Importing from China? Where do you rank in the product sourcing food chain?

There is no need to remain a bottom feeder. There are posts on Warrior Forum in which members report margins of 250%, 300%, 500% and sometimes even more over the landed cost of their products. How do they do it?

The answer is very simple. They don’t buy wholesale. They don’t buy from middlemen. They don’t buy from traders. They don’t use sourcing agents. They buy direct from the manufacturers. Before looking at how they do it, just consider the food chain hierarchy.

Strictly speaking the hierarchy should be something like this:
1. At the top of the pile is the manufacturer. These people have a factory where they actually produce the goods. Some will supply direct to resellers such as you, but you will find that if you approach local manufacturers you will often encounter barriers. They usually have their sales network already in place and small resellers are seen as a nuisance.

If however, you approach real manufacturers in China, or other exporting countries, they will usually welcome you with open arms. When you are buying from manufacturers you are almost certainly getting the lowest price possible, giving you the highest profit margins. You are buying at ex-factory prices – true wholesale.

2. Next come the wholesalers who supposedly buy very large quantities and carry them in stock for sale to resellers like you. They are supposed to carry stock, and that is usually the case in Western countries, but when dealing with Chinese suppliers you should understand that very few of them actually carry any stock. This is how it works:
*They obtain pictures of products for which they see a big demand.
*Often without any prior arrangement with the manufacturers, they post those products for sale on sites such as Alibaba.
*They get your order and your deposit, usually insisting on a high MOQ.
*Then they contact the manufacturer and bargain for the lowest price they can get.
*If that price leaves them a good margin, and the manufacturer agrees to supply them, they place an order and eventually ship the goods to you.
*If the manufacturer refuses to supply them, they cancel your order, and provided they are not scammers they will sooner or later send you a refund.

The price they have quoted you is much higher than what they expected to pay to the manufacturer, so why not go direct to the manufacturer and pay that much lower price?

3. Traders. Most of these will try to make you believe that they are the actual manufacturer. They usually have an arrangement with the manufacturer to buy at a big discount, but they don't pass that on to you.

4. Resellers, (you) are near the bottom of the food chain, but by going direct to the manufacturer you can rise to #2 position after the manufacturer. The individual consumer is at the bottom. You buy at the lowest price you can negotiate, and make a profit on reselling the goods.

Profit margins are incredibly variable. The difference between wholesale prices and direct from the factory prices can be staggering.

Don’t give up. There are big profits to be made. Make your way as near as possible to the top. Buy direct from the factories. If you have the means to sell physical products that is the hard part. Safely sourcing them even in small quantities at best prices and then importing them are the easy parts.

Walter Hay.