Selling on Amazon and buying from Alibaba can be exciting but to really know how it all works and to get the best deals it’s best to visit China and see it for your self. This article is to help merchants and trader who plan to attend the Canton Fair in Guangzhou.
Tip 1 – Getting the best seat on your flight
It’s a long trip to China so there’s a well-known trick I use to arrive relaxed and to locate the best seat on a flight. Visit www.seatguru.com, choose your airline, date and flight number. The system will display a colour coded outline of every seat on the plan with commentary from other travellers showing where the best seats are located. Once you identify a good seat, try to reserve it online or through your agent. If the seat can’t be reserved beforehand, as is often the case with emergency exit seats, note down several good seat numbers and request one of them when you’re checking in at the airport.
Tip 2 – Getting Money
The official currency is the Yuan or RMB. Compared to the USA, Australia, UK, Germany and other first world countries where card is used to pay for most things, China is predominantly a cash based economy so carry RMB with you. USD, GBP and other currencies are generally not accepted when paying for taxis, buying food or paying for other goods and services. RMB can purchased in your home country before travelling or extracted from ATM’s in China. Look for ATMs at the airport.
Tip 3 – Getting to the hotel from the airport
The 3 methods are hotel chauffeur, airport taxi and bus.
- The chauffeur is going to be the most expensive option but is probably the best as no language skills are required and it’s more secure than a taxi or bus. If you’re lucky, the car will provide water and newspapers for your enjoyment. When you get through immigration and customs you’ll meet a driver holder a plaque with your name waiting to shuttle you away in luxury. Call the hotel ahead of time and ask them to send a car to pick you up.
- Taxi is less expensive but you’ll need to show the driver where to go in Chinese so a trick is to print out the address, in Chinese, and have it ready to show it to the driver. Payment is in in cash, RMB. No cards accepted. Be careful of hustlers offering rides. Never go with them and only go in the red and blue taxis.
- For those who want to live on the edge, a bus is the cheapest but it’s also the most complicated. They leave every 30 minutes for major hotels. You’ll need to somehow workout where the bus leaves from, buy a ticket and then know where to get off because it’s all in Chinese. Payment is in cash, RMB.
Tip 4 – How not to get lost
Keep hotel cards with you at all times as they show your address in Chinese. If you get lost or need to take a taxi back to your hotel, show the card and a helpful person will point where to go and a taxi will know where to take you. Most hotel cards have a street map printed on the back showing where the hotel is located.
Tip 5 – Mobile phones and getting a local number
One of the first things I do when arriving in China is to get a local SIM for my phone because it’s inexpensive and provides some credibility. These can be purchased in most 7/11 type convenience stores so ask the hotel concierge where you can buy a SIM. If you’re visiting factories or want manufacturers to call you then you’ll need a phone number. You don’t need to buy a monthly or annual plan to get a SIM in China and you can recharge your phone with little minute cards that you buy anywhere.
Tip 6 – Charging your phone
If you depend on your phone for messages and photos then it’s a good idea to take one of those high capacity battery packs to the fair because you won’t be able to easily find a wall socket anywhere. A technical problem with thousands of people congregated in the same place is that every phone is fighting for network access and this chews up the battery 2-3 times faster than normal.
Tip 7 – Using a translator
It’s important to find and use a translator, especially when visiting factories. Within the fair, most companies have sales-persons who speak English, French, German and Spanish but it’s rare that the owner of the company or the person in charge at the fair who speaks English. If you’re serious about a product then you’ll want to negotiate with the owner, not the sales person, as they have limited capacity to haggle price, value and features. For this you’ll want a translator to repeat what you say in Chinese and to interpret exactly what the provider is saying to you. Additionally, using a translator looks very professional.
Tip 8 – Getting a translator
I found translators outside the fair, near the old centre, close to the university. There will be hundreds of students from the college offering their services holding signs for the language they translate. It’s best to give them a short verbal test and ask a few questions as they have different levels of competency. Cost is about $50 per day. A separate pass will need to be organised for the translator on the day. If you really like the translator, then buy a multi-day pass but take it back at the end of each day as a common trick is to offer their services with a pass at a higher price the next day to another person. This can be a pain.
Tip 9 – Food
There are several food halls and café’s distributed around the fair. McDonalds, Papa John and Starbucks can be found but the queues at lunchtime are long. It’s all fast food so if you have special dietary requirements it’s best to plan ahead.
Tip 10 – Getting into the fair
To get into the fair you’ll need a pass and to get the pass you’ll need to apply on-line or apply in person at the fair. If it is issued before you arrive then it can be collected from various locations within Guangzhou or collected at the fair. The website has more details: http://www.cantonfair.org.cn/en/. If you apply for a pass on the day, then expect to queue for 1-3 hours while they make the pass on the spot.
Tip 11 – Business cards
You absolutely must have a business card to do business in China, period. They won’t talk to you in a booth without one or give you prices unless you give them a business card. Best to use a burner email account rather than your real email account as they’ll bombard you with messages and offers.
Tip 12 – Medicines
If you require special medication or prescription medicines then make sure you bring an adequate supply with you. Getting medicines is almost impossible. I made the mistake of running out of blood pressure pills and waisted a day searching for pharmacy that stocked a generic equivalent.
Tip 13 – Getting to the fair
Most hotels provide a free shuttle service that’ll take you from the hotel to the fair and back home again. Hundreds of buses park in the same location for the day so it’s important to clearly identify your bus, the pickup location and time or else you’ll be catching a taxi home or walking. All buses are signposted in Chinese so unless you speak the language, it can be confusing.
Tip 14 – Apparel
The fair is very big and it’s relatively warm to hot so wear something cool, professional looking and comfortable. Shoes should be comfortable and “worn in” because the last thing one needs are blisters from a new pair of shoes. For men, shorts are not generally accepted so long pants are best. A suit would be over-dressing and a tie isn’t needed. Jeans are ok.
Tip 15 – Being focussed
Plan for success. The way to get best results from the fair is to be focussed and to go in with a plan. With so much to see, it’s really easy to become distracted or overloaded so a plan will help focus the mind. The fair is organised into product types so if you’re buying toys for example then you’ll find all the toys in the same location. If you’re buying kitchen goods, then all the kitchen goods will be co-located for easy access and browsing. My approach is to identify a range of product types in my niche, e.g. vegetable juicers, and then visit just those stands.
A map of the fair is available online along with a database of products so a useful tip is to find the companies you’re interested in beforehand so that you know exactly where to find them. It’s useful to send them a quick email beforehand saying that you’ll be visiting and the products you’re interested in so that they can bring them to the fair just for you. Manufacturers have thousands of products and can’t bring everything because they’re limited for space so letting them know beforehand that you’re interested in a particular product will ensure they’ll be ready for you.
Tip 16 – Documenting prices, and products at the fair
When quoted a price, I like to write the price on the vendors’ business card and then take a photo of the item with the price so that when revising my photos later, I can remember who was selling the item and the price they quoted.
The price quoted you at the fair is just the opening salvo so expect to be able to negotiate a much lower price over time. I’ve found that the best way to negotiate price is by visiting their factory and seeing for yourself that everything is legit and that you’re not dealing with a middle-man.
Not all of the booths are factories and many are trading companies. I always want to negotiate with the factory and avoid trading companies for several reasons.
- Branding – I want to ‘private label’ products and customise so want to know what capacity the factory has to OEM and customise products for me.
- Quality – I want to manage quality and prefer to do this directly with the manufacturer rather than through an intermediary or third party.
- Agility is important. Dealing directly with a factory is faster.
- Cost – I want the product to be as inexpensive as possible so that I can maximise profits. Having a interposed entity inserted between myself and the factory means higher prices for me and less competitiveness when selling on Amazon.
The easiest way to determine whether a booth represents a factory or is a reseller is to look at the goods on display. Factories are focussed and will be selling a range of similar items. E.g. cookware. Trading companies will be selling a mix of different types of products. E.g. cookware with utensils with plates with glasses so paying attention to these details will provide clues as to who they are.
Another way is to ask them directly about a specific product “did you make this”? Don’t assume they will be up front so it pays to look for other clues to validate what they tell you.
Tip 17 – Catalogues
Just about every booth has a colour catalogue to give you. Be judicious or else you’ll end up with dozens of kilos of catalogues to ship home. I take a fairly large wheelie bag that rolls behind me with adjustable length handle to the fair just for catalogues. Bag quality is important. Bring a well-built bag with durable wheels so that it doesn’t break while travelling long distances with you each day.
Tip 18 – Visiting factories
If you want to negotiate the best price and see how products are manufactured then it’s best to organise to visit the vendors’ factory. The Chinese are very hospitable and proud of their accomplishments so expect to be looked after and taken to dinner. They know that you’ve spent thousands of dollars and flown a long way to visit them and they know you’re serious so they’ll look after you. Most factories will send a car to bring you to the factory and to take you home. If they don’t offer this service, consider it unusual.
Tip 19 – Negotiating price
The position of power from which to begin negotiating price is when you’ve visited the factory, inspected the products, met the management, read the company prospectus and have built a relationship. The ‘take it or leave it’ method we use in western countries doesn’t see to work as well in China.
In every transaction, all parties agree on price, but they never agree on value. This becomes patently true in China when negotiating because the Chinese will quickly lock in a price, which is to your advantage, because it lets you then negotiate ‘add-ons’ such as luxury packaging, quality, MOQ, lead times and black label branding without changing the price. The trick is to negotiate a reasonably good price knowing that once it’s locked in, you can negotiate everything else without changing the price. By contrast, in western countries we like to know all the requirements before quoting but in China, it’s the exact opposite most of the time.
Another strategy that can be used to get a much lower price is though understanding how Chinese manufacturers price projects. The process is a bit advanced but it’s worth understanding because if you learn this tip and are successful with it, you can get a 30% discount, or more over the quoted price. A little known fact is that most factories pad products with a 200% margin so by reducing their margin to 100% they’ll still be happy. Incredible but true so here’s what you need to do to save lots of money.
- Negotiate a price that you are initially satisfied with, a price that you’d accept even if they didn’t give you a better price. As part of the terms, the manufacturer will request a 30% deposit which actually represents their ‘break even’ price or ‘cost price’. The Chinese are very astute business people and do not want to take a loss on anything so by requesting a deposit that covers their cost, they carry no risk and can make a profit anyway through liquidation should you not pay the final 70%. This is very important to understand as you’ll see in the next step.g. if the order is for $10,000 and the deposit is 30% then the break-even price for the manufacturer is $3,000. The remaining $7000 is their profit.
Now, make a lower offer that is less than the quoted price, say half of their profit margin, but keep the deposit amount they initially requested the same ($3,000). By doing this, you’re letting them cover their costs and they won’t make a loss should you bail later. They are accepting a smaller profit margin (100%) in exchange for your business. Many factories will accept this as they need to pay back government loans and show export activity on their annual reports.
e.g. for step 2, offer to pay the $3,000 deposit but bid down to $6,500 for the entire deliverable, a $3,500 potential saving on the order.
Tip 20 – Trademarks and patents
If you try to import a trademarked or patented product in to the USA or other countries without a permit from the intellectual property owner then your import could be denied entry (e.g. Louis Vuitton bags). Chinese manufacturers are becoming more aware of the need to adhere to international intellectual property laws but it pays to check patents and brand names for products when importing into the USA. I like to use TESS to verify the ownership of a USA trademark. The UK, Australia and other countries have their own IP organisations. You can find TESS here: http://www.uspto.gov/trademark