Many readers have asked for my thoughts on a couple of other important aspects of importing goods and products from China namely, how to ensure and maintaining the product quality of the products you order, and what are the major cultural differences when dealing with Chinese manufacturers and suppliers. In this post, I’ll look at the product quality issue.

Ensuring Product Quality

Most Chinese manufacturers and suppliers make a tremendous amount of effort to make sure their products are of a high quality. This ensures that they get repeat business and great customer reviews and high ratings on B2B online marketplaces.

However, sometimes problems do occur. Here are a few tips to make sure that what you ordered is the quality that you expect and that quality is maintained.

• Don’t get obsessed with the cheapest prices. Often it is a more cost effective option to go with a product that is a little more expensive which is of a higher and verifiable quality.
• Ask your potential supplier for samples. Even if you have to pay a small fee, this may be a preferable option to making an order for goods of unknown quality.
• If the sample sent to you is not to your liking, keep persisting until you get the ‘perfect’ sample. By this method you make sure your product specifications are exactly what you want, and it also allows you to define your tolerances and limits. Remember that good quality is also in the suppliers’ interest so this procedure is of mutual benefit.
• If a Chinese supplier or manufacturer won’t work with you to make sure that the quality of the product is up to the standard you want, then get another supplier.
• Don’t put all your eggs in one basket! That is, don’t rely on one supplier alone and spread your orders over a number of them. Then if there is a problem, there will be a minimum impact on your business.
• Make the minimum quantity purchase order from one supplier. Although a vendor may be making a great, ‘too hard to refuse’ offer on product, it’s often best to first not rush into a large order straight away. This also helps with your inventory storage and control.
• Always perform quality control on your shipment when first received and before you sell the products to your customers for obvious reasons.
• If your order is particularly large or you are spending a lot of money, you should consider using a China-based reliable quality control and inspection service which can check the quality of your products before they are shipped, or perform an audit on your preferred supplier.
• Lastly, if you’re serious about importing from China business and have the time and means, visit your supplier (or a number of them) in China!

In my next post, I’ll share insights on doing business with Chinese suppliers in relation to understanding some major cultural differences.

In future posts I am going to give you some further tips but before that I want to elaborate on one of the issues I previously raised as it generated some interest from readers. I mentioned that under very few circumstances should you pay the whole or a substantial part of the purchase price up front as you will have a very hard time getting your money back if your product is delivered late (or not at all!), or the product quality is substandard. We don’t encourage this practice at www.dhgate.com, if fact we specifically discourage it by using an escrow service as part of our Buyer Protection Plan. We also actively warn potential buyers not to work outside the escrow system as it offers them no protection.

Escrow Protection System

Some readers have asked how this escrow system works so I’ll briefly set out the basics. The escrow service is a licensed buyer protection system whereby DHgate receives and holds the buyer’s payment until the transaction is fully and successfully completed. The steps are:

• After the buyer has placed a product order on www.dhgate.com, they send the payment directly to DHgate and not to the supplier.
• Once payment has been received, DHgate then informs the seller to send the product directly to the buyer.
• The buyer can track the delivery process via the DHgate website. Once the buyer has received the product and checked that it is all correct and suitable, they confirm this via www.dhgate.com.
• Only when DHgate receives the confirmation from a satisfied buyer will we release the payment to the seller.

The system works well in practice and is well-received by our overseas buyers. The other aspect of the www.dhgate.com buyer protection service is our dispute resolution process which works in tandem with the escrow system.

Dispute Resolution

At DHgate we recommend the following process to deal with disputes:

• Often the easiest way is to open up a line of communication with the seller which usually clears up any misunderstandings or miscommunication.
• If you have a dispute, you can use the DHgate Dispute Process to open, manage and track the dispute.
• By using this process, then this guarantees that your money being held in the Escrow system will not be released until the dispute is satisfactorily settled.
• If the dispute cannot be settled with the buyer directly, then you can refer the dispute to the DHgate Dispute Resolution Center.
• Once referred, DHgate will immediately investigate the dispute by asking both parties to provide all relevant evidence.

In my next post, I’ll give some insight on how to ensure and maintain product quality and standards, and some of the major cultural differences in doing business with Chinese suppliers.

In short, we have been trying really hard to make our brand promise equal our user experience.

Of all our activities, no where has taught us more about our customers, and allowed us to understand the way they work, their personalities, their issues and their preferences more than our social media presence.

We host competitions, offer special discounts, arrange giveaways, deal with questions, provide reviews, etc in a multimedia format that get’s our buyers talking. They talk because we listen and – crucially – we act.

Our promise equals our customers experience.

We have a way to go in making improvements to our business, but we are letting our customers know that we are working for them. And they appreciate it.  Transparency is key and 2.0 is the perfect channel to keep all informed and ask for feedback.

Have you been using social media to connect with your customers? If so, what approach do you find works?

visit www.facebook.com/dhgate to see what we’ve been up to lately.

As part of this process, I hear many success stories of overseas customers, more than often from the US, who have successfully started a new business through importing product from China or have significantly reduced their costs or increased their product range via this method. I am also often asked about the best ways of starting to import from China and what pitfalls to look out for.

Some of the emails I receive from DHgate customers in the US give me examples of their initial experience in importing from China, and often it was not initially that successful. Usually this is as a result of choosing the wrong supplier, not doing your homework and rushing into product order and underestimating the nature of international trade. I want to share it with you over the next couple of posts some of my thoughts and tips to make sure your experience is successful.

Choose Your Supplier Well

One of the most fundamental errors is to pick a supplier without a thorough review process. Check whether they are the actual manufacturer or merely a wholesaler as you always want to deal directly with the source. Check the supplier’s website to see whether it’s in English which is always a sign that they do business with foreign companies. Ask the supplier for testimonials and references, and then check them up. Use a China-based verification company if the size of the order warrants it, or read customer reviews. For example on my site, www.dhgate.com, we have a number of verification methods like a 3 tier rating system and a Feedback scores from other buyers.

Don’t Rush; There’s Plenty of Time

Next, don’t rush into anything. Although there is pressure from both sides to get it done as soon as possible, it’s best to give yourself a long lead time to do proper research, complete perfect product specifications and shop around. The product will always be there, and it maybe cheaper next month or with a different supplier.

Don’t Underestimate Time and Costs

Although international delivery these days is very efficient even for smaller product orders, it’s probably wise to always work on the basis that the delivery will be late, so factor it into your plans. Also, it is probable that the landed costs will be higher than quoted or you have estimated. Eager buyers have a tendency to underestimate the time and costs of importing from China.

Don’t Pay Purchase Price Upfront

Never pay the purchase price or a substantial part of it upfront. If you do this, then it will be highly unlikely you will get your money back if there’s a problem with the quality of the products or there’s a severe delay in the shipping. If a supplier demands you do this, it’s probably best to find a new supplier. At www.dhgate.com, we use an escrow payment system where you don’t pay the supplier until you’ve received your shipment and are fully satisfied with it.

In my next post, I will give some more tips on how to deal with Chinese suppliers and basics on how to import from China especially in relation to understanding cultural differences, maintain product quality and dispute resolution.

Back in March of this year I somewhat hesitantly predicted that there would be no significant movement in the value of the Chinese currency (RMB) as against its major trading currencies like the US dollar and the Euro in the short term. This is still a hot topic of discussion and contention for many international and Chinese clients of my company, www.dhgate.com, as it has a direct impact on the costs of sourcing products from China.

Currently, the Chinese RMB is informally ‘pegged’ to the US dollar at a rate of about 6.8 and this undervaluation was arguably causing trade imbalances between the US and China. The argument goes something like this: while it was good for US importers and Chinese exporters to have the RMB at an artificially low level, at the same time it made products imported from the US into China artificially high thereby hurting US companies

In the past few months it was thought that there was a consensus amongst Chinese policy makers that the peg would be broken and the Chinese RMB would be allowed to gradually rise about 3-5% thereby cushioning the impact on the Chinese export sector. This, of course, was on the basis that the world economy was steadily recovering from the Financial Crisis and there were no other major financial crises in the world.

Well what a difference a couple of months makes!

The dramatic European debt crisis as a result of the Greek bailout and the plunging value of the Euro has meant that any plans for a slight rise in the RMB as against the US dollar are now on hold…again.

The Euro has plunged to its lowest level against the RMB in almost a decade. It has fallen 14.5% in the past 4 months alone and the future is uncertain. The dramatic slump has prompted Chinese authorities to publically warn that China’s exports to Europe are threatened. Indeed, there are a number of anecdotal reports from clients of my company that European importers are cancelling or significantly reducing product orders. This appears to be by virtue of an inability of European companies to obtain normal trade finance because of the severity of the debt crisis together with heavily reduced purchasing power of the Euro.

A number of Chinese domestic economic issues also cloud the picture. The Chinese Stock Exchange has fallen sharply in recent times. This is mainly due to the Chinese government’s attempt to restrict the availability of credit in order to prevent the real estate property bubble from bursting.

All of these factors mean that there will be no short term revaluation of the RMB as against the US dollar. There are important trade and economic bilateral talks next week between the US and China and it appears that the revaluation issue, always a perennial topic in these trade talks, has been taken off the table. The US Government has recently stated that it intends to press China on other trade issues like market access for US companies and increasing the value of US exports to China. The US has announced that it wants to double US exports to China over the next decade.

What does all this mean for US SME importers of Chinese products? I believe that the situation presents great opportunities as the prices of Chinese products available for export will remain low for the foreseeable future and there appears now to be no likelihood of major costs increases as a result of exchange rate issues. From my discussions with my Chinese manufacturing clients, there is now a lot of opportunity to lock in these prices for the future.

More importantly, because of the problems in the European import market, many Chinese suppliers and manufacturers will now shift their focus to other markets, particularly the US. This means that there is the ability to achieve much lower prices from Chinese exporters because of the excess product available. It maybe that there has never been a better time for US SME companies to commence or increase sourcing product from China.

The European financial crisis has sent shockwaves through the global economy and has a number of ramifications for the international trading sector, especially souring product from China via ecommerce platforms. However, like in all things, there is a silver lining for many companies, particularly from the US, who can take advantage of the situation.

Back in March of this year I somewhat hesitantly predicted that there would be no significant movement in the value of the Chinese currency (RMB) as against its major trading currencies like the US dollar and the Euro in the short term. This is still a hot topic of discussion and contention for many international and Chinese clients of my company, www.dhgate.com, as it has a direct impact on the costs of sourcing products from China.

Currently, the Chinese RMB is informally ‘pegged’ to the US dollar at a rate of about 6.8 and this undervaluation was arguably causing trade imbalances between the US and China. The argument goes something like this: while it was good for US importers and Chinese exporters to have the RMB at an artificially low level, at the same time it made products imported from the US into China artificially high thereby hurting US companies

In the past few months it was thought that there was a consensus amongst Chinese policy makers that the peg would be broken and the Chinese RMB would be allowed to gradually rise about 3-5% thereby cushioning the impact on the Chinese export sector. This, of course, was on the basis that the world economy was steadily recovering from the Financial Crisis and there were no other major financial crises in the world.

Well what a difference a couple of months makes!

The dramatic European debt crisis as a result of the Greek bailout and the plunging value of the Euro has meant that any plans for a slight rise in the RMB as against the US dollar are now on hold…again.

The Euro has plunged to its lowest level against the RMB in almost a decade. It has fallen 14.5% in the past 4 months alone and the future is uncertain. The dramatic slump has prompted Chinese authorities to publically warn that China’s exports to Europe are threatened. Indeed, there are a number of anecdotal reports from clients of my company that European importers are cancelling or significantly reducing product orders. This appears to be by virtue of an inability of European companies to obtain normal trade finance because of the severity of the debt crisis together with heavily reduced purchasing power of the Euro.

A number of Chinese domestic economic issues also cloud the picture. The Chinese Stock Exchange has fallen sharply in recent times. This is mainly due to the Chinese government’s attempt to restrict the availability of credit in order to prevent the real estate property bubble from bursting.

All of these factors mean that there will be no short term revaluation of the RMB as against the US dollar. There are important trade and economic bilateral talks next week between the US and China and it appears that the revaluation issue, always a perennial topic in these trade talks, has been taken off the table. The US Government has recently stated that it intends to press China on other trade issues like market access for US companies and increasing the value of US exports to China. The US has announced that it wants to double US exports to China over the next decade.

What does all this mean for US SME importers of Chinese products? I believe that the situation presents great opportunities as the prices of Chinese products available for export will remain low for the foreseeable future and there appears now to be no likelihood of major costs increases as a result of exchange rate issues. From my discussions with my Chinese manufacturing clients, there is now a lot of opportunity to lock in these prices for the future.

More importantly, because of the problems in the European import market, many Chinese suppliers and manufacturers will now shift their focus to other markets, particularly the US. This means that there is the ability to achieve much lower prices from Chinese exporters because of the excess product available. It maybe that there has never been a better time for US SME companies to commence or increase sourcing product from China.

Sometimes, when starting a new business, certain processes can be made to feel more complicated than they need to be. When it comes to getting the ball rolling, one of the first steps is finding out the particulars about company registration. I’ve included here an article from www.IntroducingSucess. com to bring a bit of clarity to the situation!

Structures and Regulations

Planning is critical to successfully starting and building a business. It is important to consider a variety of factors when choosing the best form of business ownership or structure. The choice you make can have an impact on multiple aspects of your business, including taxes, liability, ownership succession, and others.

Sole Proprietorship

A sole proprietorship is a simple and informal structure that is inexpensive to form. Usually owned by a single person or family members, the owner operates the business, is personally liable for all business debts, can freely transfer all or part of the business, and can report profit or loss on personal income tax returns.

Limited Liability Company (LLC)

An LLC combines the limited personal liability feature of a corporation with the tax advantages of a partnership and sole proprietorship. Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation.

General Partnership

Partnerships are inexpensive to form, simply requiring an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss, and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay taxes, but must file an informational return; individual partners report their share of profits and losses on their personal return.

Resources

http://www.business.gov

The official business link to the US government, offering regulations state-by-state and tips on loans & grants, registering & finances, and a link to the small business community

http://www.business.gov/states

Choose your state of business to find links to State regulations and local governments

http://www.sba.gov

Small Business Administration site offering programs and services to help you start, grow and succeed including guidance for compliance and financing by locality

http://www.sba.gov/smallbusinessplanner/start/chooseastructure/index.html

SBA site helps you determine which company structure is right for you

http://smallbusiness.findlaw.com/business-laws-regulations/business-regulations

A directory of state and federal regulations, with links to more specific resource sites

This is part of the latest ‘mantra’ of the ecommerce industry: ‘frictionless ecommerce’ which involves giving convenience, flexibility and options to a consumer.

The idea of moving money from one person to another, both quickly and cheaply is a relatively new concept. For decades, the banks had a stranglehold on the process. Checks took up to a week to clear, and transferring money from one bank account to another took days, and fees were levied at every step. The introduction of credit cards and EFTPOS made it easier and quicker but provided the credit card companies and banks more opportunities to deduct fees.

There’s no doubt that this will be one of the more interesting areas of development in the ecommerce industry in the future. However, I believe that a ‘frictionless ecommerce’ payments system is still a long way off.

In the current international product sourcing business world, the reliance on safe, cost-effective and seamless payment systems is still of prime importance to buyers particularly those who are sourcing goods from China.

As I discussed in my last post, although China is enjoying exponential growth in its ecommerce sector and the credit card industry is on the verge of major expansion over the next few years, the country is still a cash-based society. There is also a lingering distrust of anything that doesn’t involve cash.

This is particularly so in the millions of small to medium size businesses that power the Chinese private sector. Many SME’s do not have the ecommerce platforms or sophisticated banking systems to handle domestic cyber payments. The same is true for international transactions. A US buyer can’t simply send or wire money to a Chinese supplier if the supplier doesn’t have a foreign currency account held at a Chinese bank. Even if it does, the supplier requires approval from the Government to convert that payment into RMB that can be transferred to its local account. In many cases, such complexity and cost is beyond the reach of most Chinese suppliers.

Even in the area of direct sourcing of Chinese products, the available payment options like T/T or Letter of Credit become problematic because they are simply too expensive for smaller companies and purchase orders.

The ability to simplify the payment options and systems between Chinese suppliers and overseas buyers was one of the major driving forces of the establishment of the B2B intermediary websites like the one I established, www.dhgate.com. Rather than have to make a payment directly to a Chinese supplier which may have limited, unsafe and expensive payment options,( if any at all), sites like mine provide a range of payment options which bridge the gap between overseas and Chinese banking systems and make the process seamless, transparent, cost-effective and safe.

For example, www.dhgate.com currently provides the following payment options:

1. Pay Pal, the world’s leading and most reliable online payments service. Pay Pal have recently announced a partnership with ChinaUnionPay, China’s biggest inter-bank payment and settlement system which will enable more and more Chinese companies to participate in international ecommerce transactions. This is the most popular and preferred method as you don’t need to use your credit card online, payments are traceable and Pay Pal offers its Buyer Protection service.
2. Credits cards like American Express Visa, MasterCard and Discover card.
3. Real time bank transfers.
4. Offline payments like Western Union and other bank transfers.

The difference between my B2B site and others is that we recommend overseas buyers do not deal directly with a Chinese supplier but pay any amounts via the above options directly to www.dhgate.com. The site also offers overseas buyers an Escrow Service which is a licensed buyer protection service. Under this service, DHgate receives and holds the buyer’s payment until the transaction is successfully completed. Only after the buyer approves the products received will DHgate release the payment to the Chinese supplier.

This highly innovative service has been very successful with overseas buyers with numerous cases of money being returned to overseas buyers who were not completely satisfied with the quality or standard of what they had purchased. In fact, it has been so successful that it has now been copied by other B2B sourcing sites and has become the standard for Chinese product sourcing sites.

In recent posts, I have been discussing payment systems in China. Before I continue on that in my next post, today, I would like to talk about Alibaba’s recently developed hacker-technology and how this relates to another important aspect of the business environment here: the competitive situation in China.

One of the key challenges facing China is moving away from low-quality imitation of products and services to more innovative, high-quality equivalents. In fact, this is a key area of investment for my company, DHgate, as we development support and education systems for Chinese manufacturers. Previously, Chinese businesses could create value by lowering production overheads; however, in the twenty-first century, being ‘cheap’ is not enough. I believe the goal should be for Chinese businesses to create value in a totally different way: by innovating beyond the competition.

In recent years, what we have seen is the emergence of a vanguard of dynamic new Chinese businesses that are capable of this. Through DHgate.com, I have found that fostering this attitude internally has allowed us to achieve rapid expansion in international markets. In the West, audiences respond to originality and not, as has been the case in China, to replication.

This has been at the forefront of my mind recently, as one of our key competitors Alibaba, developed and introduced a mechanism which allows its suppliers to access rival backend system and pull content over to their site. This competitive imitation is the hallmark of the old way of doing business in China, and it is a worrying sign that a recognized company such as Alibaba has resorted to these tactics. This is not the environment in which Chinese business will thrive and become true international market-share contenders.

The philosophy we espouse at my own company, DHgate, is that to be the best you have to be able to innovate beyond the competition. First-mover advantage has proven to be key in online industries, but by the time a new feature has been widely replicated, a truly innovative company will already have developed another improvement.

The competitive situation is improving in China. Government regulations are slowly being rolled back, industries are becoming more diverse and dynamic, and a growing number of Chinese businesses have shown they have what it takes to be global leaders in their field.

China’s future lies in developing high-tech, fast-paced, competitive new industries, and I believe fostering a inventive business atmosphere, not competitive imitation, is the quickest and way to get there.

Read highlights below or the full article here

...But the indicators of ecommerce’s problems are not so obvious as long queues or a tired looking store front are to a physical high street retailer.

For online retailers, store layout means optimising the position of their most popular and most profitable products; check-out queues equate to the ease and speed of completing an order and the time from order to delivery. For the friendliness of the affable village butcher, online retailers must think about their after sales care and the tone and tailoring of their outreach.

Online, a company with a compelling and competitive service has an almost infinite catchment area, and it is often the big names who are investing most in understanding the science of effective retail and will prevail in the land grab.

So to avoid going the way of local stores, squeezed out by the major players – the supermarkets of the physical world – online retailers of all sizes must monitor and understand the importance of several key metrics.

First comes the number of visits and orders, and the source of traffic. This allows more sophisticated analysis than physical in-store footfall as it not only reveals total consumer number but also how they are finding the site – whether driven by direct marketing, banner ads, affiliates, search or other means…

And finally, the most obvious KPI for businesses to monitor – customer satisfaction. Many say they do so but their methodology is often based on the wrong metrics.

Businesses need a holistic view of end-to-end customer service and the efficiency of the website and back-end in delivering what those consumers want, when they want it…

It’s also highly relevant to US retailers and wholesalers who are currently sourcing their products from China, and also to those who are planning to do it in the future, because as the Chinese ecommerce market gets more sophisticated, secure and multi-faceted, the ease of doing business with Chinese suppliers becomes less of a headache, particularly for small to medium businesses and new players.

The first item was that MasterCard was entering the booming online marketplace by launching its own web shopping mall called’ MasterCard Market Place’. Clearly the move is an attempt by the company to boost its revenue in the face of cutthroat competition from its rivals like Visa and American Express and also form alternative, cheaper and newer (and hence more attractive in many ways) ecommerce payment systems like PayPal. I think this is the first time a giant global credit card company like Visa or American Express has entered this market in a substantial way. Whether consumers will flock to a shopping site run by a payment systems company rather than a retailer or a B2B intermediary site like my own company, www.dhgate.com, remains to be seen.

The second item was a recent report that for the first time in living memory US consumer credit debt fell for the 13^th month in a row. Clearly as a result of the recession and faltering labor market, Americans are curtailing their addiction to credit card and other consumer debt…for the moment. Maybe the days of credit-fuelled spending in the US are over. We will see.

‘Plastic money’ was invented in the US and its rise together with the benefits to the US economy, most notably for the banks, finance houses and retailers, and the resulting personal debt mountain and heartache for consumers has been well-documented. From a Chinese point of view, though, the situation could not be more different.

Credit cards and other forms of consumer credit are a relatively new concept in China. China is still a cash society. It is not unusual to see an ATM (also a new relatively new concept) user   withdrawing thousands of RMB at increments of 2000rmb ($285) per transaction to pay their monthly rent. The highest denomination is a lowly 100rmb, about $14. Consumers will often make major purchases like cars, high-end electronic goods and even apartments with suitcases and bags of cash, literally.

The Chinese are generally fiscally very conservative. They are the greatest savers in the world. Although estimates are difficult, it is thought that the Chinese save between 30-50% of their disposable whereas the US rate is close to 0%. Also Chinese are much less leveraged than their counterparts in emerging and developed countries. Total consumer debt as a percentage of disposable income is estimated to be about 30% compared with 94% in the US.

The situation is, however, changing dramatically. As the Chinese economy booms and the level of disposable income of its people has increased, the rise in popularity of credit cards, online ecommerce payment systems and other forms of personal consumer credit has exponentially increased. I’ve talked in previous columns about the extraordinary rise in online shopping. This is largely been brought about by the rise of the credit card and other ecommerce payment options.

China is encouraging non-cash payment options, and the banks are aggressively marketing these avenues to boost revenue. Although the area is still relatively small, (for example, only 5% of Chinese have a credit card compared to 60% in the US), the industry is expected to boom in the future. According to a recent report by McKinsey & Co, China has issued only about 50 million credit cards. By 2013, it is estimated that the figure will surpass 300 million. The increasing comfort and ease in using non-cash payment options means that there will be increasing innovation and sophistication, particularly for online buying and selling and the B2B market.

My own company, www.dhgate.com, has been at the forefront in the B2B field through our innovative partnership with one of the leaders in the online payments market, PayPal which has give our overseas clients and Chinese suppliers a safe, reliable and fast payment system.

Which leads me to my third item of interest: PayPal have recently announced a partnership with China UnionPay, the national bankcard association of China which has to date issued over 2 billion ATM, debit and credit cards. The partnership means that China UnionPay card holders can use PayPal to shop online domestically and internationally. I believe it has the potential to position PayPal and its Chinese partners like my company as the number one online payment option in the future.

In my next post I will talk more about how US small to medium online retailers and wholesalers can now take advantage of the using innovative, safe and reliable B2B online payment systems.