Step-by-step producing goods in China
Having your products made in China: even in the post-COVID era, it remains economically interesting not to write off China just yet. Even now, while working conditions in factories and the general quality of life are improving, as well as rising wage costs, it is still a good idea to have your goods produced in China. Thanks to the high number of workers, you can enjoy a high production capacity and you can often also have products tailor-made. Below, we explain step by step how you can have custom products made in China most efficiently.
1. Sourcing: fruit comes from a fruit shop
First and foremost, you need to find a good factory that understands and can deliver your requirements. Starting entrepreneurs can consider doing the sourcing process themselves and contacting factories online on well-known platforms, such as Alibaba and T-Mall Global. Naturally, this entails huge risks, such as: is the person you are in contact with really the factory? Or is it a re-seller trying to make a quick penny? Do people speak enough English to understand your needs? Read all about it in our article on; how to purchase from Alibaba?
For more senior buyers, cooperation with a trusted sourcing agent is always a good and obvious option. A sourcing partner helps you find the right producer. Ideally, a sourcing partner has 2 branches: one in the country where you are located - you can consult face-to-face - and one in the country of production - the trusted sourcing agent has a large network and can therefore choose the right factory quickly and efficiently. A sourcing partner with 1 foot in the West and 1 foot in the East basically engages in cross-geo networking and can therefore offer you the best purchasing service in China and Europe.
2. Private Labeling: how branding can make a world of difference
When our customers introduce a new or customized product to the Dutch market, they want to show that this is their own product. That is why we always recommend private labeling. This method also distinguishes your products from other products: you strengthen your identity, image and trust in your target audience. Why are consumers more likely to buy products from a (well-known) brand than a white label (no brand) alternative? Because the value of the brand is known to us thanks to strong branding and marketing.
Of course there are also a lot of legal things involved when you start producing a 'unique' product; for example, you are automatically legally protected when it comes to copyright. When we talk about trademark and Intellectual Property (IP), it is important that you have a watertight contract with the factory. A sourcing agent in China can deal with this and also has the right legal contacts to secure legal production in China.
IP law (intellectual property) offers protection with a focus on the production of a certain product (the shape, the graphic design and elements, etc.). This can be requested at both national and international level.
A Trademark applies when you actually sell your products; you protect your brand name, logo and unique, visual properties of your product.
If you later want to sell your product/brand, it is of course crucial that you have all the patents and papers. This is also important to protect your product against counterfeiting.
Case Study: "The Dollar Shave Club"
The Dollar Shave Club is a company based in the United States that sells razor blades. Not only is it cheaper than 'Gillette', but thanks to strong branding they are able to market this everyday product 'differently' and create more value. Their razor blades come in a nice box with a lot of accessories. Private labeling is therefore important and is a handy tool to add more value to your product.
3. Purchasing Guidance: “Good accounts make good friends”
Obviously, one of the most important steps why companies want to produce in China is; the price. The Oriental way of doing business is virtually unknown to us in the Netherlands. Words like "guanxi" and "wusuowei" probably don't sound familiar. However, it is important to emphasize this. When negotiations take place in China, they follow a certain process. Chinese business people attach an incredible amount of attention to building trust and therefore always aim for a long-term relationship. That is why it is better that you send someone to the negotiating table that you trust and who is also familiar with Chinese culture. The better you can become friends with the factory, the better the quality of the products. Sustainable relationships are therefore extremely important when you start producing in China and are key when doing business in China.
4. Quality control: dot the i's and cross the t's
Quality over quantity: this is what we often have to report to our Chinese colleagues in the factories. Quality Control is the last moment when you can make adjustments. As soon as the goods are out of the factory and are shipped out, you lose control over the goods and so the quality. That is why it is important to arrange a quality check in China on the side by a professional inspector who understands exactly what your requirements and wishes are. Culture and language are the two important elements during quality control.
5. Transport, import and import duties
If you import products and goods from China, you will be faced with import duties, VAT and customs clearance costs from China.
It is important that you have the right documents, do not pay too much for import duties and do business with a reliable supplier and/or manufacturer. Your product must comply with European and national requirements and regulations, and must be safe and usable. As an importer you are responsible for this. Each product has a commodity code or 'Taric Code'. This code usually consists of 10 digits and is based on Harmonized System Codes. Customs worldwide use this HS code to classify products. The HS code for leather handbags, for example, is therefore the same in all these countries, namely 4202 21. You can find the list of HS codes on the English-language website of the World Customs Organization. Visit our website to learn how to calculate import duties from China.
Within the EU we have eight-digit codes for goods that you export from the EU. These are HS codes supplemented with two digits. When importing goods into the EU, you usually need ten-digit codes. These are HS codes supplemented with four digits. These codes for export and import are also referred to as commodity codes. Commodity codes are therefore based on HS codes.
Need help with production in China? Scale Roads can help you with each of the above steps. For years we have been helping our customers import from China.
At Scale Roads, we believe we can take your business to the next level. With our experience and network in Asia, we can be your company’s procurement partner, so you can spend more time running your business. But we are not only a procurement partner in Asia, with our experience in e-commerce & marketing and as Dutchmen we also understand the markets in the west. Whether you are a trader, retailer or an e-commerce company, we can help you source effectively.
`
Björn van der Heijden
Founder at Scale Roads BV