be done a bit earlier in today’s flow – but it’s better late than never. Go ahead and start building a long term brand. Register a trademark in the Chinese market, as well as in the USA market. Selling in other markets too? Can go a few different ways with a worldwide trademark via the US Patent office, not sure what’s right? Check out Tayan Patel’s podcast interview speaking about IP protection for more details, or contact him directly.

Why get a trademark in China if you’re not selling there? This is a huge question and important you understand this one. It is to protect your production and export market as well. In China, a trademark protects you from selling in China (duh) but also from exporting the product to the international market. Ya, I know – how will you really enforce that. But China is getting better at respecting IP – and many times if they see brands on the products during the export process, they will ask the exporter to provide proof of documentation they have the rights to export / sell this brand of goods.

So this can save you from competitors buying your brand and ripping you off. Yes, you can buy me a beer later. This investment is a big one -in protection – for a rather small cost. Listen to Dan Harris’s podcast on China distribution tips.

The Art of War

A book we should all read when doing China business, or international business – check business in general. Think of it like a game. Like a sport. And separate your personal emotions from business. It is a cutthroat game here in China. The logic is, there are so many people in the world, how can we watch out for all of them.

I read the book, and it gives you these brutal strategies for getting one up on your competitor. It contains many examples of how war lords in China tricked their competition into a pit and then crushing them. The most intriguing part is the indirectness of many of the war strategies. It is well thought out, long term, multiple step strategies. Get the competitor off their guard and then with the swipe of a finger, the king has the competitor’s army annihilated.

This is China business strategy, don’t be direct. Step by step. Make your competitor think they are winning, and then suddenly come out of nowhere and dominate.

Keep this in mind as you do business. It is a multiple step chess game. They may like you get a pawn or a knight in the game, but they are constantly looking to take out the king and queen in the long term. Always add value to the supply chain, never show the factory you are getting lazy and comfortable. Be one step ahead and always have multiple options.

It sounds cruel and insane, but it is a check and balance. If you look weak or if you look like you’re not adding value and purely a middle man collecting money, you will risk being cut out.

Decide Your Strategy – Broad and Wide or Deep and Strong

Are you trying to do tons of products and be another Walmart? Or are you going to specialize in a certain product line? I really mean towards specializing in a product line. especially if you are a bootstrapping entrepreneur. Like I just said, business in China can be straight out war, you need to build up your defense and specialize in a competitive advantage.

Unless you have massive investment or want to be insane (like I was at times) and try to manage hundreds of products, focus is the key to success. Be a master of your product, your market, and your customer base. This is the long term strategy that will have you be the king of this mini-empire.

I know exactly what you are thinking. You want to be bigger, you want to be the king of the world. Yes, we have all been young and full of energy. And I respect that. But dominate one piece of the market first. Get the cash flow coming in. Learn the process from front to back. Hire staff to manage it, build a team. Build a community of customers. And if you expand to more products or industries, at least find a complimentary one that you can leverage your current customer base and distribution channels.

Maybe Become The Factory (F2C)

Hey, why wait for the Chinese owned factory to dominate the market and crush you? There is a trend now called F2C, or Factory to consumer. You probably heard about B2C (business to consumer) – well now it is going direct to the manufacturer. America and the rest of the west outsourced all the manufacturing to China, and now these factories are cutting out the American businesses who outsourced to them!

Stay one step ahead, grow your supply chain to go direct from the source to your consumer. Who says a foreigner can’t own a factory in China? Own your own brand in China, and even own your own production. But of course, this is a massive undertaking. Keeping quality control good, and staff management is easier said than done. We can blame Chinese factory bosses all they want, but they do have quite a big job to manage all these factory workers and ensure their product output is top quality.

If you’re ready to do F2C, we have a blog post on it, as well as a top podcast with Wilson Blues on F2C direct from China.

What Do You Think? Ready To Fight Up The Supply Chain?

It is a great journey. And if you are a young entrepreneur reading this now – put your head down, pick a product, and learn the process. You can keep reading blogs and books over and over, but until you take action and start learning by doing, you will get nowhere.

Save up some initial money to buy some stock. Start messing around with Amazon and other online marketplaces for your target customer, and learn by doing. Listen to each and every customer. You have an advantage as a new kid on the block. You can engage with your customers, send them a personal email or message on the platform. Get their feedback on the product, on the order process, on what else they would want.

Customer service is often the last frontier of building the brand. This is what the customer remembers the most, after of course having a quality product or service. So don’t get lazy, and follow up with all of them.

Want To Engage With Others? Consider Our Member’s Club

Hope today’s guide inspired you to take action. If you’re interested in going even further down the rabbit hole, we encourage you to sign up and be a member of our Global From Asia Member’s club. Here you’ll find more entrepreneurs and business owners like you working towards success in their business in China and Asia.

We have regular calls and have a ton of private forum information for you to read and digest to take your business to the next level.

No pressure of course! If you enjoyed this article, I’d really appreciate hearing it in the comment section below. And best of luck on your international business endeavors. Stay positive, and make positive steps each day – no matter how small they are, make sure they are going in the right direction!

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