Why Choosing the Cheapest Supplier Could Cost You


Our Experience

As a professional importer, one of the scariest things I hear clients ask is, “I saw this product quoted on Alibaba at 50 cents per unit. I’d like you to get it done for 25 cents.” Can I do it? Yes, almost certainly. Will the client be satisfied with it? Well, that’s a very different story.

If you were to walk into a Mercedes-Benz dealership in the United States and tell the salesperson that you need a brand new C-Class for $15,000, they’d say, “Sorry, can’t help you at that price.” It’s not that they’re unwilling to haggle with you; it’s that fifteen grand for a Mercedes is simply not possible, and they’re going to be upfront about that.

The same principle, however, does not carry over into the world of Chinese factory sourcing. If you were to contact a supplier and request a product at an outrageously low price, they might not turn you away. Like we’ve written before, in Chinese business culture, “No” means no, but “Yes” doesn’t always mean yes. Instead, a supplier will more likely meet your asking price, or come close to it, but skimp on some aspect of production or shipping to make up the difference.

This may result in products made with low-quality materials, or low-quality packaging. Lead times may be extended far beyond what was agreed upon as more profitable orders are allowed to take precedence. In other cases, production will be simplified and sped up so much that the end result comes out sloppy and defective.

Several years ago we had a client who was looking for a product to fill some empty space he had in a shipping container before delivery. He chose a product and asked us to find him a supplier. Although we stand by every quote we obtain, nothing we found was as cheap as he wanted to pay. Instead, the client went out and found a supplier that offered a substantially lower per-unit price. Unable to vet this supplier, and at our client’s insistence, we moved forward with production.

Sure enough, the production ended up being very late — almost missing the ship date. When the container finally did arrive to be unpacked at the client’s warehouse, we discovered that it had been packed so inexpensively that units were literally falling out of the container when the doors were opened. Unsurprisingly, the materials used were so inexpensive — the cheapest, stinkiest plastic our client had ever seen — that he was forced to discard the product and absorb a big loss.

In short, our client got what he paid for.

Shop for quality, negotiate for price

As counter-intuitive as it may sound, importers should resist the urge to look for the cheapest suppliers, and instead line up suppliers based on their capability to manufacture your product at the right quality level. Once you have an initial list of potential suppliers based on this criterion, then you can begin negotiating your required price. Remember also not to get too caught up in per-unit pricing when areas like minimum order quantity and logistics can also have significant effects on your bottom-line costs.

Check out our article China Suppliers: 15 Pro Sourcing Strategies for more information about smart sourcing.

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