Annie Xu, general managerof B2B website Alibaba.com’s U.S. office, recently wrote an article for TheSelfEmployed.com to help introduce small business owners to some of the advantages of international sourcing. Check out her report and the accompanying video.
Can you imagine getting told it will cost you $12,000 to make a mold and some samples of your product, then getting a second quote for $800 which offers a superior product and over twice the number of samples?
That’s what happened to Ed Augustavo, whose company, Hard 8 Beverages, makes energy drinks that come in small, shot-sized aluminum bottles. The first estimate was from a supplier in the U.S. The second one came from a manufacturer in China.
The American company said they could make a mold for some bottle caps and 100 samples for $12,000, Ed told me recently. “I went to a cap maker in China who made me a mold, including a revision which made it better, and 2,000 samples for $800!”
Ed is thrilled with the service he is getting from his Chinese supplier who he found using Alibaba.com. In fact, the caps he was able to source in China through Alibaba.com have spawned a new company with an exciting new product, .50Cal Energy.
Outsourcing product manufacturing isn’t just for the big players anymore. Small businesses like Ed’s can achieve high quality and low costs by finding the right supplier overseas. Alibaba research indicates that overall savings of at least 50% for completed products, including packaging, are fairly typical when manufacturing in Asia.
China now accounts for 15.6% of the world’s manufactured goods. Much of that has been motivated by economics – the ability to produce goods much more cheaply in China than at home.
Even for those who would rather have their products made in the U.S., the challenge can be trying to persuade domestic manufacturers to take a small order, or not to charge an arm and a leg to do so.
The fact that sourcing an overseas manufacturing partner, placing orders and dealing with deliveries can all be done online makes the process incredibly convenient too.
In addition to production needs, buyers should also be aware of the costs and time involved in shipping products, including customs tax, and be up to speed with global import regulations such as trading policies. Customs duties can be reasonable, but it depends on what you are importing. Some products, such as candles, have high duty costs, so it’s important to do your research. Buyers also need to factor in and plan for the volumes they need to order to make economies of scale.
As a buyer, you are looking for a Chinese supplier you can trust, so you need to do your due diligence before settling on your manufacturer. But it’s important to remember that Chinese suppliers are also looking for buyers they can trust. They too are entering into a partnership that involves investment and potential risk.
So put in the time to build a good relationship – one that is grounded on excellent communication and honesty.
Find the right communication tool, too. Many Alibaba customers use the online messaging embedded in the site. Lots of our customers also use email and Skype to talk and trade information, and most factories in Asia have sales reps who speak English.
Ed at Hard 8 Beverages talks regularly with his Chinese bottle manufacturer to brainstorm design concepts and discuss the best materials to use.
It’s also a good idea to browse what’s out there in your market on sites like Alibaba.com to pick up some inspiration. It’s likely that there are suppliers who will be able to make what you are looking for, not least because they may work with a range of clients around the world so have a breadth of experience you can benefit from.
A good tip is to ask for what you wish was available, rather than what you think can be made.
Some small business owners are nervous about venturing overseas. But Alibaba sees many success stories like Ed’s.
As he put it to me: “I don’t have horror stories, I just hear ‘yes we can do that.’ ”
Annie Xu is general managerof Alibaba.com’s U.S. office.
