Podcast – Sourcing goods from Alibaba with Heather from Sourcing Playground

Heather from Sourcing Playground explains how buyers should correctly source imported goods from online marketplaces such as Alibaba, Made-In-China, Global Sources others.  Heather gives key tips on how to correctly give suppliers detailed product information, how to compare supplier’s quotations and product specifications, overcome language and cultural barriers, understand if you are dealing with a factory or trading company and how to negotiate pricing with suppliers.

• When sourcing from online marketplaces, what should a new buyer do to contact new suppliers?
• How many suppliers should your source and compare?
• How do you know if you are dealing with a factory or a trading company?
• What are the pros and cons of working with a factory VS working with a trading company?
• What is the best way to negotiate pricing with suppliers?
• How should you arrange samples with suppliers?  Would you suggest to get exact samples made up and sent to you by airfreight?
• What is Sourcing Playground and how does it help buyers source new suppliers online?
• How does Sourcing Playground reduce the time it takes to find a suitable supplier?
• What are some key tips to give new buyers when sourcing a new supplier?

Read full Transcript here:

Ben:                     01:13
Hi everybody, it’s Ben Thompson here and welcome to the Import-Export podcast. Today, we’re talking about how to source products online from online databases such as Alibaba and others. Sourcing products online gives new buyers opportunity to instantly find suppliers for the products that they need. Today, we’re joined by Heather Williams from Sourcing Playground. Welcome to the show, Heather.

Heather:             25:02
Welcome. Thanks very much, Ben.

Ben:                     26:22
So, today, Heather and I want to give listeners some key tips on how to correctly source suppliers online. It can be sometimes quite a confusing and frustrating process. And we want to break down it into some easy to understand parts to give you some tips on how you can improve that process. So, before we get started today, Heather, I understand you’ve had quite a bit of experience when it comes to sourcing products from factories in Asia. Can you give me a bit of information on this experience you’ve had in this industry?

Heather:             58:06
Yeah. So, I used to work as a buyer and I used to work for product development specifically in consumer electronics. So, products around mobile phone accessories, chargers, speakers, headphones, these type of products. And, we used to work with outsourced manufacturers in China. So, I dealt with the whole process from sourcing factories and visiting the factories, specifically in China, have been to Hong Kong factories and the trade shows to see new up-and-coming technologies and suppliers and I’ve been involved with the whole process of sourcing suppliers. So, for example, the negotiation part, the actual product development and product marketing and road mapping. And, yeah, so I’ve had a really good insight into the both buyer side and also the manufacturing side being visiting China a few times.

Ben:                     01:49:05
Yeah, that sounds great. It’s important, as you mentioned, to understand both parts of the supply chain, I guess. You got to understand the product. So, sourcing the right factory is only part of the process but you also have to understand your market, how you can sell these products, right?

Heather:             02:06:18
Exactly.

Ben:                     02:07:19
So, yeah, as a typical process, say, I’m an importer and I want to buy, I want to source a new supplier for a 20-foot container of furniture products. There’s plenty of online databases out there, marketplaces of suppliers. Say, I come across Alibaba or something similar, what are some key tips you can give us about what I should do firstly?

Heather:             02:30:21
Yeah, so I would say the most important thing for a buyer to do is really do your product research. So, go online. There are so much resources and you know how to make your product. Go online and look at YouTube videos and literally the process of how to make that product. Find out the components and the materials that you use. For example, is there a process within making your product that is quite difficult? Basically, trying to understand from a manufacturer side of you, “Okay, what are the challenges and what happens in that process of making that product?” And the more you can build up your knowledge on the product, you’re selling these to consumers. The better you know about the product the better anyway. And it also gives you a very good point for negotiation when you understand the product, then you’re able to offer also inputs and if there’s a challenge with a certain process of developing that product you can actually offer guidance and help. “Okay, this is how we can solve it and you can input that.” And then, I would say, you go and do keyword searches for your product. What are the key manufacturers out there? They’re doing it obviously, if you’re on Alibaba, you can search for the product you’re looking for and it will show you different factories that come up and who can make them for you. And, researching that company listing to make sure that the product, how many factories can make that product? Is it a niche product? Is it something that only a specialised number of manufacturers can do or is it quite a competitive marketplace? In which case, there will be lots of suppliers, it will be able to develop that product. And, typically, and obviously, in a competitive market, obviously, you’re talking about pricing and pricing will be competitive, then, new challenges will come up with that. Usually, when you have competitive market, there’s a race to the bottom in terms of pricing. So, really do your due diligence and make sure you know. Once you’ve done that product research, you know what the average buy price for that product should be. So, if someone, a manufacturer, offers you a very, very low price, you should be sort of wary of, “Okay, how they got to that price and what are they compromising to make sure they can hit that price.” So, as much as possible, before you even go and talk to suppliers, know your product, research how to make it, what is the average buy price, find out how much of the components cost. Do your research and do the calculations. Can you find out and sort of model and simulate how much it would cost to make that product? Obviously, factor in the overheads, that type of thing but try and sort of come up with a price that you think is reasonable. And, another thing is to find out how long that supplier has been running for. So, are they a new player in the market and they’ve only been running for a couple of years or is this sort of a 15, 20-year supplier that have had massive recommendations that have worked with key leading companies and brands? So, really understand who you’re working with.

Ben:                     05:19:08
Yeah. I find it interesting whom you mentioned that the new buyers should really understand their product first. It’s surprising how many people I’ve talked to that have tried going through this process and they might find suppliers online and send them an enquiry and go, “I want to buy furniture products.” And, they have, they don’t provide the factories of any sort of detail on the material, on the sizes, on the specifications, on similar products or even understand how that’s put together. And it’s important, I think, that people realise that they’re dealing with factories, they have to buy the raw materials, they have to put these components together and if you’re not communicating that properly, well, then, they, a) they’re probably not going to take you seriously or, b) you’re not going to get any products.

Heather:             06:04:18
Exactly.

Ben:                     06:07:03
So, yeah. And when you source products online, how many suppliers would you recommend that I should compare?

Heather:             06:17:23
So, I would say you can break this down into two sections. So, you would send an initial intro, introductory email. So, this introductory email, you want to be sending out to as many people as possible because you will, a) not likely have people reply because usually, you’ll be getting a generic info at the email address. People won’t able to know the exact products you’re looking for. So, this intro email, you want sending out to as many different people as possible. And in your email, you want to basically say who you are, what you’re doing and what your plans are. You want to be detailing a little bit about the products you’re looking for and explain the product. I’m looking for roughly, I don’t know, this chair in this sort of price bracket, am I looking for a low or high price, just to give them an idea of what you’re talking about. In this email, you want to be sending out to as many people as you can. And just start to build up maybe a list of all the ones that then start to reply. And then, I would say you would follow this into the second part where you sort of start to narrow down the search of, “Okay, what are they like at communication? Can they actually produce the product? Are they in the best manufacturing location that I want?” All these questions that you need to take into consideration. Then, you start to narrow down your search. And then, I would suggest you would, as much as possible, have video calls or voice calls or actually speak to the factory you’re dealing with. There are loads of different online softwares you can use now if your supplier is on the other side of the world. You have Skype, Zoom, Appear In. Manufacturers often use WhatsApp so you can use the voice call, the video call on WhatsApp. They’re really, really quick and easy to use. You use these tools as much as possible to build up that real personal connection and personal relationship. So, that supplier knows that you’re serious and you want to work with a long-standing supplier.

Ben:                     08:06:14
Yeah, absolutely.

Heather:             08:07:16
And then, in this second, you would then send a brief of all of the exact products you’re looking for. So, after you’ve done your research and you know what you’re looking for and you can clearly detail the specifications and features for every single product you need. Then, you would need to send a brief to the suppliers you’re looking for. And in this brief, usually, this is done like a really, really simple Excel document. So, you list every product by line and you would list the quantities, the MOQs, the target price you’re looking for, the actual specification for all of them and the lead time, so how long you need for them to be manufactured and what’s the average time it takes them to manufacture. And, basically, this is a brief that you would send out to all the suppliers that you’re really sort of considering. These suppliers, then, are sort of your core shortlisted suppliers and these are the ones you should start really taking time to understand and doing your research about that supplier, talking to them on video calls, asking to see customer testimonials. Do they have any other customer testimonials? What brands have they worked with before? Can you access them on social media? Are they even on social media and do they have a website? And really doing your research around these number of suppliers and I would recommend around five to ten you should be looking at when you’re looking at pricing. And it would just start to give you a better understanding and give you a range of pricing and different options to look from.

Ben:                     09:40:17
Yeah, I think it’s invaluable. As you mentioned, actually having face-to-face conversations with these potential suppliers because, in some cases, right, you could get a feel for their operations and the people, the person you’re dealing with in the factory. Are they at the factory? Are they not at the factory? Are they legitimate? You get so much more than just sending an email, right?

Heather:             10:05:01
Yeah, massively. And they appreciate that on their side. A lot of people don’t actually take the time to speak to each other. So, if you’re the customer, there is wants to talk to them, wants to find out how to help and really take a proactive approach in the sourcing process and they respond really well to that. They like it. So, manufacturers always ask you to come and visit their factories to try and build that gap between the both and try and meet them halfway. Fair enough if you can’t fly out twice, three times a year to the other side of world, that’s fine, but okay try and see how you can manage it in a different way.

Ben:                     10:39:02
Yeah, great. And when it comes to talking to these people, there’s a lot of opposing opinions and pros and cons when it comes to, “Am I dealing with a factory or am I dealing with a trading company? Sometimes it’s blurred lines but I believe that dealing with a trading company is not essentially a bad thing all the time. Can you give some pros and cons as compared to a) how can you find out whether they are a factory or a trading company and b) what are the pros and cons of dealing with each?

Heather:             11:19:03
Yeah, sure. So, a trading company, in essence, is they’re the middleman between a buyer and a factory. So, typically, this trader or a sourcing agent, they have a large database of factories they can use. So, from a positive point of view is that 1) they have access to lots of factories that they’re used to dealing with. So, usually, the process is quite smooth on their half. So, they already have the contact details and the initial process tends to be a bit faster. So, they already have all the contacts, all the details and they can start the process a lot faster for you. They also can help with negotiation. They’re often buying in large bulks for different clients so they can often piggy bank two orders together and try and get a better price for both their buyers, which is really helpful. Another thing is that, when you’re a first-time buyer, there are so many things you have to learn about. You have to know about the product, you have to learn about shipping, your actual product development process and it can be quite a daunting task. So, this trader or sourcing agent really helps you in that middle section and they basically help you– they will liaise with the factories if you want. If there are difficulties with communication, they can go back and forth and do the legwork because there is a lot of back-and-forths literally for months. It can take six months, twelve months to develop a product for example. And if you’re a business owner that has to do other things, then you need that time to be able to focus on other areas of your business. So, that’s really where a sourcing agent comes into hand. And I would say, though, to be careful with sourcing agents because 1) it’s difficult to track the consistency of the product. So, when they’re sourcing from different factories, consistency of product quality is really, really important. And you want to make sure that you’re controlling all of the supply chains. And if you’ve got someone in between, then it adds another link in a chain and adds one more section that everyone needs to consider. So, really be careful on who you’re working with. If you are working with a trader, then really know them and do your due diligence around them. Yeah.

Ben:                     13:39:15
Yeah. I think I’ve come across a lot of people that think that it’s a very bad thing to deal with a trading company but as you mentioned there are so many benefits.

Heather:             13:49:13
Absolutely.

Ben:                     13:51:10
As you mentioned, they can get access to so many different suppliers. They can get things done quickly. So, people should consider that.

Heather:             13:55:23
Definitely.

Ben:                     13:58:19
And so, when it comes to– you’ve researched online, you’ve narrowed your list down to say, five suppliers and they’re all around the same pricing and specification. Let’s talk about the negotiation process. Some people sometimes can think that you can really push suppliers right down on pricing but they seem to forget that they want a quality product at the same time and what are you going to pay for? So, I feel it’s a quite a fine line between negotiating a good price and a price where factories are just going to try. They want your order, they’ll accept it but they’ll be like, “Okay now, how am I going to cut corners here?” So, it’s very risky. How would you suggest to go through that negotiation process?

Heather:             14:49:06
So, again, this starts off of knowing your product. So, and only until you know your product, then you’ll know the average or realistic price it costs to manufacture. And then, you will start to build up a better picture. So, you’ve done your research and you find out, okay, for example, it costs $10 to make this product on average and then you’ve gone to speak to, I don’t know, 20-30 different suppliers and you’ve narrowed that down to about five or ten. And these suppliers are all in range with about $2 each side. You’ve got something from $8 to $12 dollars. So, this, already you start to see– you map out the pricing on a realistic scale and you can also justify your pricing because if a supplier here is telling you supplier A is saying, “Okay, it’s costing me $9,” and then another manufacturer is saying, “It’s costing me $30.” Then, you’ve already built up your own knowledge to realise, “Hang on, I think that’s a little bit outside the scope and that can be negotiated a lot further down.” Whereas if a supplier is telling you, “Okay, I can manufacture this for $3.” “Okay, this is starting to feel a little bit– okay, there’s going to be compromises somewhere.” So, only until you’ve done your research and you know the pricing, I would say you’re in more of a confident position to negotiate. And then, when it comes to actual negotiating, I would suggest it you send out your target price and what you’re looking for. And, you base around your target price, you have considerations that you need to factor into. You have your own margins you need to work again. So, you have your own– depending if you’re selling online or if you’re selling to an Amazon or an eBay, you do have commissions you need to be factoring. So, you have your own justifications on what target cost you need. And, basically, you want to talk this through with your factory. Find out in the account manager or the contact you’re dealing with and set up a call and discuss all this with them. And find out, “Okay, if they are more expensive is why how come they’re more expensive? Are they offering any better quality products or are the materials any better? You need to find out what justifies their cost. And equally, if they are lower on the scale, find out how they are lower because as you rightfully say, there’s just a race to the bottom for pricing and they will accept anything. So, if they can cut a corner and source a cheaper component, for example, or lower quality materials, then they will definitely do that. So, you just need to bear in mind that when you are negotiating is that it can be quite easy to just push further and further and further and especially, if you’re a first-time buyer, you don’t want to be dealing with inconsistent product quality. You want to know what you’re buying and can trust the supplier you’re working with. So, make this a more of a long-term vision and start off slow, start off with the pricing. And as you build up your volume, then obviously, then you can start to negotiate pricing. Can you negotiate with the supplier if you hit certain volumes by certain periods? Can you get a discount on price? So, I don’t know if you hit 10,000 units, can you get a better pricing after a certain amount of time? And this type of relationship is a much better approach working with a supplier than just going in at a very, very low cost because it’s not sustainable for the both of you.

Ben:                     18:18:03
Yup, absolutely. It’s not sustainable. People need to keep that in mind. So, yeah. And through a sampling process, you’ve narrowed down your suppliers again. You might have two or three. Walk me through what you would do to arrange samples. Should you get exact samples of your exact product made up or would you be happy to receive samples of a similar product?

Heather:             18:42:04
So, when you’re first starting, often the samples you’re going to get aren’t probably the exactly the same that you’re going to actually manufacture. So, I would suggest to maybe select a few different type of products. Ask them to send it to you. And then during this process, you really want to understand, test the product, why do you like it, can you change it? Often when you are dealing with factories, you’re going to want to sort of customise it how you wish. So, when you talk with a supplier and explain all of the changes that you want to make. Are you going to source, actually, this specific section of the product, I want to improve the quality of this or add improvements where possible if you would like or change colours, how you can add your branding and are you going to change the colours. Talk this through with your supplier and give as much details as you can as possible and what you want to change. And then, I would suggest receiving a second sample, which is based on your changes and your requirements, you have your second sample. This is then the sample that you’re going to want to be sending out to your customers or are you going to be using this for marketing material to shoot for your online website? This is the opportunity for you to use this product to understand, is this product going to sell? And then, from that, then you go ahead, are you actually going to order with this supplier? Yeah, you’ll go through that process. And then once you say, for example, you’ve finalised with your supplier, then you’re going to want to make sure that you receive an exact mass production sample. Now, usually, we refer to these as golden samples or mass red seal samples sometimes. And these are the exact model of what is going to get manufactured. So, this, you’re going to want to make sure that not only you but your factory has that golden sample. So, you want a sample at your warehouse and at the manufacturers’ warehouse to make sure that on both sides, you can both compare when you have mass production going through and you’re placing orders on a six-monthly basis, you always have something to refer back to. You can check, you have your stock in six months time, for example, and you can check against the sample that you’ve ordered it to. And what we used to do is, typically, when you place your order, you can do subject to golden sample approval or basically poke a line into the order where you make sure that it is the exact copy of that sample because then you have and basis to go back if the supplier has changed anything you said, “I’m only placing the order subject to actually being the sample that we’ve approved. This just give you little reassurances you’re buying what you’ve agreed on.

Ben:                     21:39:12
Yeah. It’s a very, very important part of the process. The whole business can be based around it and it is quite complex and important to get it right. So, any improvements in this process, I’m sure everybody will appreciate. So, I hear that you guys at Sourcing Playground are working hard to make that whole sourcing process a hell of a lot easier. Can you tell me a bit about Sourcing Playground and what it does to make this process easier?

Heather:             22:11:11
Yeah, of course. So, as I worked in the industry for several years, I realised that one of the hardest things is that what everyone finds is finding that perfect supplier is really difficult. It’s difficult to actually find them online. Typically, they don’t have very broad visibility online so they’re not going to come up first for the search results of searching a product, it’s never going to happen. They typically aren’t very active on social media so it’s not something that you can even do your research into that. You can go to trade shows, go visiting trade shows around the world. But, especially, if you’re a first-time buyer, you might not have the investment and it might not be viable if you do invest in a long business trip. So, if you’re online, how can you find that trusted manufacturer? Sourcing Playground helps to make this process easier where we have factories and manufacturers that are based all over the world. So, these fantastic manufacturing capabilities and come places like the US, in all of Europe, Poland, Portugal and these companies are specialised in what they’re doing and we want to make sure that we can give by is the opportunities of using the best manufacturing talents regardless where they are in the world. So, yeah, if a buyer is looking for, I don’t know, if you’re starting your own brand of T-shirts, for example, you need to find a factory. So, you come to our site and you basically post your product and in your product, this is your brief that I mentioned at the beginning and you explain every single product you are looking for. So, you say, I’m looking for 500 T-shirts at this target price and these are all my specifications and requirements that I need for this T-shirt. Your products get sent out to all the factories within those product categories and, basically, you start to receive quotes and offers from suppliers that can deliver the products. So, as I mentioned is that it’s very time-consuming going and talk to each individual supplier and going through pricing, going through their offers and what they can offer you. So, we try to make this a lot faster and easier for a buyer. So, as you have one brief, this gets sent out to different suppliers and they quote you like for like quotes. So, you can start to build up that initial enquiry stages a lot quicker and a lot easier. And then, you can discuss your project with each supplier through our chat systems and you can share files and images of what you’re looking for. They can share the images of the samples that they can send and it basically starts to build up that relationship through our site. And then, once you found a supplier that you want to go ahead and order with you can agree and award that project to that supplier. And then, continue that process and we’ll help guide you through what happens next. So, we’ll help advise on the sample stages and offer support and articles and resources around the sourcing process. And basically, the platform is built on users and user feedback so that’s really important is the trust in the relationship for buyers is so, so, so important. A factory and a supplier is one of the key factors in product development. If you have a fantastic supplier that you can trust, it’s going to really iron out a lot of issues down the road for you. So, a lot of buyers are often worried, “Okay, should I go with this supplier and can I trust them? How do I know I can work with them?” So, through our site, all of the supplier’s previous work histories and reviews are visible online. So, you can actually see that they’ve worked with this supplier for ten years and they’ve been fantastic or this supplier might not be great for this or you can start to understand who you’re working with and build more of a transparent relationship with this supplier as opposed to, at the moment, in industry, it’s more of like trade secrets on who you’re working with and people tend not to be as open. So, we try to really encourage people to explain who they’ve worked with in the past and help previous buyers.

Ben:                     26:21:17
Well, it’s great to hear because I know that’s sort of what the industry has been missing. I mean, it’s one thing to go online and connect with a supplier but as you mentioned who are they? What rating? Nobody has utilised a rating system that can give you good insight into their performance.

Heather:             26:39:09
Yeah, exactly.

Ben:                     26:39:09
That sounds great. And as you said, to post your products with the actual details and in detail, that’s going to cut down the people that you’re talking to and you’ll be talking to the right people, I assume, and cut that time what nearly in half?

Heather:             26:59:03
Exactly. So, at the moment, it takes around six months on average to get a product developed. In the initial stages, buyers on our site to get prices back within 48 to 72 hours from a range of different suppliers. So, this already gives you a better understanding of a) who can supply you? So, the people that have replied to you can supply this exact product that I’m looking for and this is the price and you’re able then to go and do your research into all the supplier profiles. On-site, each supplier has their own supplier profile which is almost like a mini-website that we provide them. And you can also, we allow them to upload all of their certifications and standards that they are all approved by so you can actually go in and make sure that they are complying to all the legal requirements for all of their products. And you can start to build up your own and research and gives you a place that you can access suppliers because often they don’t even have a website so we help that process and the research inside.

Ben:                     28:03:18
Well, that sounds great. As I said, it’s exactly what the industry needs. I haven’t personally seen any market places improve in this space. So, yeah, that’s awesome. So, in summary, what are the key tips when sourcing a new supplier? What are the key things that a new buyer must get right to make that process easier?

Heather:             28:26:10
So, I would definitely is know your product and do your product market research. Find out, as I said, the more you know about the product the better you are at a) selling a product and you can be able to go to the place of understanding what that product is. You’re able to negotiate better and understand from a manufacturing’s point of view the process and how it works. And you’re also able to work on pricing a lot better. Definitely know your product is the most important thing. And then, I would also say is invest in the relationship with your suppliers. Don’t see the fact that they’re on the other side of the world so a few emails here and there is okay. Some time talk to them, understand who they are and really work with them on creating that long-standing relationship even when you are working with a supplier, spend time on regular intervals, maybe, once every fortnight, once every three weeks, touch base with them, find out, “Okay, what’s the next step in the process?” Even if you have ongoing orders, take your time and talking to them and building that personal relationship because if you’re a good customer they’re going to want to work with you.

Ben:                     29:41:17
Yep, absolutely. Alright, well, that’s great, Heather. Thanks for your time. I think you’ve given listeners some really good tips when it comes to sourcing suppliers. I know it can be a hard process but it sounds like what you’re doing is really streamlining that. So, I encourage all of our listeners to go onto your website, sourcingplayground.com. Sounds like it’s going to make their job a hell of a lot easier.

Heather:             30:06:10
I hope so.

Ben:                     30:08:07
Alright, well, thanks very much for your time, Heather, appreciate it.

Heather:             30:11:08
Thanks very much.