- Step 1) I want to begin sourcing products from China but I don’t know where to start. How do I make sure the supplier I decide upon is reputable and won’t leave me high and dry with poor quality products?
Online B2B marketplaces and directories that connect Western businesses with the East, like Alibaba, are a good place to start, but conducting all of your due diligence from the comfort of your desk in the UK may be a tall ask for a seasoned online seller. Gold ‘trusted’ status on some of these marketplaces can be ‘purchased’ for the price of a fixed subscription fee, so it isn’t necessarily indicative of the past or future performance of the supplier.
Once online sellers have done their initial research on those marketplaces (and perhaps even ordered a few samples), the next step is to reach out to your peer network to see if there are any suppliers they’ve done business with that they would personally recommend.
Unfortunately, many online sellers’ competitive advantages lie in their supplier network, so asking them to divulge their secrets might not land you with the word of mouth recommendations you were hoping for, but it doesn’t hurt asking. Finally, a trip to the Canton Fair or visiting select manufacturers and warehouses on the ground in China (perhaps those that you originally found on online B2B marketplaces) is the most sure-fire way to establish productive working relationships and build trust on both sides.
Exporting was probably summed up best by Will Butler Adams, CEO of Brompton Bikes. He told us businesses just need to “Get out there, have a laugh, meet some funny people, eat weird food, drink funny whisky. Exporting is a good laugh. It’s a such a no-brainer.”
In short, there are no guaranteed cheap and/or quick ways to find a supplier in China – there are very few shortcuts that don’t result in lots of trial and error for online sellers.
- Step 2) I want pay my Chinese supplier in CNY, can you help?
Has your supplier received CNY payments from other foreign customers before? If they have, great, ask them to provide the following information*. If they haven’t, we would suggest you consider making the payment in USD, as CNY is a controlled currency and many banks in mainland China are not experienced in receiving foreign payments in CNY.
Due to new 2016 regulations, CNY payments to mainland China require the following:
- Beneficiary name and address
- Purpose of payment and corresponding mandatory payment code
If the purpose of payment does not fit within one of the payments codes, the ordering customer may be asked to provide that the payment complies with the rules and regulations of mainland China.
If the purpose of the payment is not provided, the Chinese beneficiary must obtain prior approval for the payment from the mainland authority.
- Step 3) Why is Amazon.cn market share so small in China?
Shopping habits are very different in China and Amazon has struggled to gain a foothold in a market already dominated by local players such as Alibaba’s TMall and JD.com’s B2C marketplaces. Consumers in Asia are far more wary of counterfeit products and want to be certain that the brands they are purchasing online are genuine, which has led to a lot of high GMV luxury brands launching their own e-commerce sites outside of online marketplaces, alongside a continued growing physical store presence.
Amazon China is currently striving to change that behaviour by becoming the primary destination for Western and other global brands online and they’re hoping that they can grow their market share by capitalising on the trust in the Amazon brand and the A-to-Z buyer guarantees that Amazon sellers offer. However, whilst Chinese online sellers know that Amazon is the primary destination for their export B2C sales, a large number of them bypass listing on the Chinese Amazon site in favour of other local marketplaces when it comes to sales to domestic consumers.
- Step 4) Where else can I sell?
TMall Global, JD Worldwide and Kaola are all popular marketplaces that cater to the domestic Chinese market. Alongside those, a rise in social media platforms offering e-commerce capabilities and features, such as WeChat Shops, allow their huge audience to seamlessly purchase products without having to leave the social media site, a boon for a country almost surgically attached to their smartphones. And if your brand can handle the lower exposure, launching your own standalone e-commerce site could offer you more ownership over the customer experience (and cut out commission costs per sale), providing you get the UX right and can handle longer loading speeds that turn off local shoppers used to snappy domestically-hosted websites.
- Step 5) What is the difference between CNH and CNY?
Currency in China can be confusing. Some call it RMB, short for renminbi, which is the equivalent of calling the pound ‘sterling’, while you may also hear people refer to it as the ‘yuan’. To complicate matters again there are three types of ‘yuan’; CNY (onshore i.e. mainland China), CNH (offshore and settled in Hong Kong) and CNT (offshore settled in Taipei).
CNY is not a freely traded currency and its value is set every day by the People’s Bank of China while CNH and CNT are freely tradeable and therefore subject to the rises and falls of market conditions. Their values mirror the onshore price because to all intents and purposes they are the same currencies subject to 98% of the same forces. Differences occur when liquidity conditions signify that one type of yuan is more in demand than the other.
How to Start Trading with China in 4 Easy Steps
- Find reputable suppliers and quality products.
- Understand why Amazon.cn market share so small.
- Learn where to sell.
- Understand the difference between CNH and CNY.
You can check the USDCNY and USDCNH rate here