5 secrets of China suppliers that will affect your interests (Every buyers should know)

By justchinait
 / 
April 22, 2021
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There is a huge difference between Chinese and Westerners, not only in appearance but also in thought and culture. These differences are also a major factor that prevents foreign buyers from learning about Chinese suppliers. As a foreigner, understanding the psychology of Chinese suppliers and the real business situation in China is of great help to your business.

It used to be difficult to get to know the culture of an area unless you lived there for a while. But now the developed Internet has turned the earth into a “global village”. As long as you move your mobile phone, you can easily understand the cultural customs, living habits and so on around the world. You will also find many interesting stories about dealing with the Chinese people.

I once hosted a Bangladeshi buyer who lived in Hong Kong and was looking for a factory to make the cloth bags for his battery charge bank. As I showed him around the factory, he asked some very strange questions. “How much is the rent in Shenzhen? “How long do we work every day?” Then he came up with a price that surprised me. This price is almost close to the cost of our processing his cloth bags. It dawned on me that he was asking all those questions in order to find out the living standard in our area and to work out the wages of the workers. And he knew the process of the product so well that he figured out immediately what it would cost to make it.

It is indeed not easy to have such a good understanding of the products. You need to know the composition of the raw materials of the products, the local price of the raw materials in China, the hourly wage of the factory workers, the specific time required to produce the products, the gross profit of the factory and so on. These are the basic skills of local buyers in China, so they can always get the best price. For foreign buyers, it’s hard. But it’s not impossible. Now the Internet has a lot of information about products, about raw materials, as long as you slowly research, there will always be some unexpected harvest. In this issue of our blog, we will introduce some unspoken Chinese business rules that foreign buyers will never know so that you can get to know China and your suppliers from scratch.

Relationship

“Relationship culture” is one of the traditional Chinese cultures, which refers to a kind of culture generated for the purpose of maintaining a survival relationship between people. In order to maintain this kind of human relationship, they give gifts to each other during festivals and weddings and funerals. Expansion to social contacts is a means of expanding contacts and ingratiating oneself with superiors, which is easy to breed corruption.

“Affection” is in fact an emotional investment, all hope to get a value return, this has become the Chinese tacit unspoken rule. At its root, “Relationship” consumption has become the most practical and effective social relations. One of the main motivations for the Chinese to do favors is the expectation that others will reciprocate. If the recipient owes your favor, if you open your mouth to ask for help, the other side will be difficult to refuse.

This relationship also exists directly in foreign trade purchasing and suppliers.

How can you leverage relationships?

Please remember this sentence, everything is negotiable. In fact, the relationship is both a positive and a negative word. It will bring corruption and it will bring some good things. Not China, actually every country is very relations-oriented. Where does “relationship” come from?

Suppliers will pay more attention to old customers

Suppliers will offer more favorable conditions to old customers.

For example, the payment terms, the supplier may tell you that they only accept 30% TT in advance and 70% against the B/L. However, according to our experience, the supplier may accept even 30% TT in advance and 70% after receiving the goods for the old customers with long-term cooperation. In short, if the old customers establish a good cooperative relationship with the supplier, all the hard conditions of the supplier can be changed. They may make samples for old customers for free, lower the minimum order quantity, offer discounts on prices, etc.

Establish a good relationship with suppliers

In another article, we explored ways to reduce vendor MOQ. The supplier will value those who have potential and sincere customers. If you want to enjoy customized services while reducing the number of orders, you should use communication skills to establish good relationships with suppliers. Often, it’s not impossible for the supplier, it’s just a matter of whether the supplier is willing to do it. If the vendor is willing, you only have to pay an additional (usually modest) customization fee.

While raw material suppliers and printers also have minimum orders for suppliers, but the Chinese are very focused on “relationships”. Suppliers usually have long-term cooperation with the printing factory. As long as the supplier is willing to contact the printing factory, it is easy to reduce the minimum order quantity. But you must let the supplier see your sincerity and potential, otherwise, the supplier will not be willing to negotiate with their supplier for you.

You can disclose your business plan to the factory sheet. In fact, most of the time, the factory does not care how much you spend to run the product but to see if you have a plan and long-term planning.

The mature ones can have mature factories and they are not easy to deal with, so they are more interested in buyers who have long-term plans and prospects. If suppliers see your business potential, they are willing to spend more time and energy to help you prepare materials, discuss the market and price, and give you some support on price or other aspects in the early stage. Instead of just quoting you a price casually.

So when you see a vendor’s high price tag and MOQ, don’t give up immediately. Everything is negotiable.

Let suppliers owe you favors

This means that in cooperation with suppliers, you should not always try to get concessions from suppliers for your own benefit. Occasionally you can help vendors. There are many ways to help each other. If you can help the factory,  the factory will help you enthusiastically when you have difficulties. For example, when the supplier’s capital is not available, the time of payment should be advanced. That way, the next time you need a vendor’s help, he’ll be embarrassed to turn you down. The more people owe you, the more resources you have.

Rights of China Boss

You must not know that the factory owner has the highest power in the China company. Unlike in other countries, bosses may have to abide by the company’s rules as well as employees. But in China, the boss doesn’t need to follow any rules of the company. Employees will do what the boss tells them to do as long as the boss tells them to.

Therefore, when you work with Chinese suppliers, you must contact the boss. Once there is a problem, you can communicate with your boss. For example, the delivery date of your order is delayed, and the salesperson tells you that there is a problem with the raw material of the product, and the delivery date needs to be delayed by half a month. If you are in urgent need of the goods, please contact the boss immediately. As soon as the boss tells the production department to complete your order on time, the production line will stop making other orders to service your order, and the delivery date may be brought forward. As long as the boss agrees to your request, it can be done.

Chinese bosses have strange personalities. According to their characteristics, they can be divided into the following 6 types.

图片

BOSS A: Technical-based

A technical boss mainly refers to a boss who focuses on technology and supplements by the business. Generally, their desks are covered with equipment and some products because they have to continually research new products. They are relatively limited in business ability. Most of the customers are old customers because they are not very good at business development.

Sometimes they will sit in the office and stay away from home all day. They start smoking and meditating when they encounter problems. They don’t pay much attention to the training of subordinates’ business ability. Some employees who have worked in the company for 4-5 years even do not know the function of the product, they don’t know the product performance at all, and they don’t even know the price, because these are all controlled by the boss. The workshop workers only knew operate as the boss’s requirements, but don’t know why they did it.

The company’s management is also very simple, and there is no standardized system. As a result, the factory has not developed for many years. Although the factory cannot be closed down, it is difficult to make a big development because the boss does not pay attention to the cultivation of talents.

He is often only seen on the production line, wearing the same clothes as the workers, and it is difficult to distinguish the boss and the workers.

In short, such a boss uses his hard-earned money to support his employees.

BOSS B: Business type

Business bosses put customer information on their desks. They will continue to contact customers, maintain customers, and develop customers. A business department will also be established to train more salesmen to serve the company. They will formulate incentive policies to encourage salesmen to work hard. All contracts and documents will be managed by a dedicated person, and the financial will be fully handed over to the accountant. They can’t wait for all the employees to be salespersons to reach customers and bring benefits to the company. The product knowledge is taught to the employees one by one. Even if the boss is on a business trip one day, it will not affect the operation of the company.

The business bosses like to talk very much, have strong communication skills, and like to brag. They will try their best to get the order. After getting the order, their attitude may be different because they have to find a way to get another order.

In short, it is a boss who makes employees work hard for him.

BOSS C: Handyman type

They like to do everything by themselves, regardless of the big and small things.

As soon as the handyman boss enters the company every morning, his eyes are constantly watching the working status of each employee. At the same time, he kept talking, “Why is no one cleaning this place?”, “Why is there a lot of materials piled up there?”, “Xiao Wang hasn’t come to work yet?”, “Has the modified plan been implemented yet?” The mouth kept talking and the hands kept gesturing.

They are so busy every day, are solving the problems at any time. But it is usually too late, and tragedies continue to happen. He often interrupted his subordinates halfway through their work. Secondly, they are very vigilant to anyone, keeping an eye on every job at any time, and knowing almost every department’s work details. Third, he is the direct leader of all employees, and everyone reports to him. The entire team has almost no horizontal communication. He has become the core of the department and also a bottleneck.

In short, it is a “good” boss who is willing to exhaust himself rather than his employees.

BOSS D: Decision-making type

Decision-making bosses do things decisively. The team must carry out his decisions unconditionally, even if the workers have different ideas, he will also ask them to change in a very tough way. In addition, when the company is in crisis or employees violate the regulations, he will also use this very tough way to ask them to change.

Decision-making bosses give people a sense of inaccessibility, indifference, and lack of affinity. For this type of boss, the team staff led by them will lack a sense of participation, and everyone will only focus on the immediate situation without long-term planning.

In short, it is a bossy boss who depresses employees.

BOSS E: Old-style type

First of all, the old-style boss is a lot older. The dressing is always in one style, the shirt is always tucked into the pants. The company created through hard work is naturally cherished by them. Do things very prudent, pragmatic, and honest. But their thinking is relatively conservative, and the signs of the years can be seen in the factory display and machinery. They are pragmatic, do not make any innovative moves, and are unwilling to change.

In short, they are true and simple, good “old man” with their duty.

BOSS F: Chaoshan boss

Chaoshan bosses have some interesting characteristics. For example, they are usually more gentle, speak Mandarin in Chaoshan style. They like to have a pot of Kung Fu tea when talking about things, and unknowingly trade favors during tea tasting chats.

Chaoshan bosses generally have no higher education. They choose to leave their hometowns before the legal working age and go to work in big cities to make money. They start from the bottom, and they are determined to be the boss. Chaoshan people who are away from home always show a sense of group consciously or unconsciously. I think that the most important reason for this phenomenon is Kung Fu tea. To some extent, Kung Fu Tea is the identity symbol of the Chaoshan people. All Chaoshan bosses do the entire supply chain of Chaoshan bosses. Internal resources help each other and like to take care of their own people. They are particularly shrewd in Business. Everyone is good at business, known as Oriental Jews. 75% of Shenzhen Huaqiangbei Electronics Market are Chaoshan people. However, some of them have very poor quality, are very cunning in doing business, dishonest and do whatever they want for money

In short, he is a boss who is willing to do everything for money.

When you reach out to suppliers, it’s often the salesperson you’re talking to. They just do the usual work of talking to you and then placing an order. When something goes wrong, they need to convey your opinion to the boss, who then makes a decision. So getting in touch with your boss is crucial. When Chinese trading companies buy from a factory, they usually contact the factory owner directly.

The relationship between the trader and the factory

As we all know, the suppliers on the B2B platform are mostly traders, which basically account for about 90%. So why does this happen? Why are there more trading companies when manufacturers have the advantage? The supplier and the manufacturer are obviously in a competitive relationship, so why would the manufacturer be willing to supply to the trading company? Nex I will illustrate this with a case study.

Mr.Wang formed a factory specializing in luggage and bags in Dongguan, mainly supplying domestic Tmall and Pinduoduo websites of his classmate Mr.Li.

The initial production volume is very good, and there are not enough goods to be delivered every day. However, with the continuous updating of products in the domestic e-commerce market and the unhealthy competition from peers, the sales volume on Mr.Li’s Tmall store and Pinduoduo website is not as good as before, and in the end, the store can only be closed. As for Mr.Wang, the warehouse is still holding many undelivered goods. The warehouse is also overstocked with a lot of fabrics. Mr.Wang is in a hurry. He doesn’t know anything except production technology. How can he find a buyer?

At this time, the raw material supplier Mr.Zhu asked him that the domestic market is not easy to develop, why don’t you develop foreign markets? Mr.Wang said that he does not speak English, and the factory does not have a salesperson. Where can I find foreign customers? Mr. Zhu also said that you can find a domestic trading company for cooperation. So many trading companies and so many salesmen who understand English can help you sell the goods abroad. You only need to produce it, the trading company will not owe you. As soon as Mr.Wang heard that this idea was good, he also knew a few friends who were work in the trade industry, so he acted immediately and sent samples to the trading company one by one. In less than two months, Mr. Wang’s factory resumed normal operations. By the end of the year, the profits of cooperation with trading companies doubled compared with previous cooperation with domestic platforms.

In China, at least hundreds of thousands of factories like Mr.Wang are all cooperating with trading companies. The factories do not have foreign trade salespersons, and their products are still exported abroad.

Why manufacturers are willing to cooperate with trading companies? Here are a few points:

  1. They are all in China, and they are all Chinese. There is no need to speak English, so communication is much easier.
  2. The factory does not need to set up a separate international trade department, which can save a lot of costs.
  3. All kinds of operations are more convenient, such as collection, receipt and delivery, and communication. (You don’t need a U.S.dollar account, just receive CNY directly. Delivery is convenient, you can receive goods from any city in the country within 1-3 days)
  4. For factories, trading companies are their biggest source of stable orders, so they will do their best to cooperate and even give more favorable prices to the trading companies. How can the price of a trading company be lower than a factory?
  5. There are many trading companies, which are very common and save trouble. Factories can spend more time focusing on their own production. (For example, if you want to make colored rubber cord, multiple traders want the goods and you can produce them together if you receive an order of 5,000 units from all the trading companies, but it’s harder to find an international buyer who buys 5,000 units)

Therefore, the manufacturers mainly focus on production and development, and the trading company mainly cooperates with marketing. That is to say, the two parties are a community, and the manufacturer is the factory of the foreign trade company. Both parties agree that the cooperation will be very happy

True manufacturers tend to focus more on making products, and they are not good at marketing their products. Trading companies don’t have to produce, so they focus their time and energy on marketing. Therefore, trading companies are easier to be found by buyers, which makes it easier for trading companies to get orders. In this way, trading companies are developing better and better, and there are more and more trading companies on the B2B platform.

The real situation of Chinese factories

China’s low labor cost is well known and is one of the reasons why China has become the “workshop of the world”. Wages in China have risen in recent years, but they are still relatively low compared with those in other countries. So what do Chinese factory workers really get paid?

How long do they work a day?

In many factories in China, workers are typically paid a modest base wage, slightly above the local minimum wage. And to earn higher wages, workers must work longer hours or work more efficiently. But even in factories that pay by the piece rate, the rate at which they set up to pay a high rate often requires them to work overtime, so workers work very long hours.

Let’s talk about the working hours of employees in our factory before. Under normal circumstances, they work 12 hours a day, two shifts, and one day off a week. This is also the working hours advertised to workers in the factory recruitment. But the reality is that when orders are heavy, it is common for workers to work more than 12 hours a day, and it is also common for them to work on weekends. When I talked with workers, some workers said that sometimes they can only have one day off in a month.

What are their working conditions like?

In addition to the long working hours, the working environment and conditions of the workers are also relatively poor. At that time, the best working environment for the grassroots workers in the factory was the assembly line, because there was air conditioning, they could also sit, and they would not smell the heavy metal product crumb smell.

On a manufacturing line, workers basically stand or sit all day and repeat the same movement all day long. This is not the most difficult, in the summer, some workshops are not air conditioning, there will be a lot of machines in the workshop 24 hours a day, the weather is so hot.

Some workshops have machines buzzing all day long, and after a while, they will feel that their ears will lose their hearing, and workers have to stay in such a noisy environment for more than ten hours a day. Although they will be equipped with earplugs and other protective equipment, it is still harmful to the ears. At the same time, such noise is very affecting the mood, staying in such an environment for a long time, will let people fall into a state of numbness.

In general, the factory environment is usually not very good, especially in some small factories. Small factories are often more disorganized, with no division between finished products, defective products and the raw material section.

But the working atmosphere of small factories is still relatively relaxed, workers can listen to songs and chat at work. Some small, out-of-the-way factories even allow workers to bring children to work. But in such factories, the production efficiency is usually very low, and the staff’s work motivation is not high.

What about their pay?

The money workers earn is really hard-earned money, not only tired but also seriously damage physical and mental health. Even for such hard work, the workers can only get more than 5 or 6 thousand CNY a month. In a small fourth-tier city, this is a relatively high salary for ordinary people without any skills or education, but it takes a lot.

In fact, the workers know that the work is hard and the environment is not good, but they all want to make money. It is not easy for people with education and education to earn more money, who often work overtime. And it is even more difficult for those who do not know anything and are older.

What is their attitude towards their work-life?

In Shenzhen, there are many factories that produce different things, but the conditions of workers are not so good. And for the people who work in the factory, in fact, many have been used to this kind of life.

We met a 23-year-old girl in the factory before, she has been working in the factory for many years, she said she is actually quite satisfied with her current life. Because the factory is full of food and accommodation, usually working overtime, so the living expenses are very low, can save a lot of money to send home. Although the working hours are relatively long, she can basically accept 1-2 days of rest in a month and work from 8:00 to 20:00 every day.

Her work on the assembly line, the relative environment is much better, do more for handwork, not too tired. The happiest thing for her is to get off work at 20:00 in the evening and take the shuttle bus back to the dormitory to have a video chat with her family or watch videos on her mobile phone. She often buys some snacks for herself, and it is a rare happy moment for her to eat snacks while watching TV in her dormitory.

A lot of people who can work in the factory for a long time will have this kind of steady-state of mind, they have been used to this kind of work in the eyes of outsiders is very tired, they can find some small things to make themselves happy after busy work. As long as nothing happened to the factory, as long as nothing happened to their lives, as long as nothing happened to their jobs, they thought it was a happy life.

Get commissions

Regarding foreign trade commission, this is the gray area of the industry. Some people blame it as a disruptor of trade rules, others admit that it is an unspoken rule of the industry, and some even point out that it is easier to take orders for a trading company.

You’ve probably never heard of it, but there’s a good chance you’re one of them.

There are many ways to get commissions, For example, trade commissions, purchasing commissions, inspection commissions, translation commissions, freight forwarding commissions. Below we explain the operation of each commission in detail for you.

Trading commissions

Foreign buyer A finds salesman B to purchase a batch of masks. Salesman B finds mask factory salesman C to purchase and C will directly ask B how much commission to add to the unit price during the quotation.

In a sense, trading companies profit from such commissions. The buyer buys from a trading company, which in turn buys from a factory and earns the difference. In fact, in the end, the trading company still makes money from the buyers.

Purchasing commissions

The most common purchasing commission is that the purchaser earns the difference by raising the unit price of the product. After the order is completed, the difference will be remitted to the purchaser’s personal account.

The second is to get a rebate based on a percentage of the total order amount. If you go to Shenzhen Huaqiang North Commercial Area to purchase the spot and high-profit electronic products, the boss will return cash to the purchaser on the spot as a coffee fee if the total amount reaches 10,000RMB.

Inspection commissions

Usually, the customer will arrange for a quality inspector or an inspection company such as SGS to inspect the factory before working with the supplier. Or the buyer will arrange personnel to inspect the goods after the production of the order is completed.

Some quality inspectors or quality inspection companies will not allow the supplier’s product or factory to pass even if the product or factory is qualified if the supplier does not pay the inspector commission. Conversely, if the product is non-conforming, the inspector may write “pass” on the inspection report if the supplier pays the inspector a commission.

This sort of thing is not the exception; it happens all the time.

Usually, the inspection fee maybe $600 a time, which is paid by the buyer himself. If the goods fail to pass the inspection on the same day, the quality inspector will continue to go to the factory for inspection until the goods pass the inspection. The cost is still $600 per time, but the cost shall be borne by the supplier himself. If the product does not pass the inspection, the buyer will not accept the goods and arrange to pay the balance payment. Therefore, in order to allow the customer to accept the goods and make payment as soon as possible, the supplier would rather directly pay 1000 USD to the quality inspector, so that the quality inspector will write “passed” on the quality inspection report directly.

As you are far away from home, you cannot inspect the goods by yourself, so you have to rely on a quality inspection company.

In the end, even if there are some problems with the goods you receive, you will have to accept them.

Translation commissions

Some translators rely on factory workers who don’t understand English to deliberately increase the price when talking about the quotation. After the order is placed,they will issue two orders,one order for the factory is 10 RMB/pc and another order for customers becomes 11RMB/pc. The extra 1RMB goes into the translator’s pocket. It is common that a translator can make more money than a factory from an order. Some translators even ask the factory to add their profit to the quotation and they will send the inferior-quality goods to the customer after taking the benefit of the factory,

The wool comes from the sheep’s back. No matter what kind of commission, in fact, this fee is from the buyer. To avoid paying extra fees, the first thing you need to do is to know that these fees exist and how they work.

Above we introduced the 5 common phenomena in China’s trade industry. These phenomena are of interest to you. Learn more about the industry so you can avoid being duped into paying more.

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