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    1. roby is offline

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      #1

      Trusting your Chinese supplier after the initial due diligence

      Hi,

      I am thinking of doing the above with flat packed furniture and have done many hours of research into this. I have found a supplier that looks very legitimate, we have had many weeks correspondence via email and they have sent me some actual samples of the products they manufacture which match the pictures and descriptions in their emails.

      Everything seems to checkout but I still cannot bring myself to fully trust them. Is it possible that they could have got these samples etc from another supplier? I asked if I could visit their factory but they said they don't generally allow customers to visit. Does this sound a bit odd?

      Is there a way to get a definitive answer whether a supplier is genuine?

      Thanks
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    2. WholesaleMod's Avatar
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      #2
      Hi Roby,

      Welcome to Wholesale Forum

      By the sound of it you have been dealing with a factory agent or a trading company. That doesn't mean necessarily that the supplier is bad or fraudulent, just that probably you are not dealing with the factory directly. Many factories work through agents and trading companies, for example because the manufacturer may not have in-house staff that is fluent in English. Also a Chinese manufacurer may not be familiar with export procedures, nor have the appropriate Chinese licenses to export, and may for those reasons and other reasons refer to an export agent.

      It is difficult to comment further without knowing the name of the company you have been dealing with. You should know that the majority of Chinese furniture manufacturers are based in Chengdu, and more specifically in Chongzhou, Pengzhou and Xindu (the largest of the three). If the supplier you are dealing with is from that area, there is an increased chance they are legitimate, however this is not a guarantee of legitimacy on its own.
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    3. Thank you for this post:

      roby (22 Jan 2012)

    4. Dipper is offline

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      #3
      Hi,

      I tend to agree with what the Wholesale Mods states. But also like to make the following additional comments:-

      1. While it is true that certain industries such as furniture makers are situated in specific areas/regions/cities, for the simple reason that they benefit from having the specific infrustructure for their industry in the one place, there are still manufacturers of these products in other places as well. So my comment is more to suggest that it should not necessarily be a problem if your intended supplier is not in the areas mentioned.

      2. It is uncommon for a real manufacturer to not want you visit their factory, in fact I would say the vast majority of manufacturers like to receive visits. It allows them to show off a bit as well as know that if you are prepared to spend the time, money and effort to make the trip, then it shows you have some commitment to any deal. Having said that, I have personally been told I could not visit a factory and some of the reasons for this may be:-

      - As suggested it may not be a real manufacturer and therefore do not have factory facilities at all
      - Some factories are not very advanced and some of their facilities may not be very good. As an example they may have inferior staff facilities which show neglect of their staff
      - They may be producing products that they shouldn't, such as fake branded items. (which i think may be the reason I was declined a visit)
      - They may be producing a particular style of product for 1 specific supplier that they prefer you don't ask if you cna have that product too.

      (Just some examples)

      It is also likely, as suggested that you are actually dealing with an agent, rather than the real manufacturer. In this instance I would just ask them and determine my action on their response. Have you asked WHY you cannot visit the factory???

      It maybe be as simple as that they need to use another company for exporting because the factory does not have an export license, or it may be more complicated. But in the end, if it is a trading company trying to pass themselves off as the manufacturer, it has to create some doubt about their honesty even though they probably have done that to have you believe their pricing is similar to the factory. I know why a lot of traders do it, but thats going off track a little.

      In your situation I would consider the following:-

      1. As it would be your first transaction, and you have concerns about the true identity of the factory, I would arrange a factory visit from you or a third party. This doesn't have to be a long winded inspection just very basic to ensure the factory is real etc.
      2. If the factory will not allow this, then ask why. If the answer is not satisfactory to you then be prepared to walk away. I know you have spent time and effort already, but also compare this to the potential risk and loss of money.
      3. If everything is fine at this stage, I would then make sure to receive either pre and post production samples and/or arrange at the very least a post production inspection before you make any final payment for your goods. (I assume you would be working on a 30/70 payment)


      I realise these steps cost money, but in the end you need to be aware of your costs compared to risks and potential benefit.

      And quite frankly, and I have been playing this game for many years, I can quite honestly say that I have spend more time, effort and money on dealing with quality and service problems from suppliers, than i have spent on supopliers that were not legitimate.

    5. Thank you for this post:

      WholesaleForum (21 Jan 2012), roby (22 Jan 2012)

    6. roby is offline

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      #4
      Thankyou for your replies. Sorry, I should have been more detailed in my first post. I'm sure this is an agent acting on behalf of multiple factories, although they never actually introduced themselves this way, as when I asked for specific designs of furniture they replied with "I'll ask around in the surrounding factories". I will ask them.

      The reason they gave for not allowing me to visit was "we have other customer's products being made" although on their website blog they had "we have a customer from South America visiting this week". Although this customer could already be having their custom designs being manufactured.

      I should also say that the supplier found me rather than I found them. They must have found my email address on my online shop.

      The address is near Hong Kong. Am I allowed to say the name of the company or can I send you a personal message?

      Thanks for your time.

    7. Dipper is offline

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      #5
      Sorry for the delay in responding. And it may be relevant to you as well that currently it is the Chinese New Year Holidays. I would expect you will not get much response from any factories/suppliers in this area for at least a few more days. (This week at least)

      I would say is more likely a trading company who sources their products from several different suppliers/factories.This is not in itself a bad thing. In my way of thinking, there is a difference between blatantly lieing and saying you are a factory and just giving an impression you are a factory. Blatanly lieing about it would put up some red flags to me about their honesty, but just giving the impression is all part of the sales process and if they have not actually said they are a factory, then what they have done is no more than many other sales people do when they "stretch/bend the truth".

      The reason that they gave for not allowing a visit to the factory is rubbish. Every factory has "other customers products being made". I think they are worried that if you visit the factory you will then know the factory and be able to deal with the factory directly, instead of through them. All you can do is offer some type of reassurance in this regard.

      That the supplier found you is just really another form of marketing. I am looking for various companies worldwide all the time and sending emails about the products and services I can offer. I don't believe that has any specific meaning one way or the other. If I were you though, one thing I would be asking them is what services they are able to offer you. For example, if you are paying a middle man, it is their job to act in your interest. So what are you getting from your money as opposed to dealing directly with a factory.

      If it is a trading company, the address being near HK isn't necessarily significant either. There are furniture manufacturers around the Shenzhen, Dongguan, Guangzhou area. Besides, as a trading company myself, I am in HK but I also source products from northern China regularly, so it is not so unusual to not be in the the same area as the products originate. One easy way to tell where the products come from is when you see the FOB price. It should include the port where the goods will be shipped from. Once again, I am in HK, but I can have goods shipped say FOB Shanghai, which means they more than likely originate from around the Shanghai area.

      Having said that. and it has been a while since I have looked at furniture products, you need to be mindful that prices can vary in different regions. For example, in general, wage costs are higher in the coastal areas and also they are more likely higher in Shenzhen, Dongguan and Guangzhou than they are in Chengdu, so this can also affect your overall costs.

      Ultimately, you are the one that makes the final decision. With this type of business the one major inherent risk is that you are dealing with someone half way around the world where you have very little recourse available if something goes wrong. I know that sounds very negative, but in the end it just means that you need to make sure that you are confident to proceed.

      And my comments in my previous message about various checks you should do, still stand.

    8. Thank you for this post:

      roby (24 Jan 2012)

    9. roby is offline

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      #6
      Thanks for your reply, some very useful info there. There is certainly a lot to think about in this business. I've been asking around a bit more to other suppliers to compare any differences before going any further.

      I'm not put off by dealing with people halfway around the world as the rewards are there if done correctly and so far the Chinese have been a lot more helpful and polite than any of the suppliers in the UK I've talked to.

      Thanks again for your time, it is really appreciated.

    10. marcus.xu is offline

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      #7
      Hi
      Tell me the Chinese name ( in Chinese) and English name, I can help you find out :
      if the company is registered in Chinese government and if the company have an export license.
      and in most case, what the business scope of the company is.

    11. Dipper is offline

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      #8
      Hi Francis,

      Sorry, but I am going to disagree with a comment you made.

      "I'm sure if you dig well enough you will realize that the price that was offered to you is in reality a bit higher than from the manufacturers themselves since this will eliminate the middle man in the process."


      That is not necessarily true.

      Firstly, yes there is potentially always a better price. But in my opinion price alone should never be the only consideration. The problem with only focussing on price is that, the lower price often goes hand in hand with lower quality. You can look and look and look, but at some point you have to make a decision on what you want. In this case, as a buyer, you should already have an idea of the price you are prepared to pay as well as the quality you expect to receive for that price. As a buyer, if you don't know that, you should not be buying in the first place. To simply say you want the cheapest is a sure fire way of receiving poor quality if you are not careful.

      Of course you should be looking to minimise costs, but there has to be a limit.

      Regarding the comment about reducing cost by eliminating the middle man, let me first start by saying I operate a trading company based in hong kong, so as to show some transpparency with my comment.

      There is this constant idea that by including a middle man you automatically incur additional costs because that middle man has to be paid, which is often indluded in the costs of the product. I may be a little biased, but i don't buy that argument.

      If you have ever dealt with a Chinese factory, you will know that there are often problems associated with the deal. From trouble to communicating to delays in delivery, to quality assurance etc. In many instances there has to be an added value in having someone on the ground working to resolve these issues for you. For example, if I am in the US and buying from China, if there iis a problem I to spend valuable time and effort and money following up with someone that may not even speak good english. Whereas maybe there is a benefit in having someone closer who knows the language and business culture and has experience in resolving these matters before they become a problem. Surely there is a cost benefit for this service???

      Added to this, if a middle man has experience with a particular product and factory it may be that they can actually get a cheaper price than you can as a buyer. Lets say you want to buy 1,000 pcs of a product, you can arrange a quote from a factory. maybe as a middle man i have dealt with this factory before and have previously ordered 100,000 of this product. Who is going to get the better price??? Even including a commisssion, maybe the middle man can offer better pricing.

      The funny thing is, you talk about reducing costs by cutting the middle man, then suggest you can help the buyer to find suppliers and manufacturers. Doesn't that also make you a middle man????

    12. Dipper is offline

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      #9
      Hi Francis,

      Yeah maybe I did misread and my apologies if I took the wrong meaning.

      There are so many people who have an view that using an agent will add unnecessary costs to their transaction. I was just trying to expand on the idea that there can potentially be a real benefit in using a trading/sourcing company. Of course my opinion is a little biased as well.

      I look at if from the point of view that if you have a business selling whatever product, then your time is better spent promoting your business and products rather than spending time on the telephone trying to speak with someone who you can hardly understand, as to why your shipment is delayed.

      But you are also correct in saying that there are scammers out there. I personally have a real problem with traders/sourcing companies where they take a commission from the supplier. I expect to be paid for the work I do, but getting a commission from a supplier opens up all sorts of problems with transparency and conflict of interest.

    13. cody is offline

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      #10
      Thank both you.
      Actually,there is a lot to learn on trading business, and I learn much here.

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