Post-Covid Sourcing from China
What happened with Chinese suppliers in the wake of Covid-19?
I was super scared when Covid 19, a form of coronavirus broke out in China in early 2020, as a sourcing agent company in China I was projecting the product sourcing business in the year to come to be doomed.
All the way to September, I made no personal investment plans for any assets including both Bitcoins and stocks(including Tesla, though in May 2020, I bought the book for the legend behind it).
In hindsight, I missed too many utterly lucrative opportunities.
What surprised me more is the business turned out insanely great in 2020, especially for most of the e-Commerce companies in China. 3 of my personal friends bought their first apartment in Shenzhen exactly in this same year.
Only in another hindsight can we understand it should not come as a surprise at all.
You simply need to be aware of a completely locked down world outside China that’s thirsty for pandemic prevention supplies and myriads of any possible other products, and on the other side, in sharp contrast to it, a country named China that quickly recovered from the devastating hit after implementing 2-3 months of real sense of lockdown ever since the Chinese new year.
There’s no other country that could withstand being advised to avoid visiting any families and friends, wear a mask everywhere one goes, stay indoors all the time in the most important family occasion of the year.
Only China can, it’s not because of the laws, it’s because people simply follow science and common sense. The coronavirus is a dangerous respiratory disease, it has to be contained from further spreading, everything else is secondary.
In the meantime, numerous Chinese factories (including BYD, a peer to Tesla in the e-car industry) regardless of their industrial background were audacious enough to open sooner than they dared and steeped themselves in producing surgical or KN95 masks. Not only that, the Chinese government green-lighted their operations and lubricated their registration in producing medical supplies. Behind the “heroic” factories was a deadly shortage of mask supplies nationwide and the absolute exponential profitability of the business.
Many of the Amazon sellers in China(probably across the globe) found their inventory cleared up at an unseen fast speed because of the short supply of every possible product: nearly every factory has no ability or plans to reopen. If they needed expensive PPC ads in the past, in the first half of 2020 they didn’t, all they needed is to have stock in the FBA warehouses. Especially for masks, some sellers created the listing of masks and made 10-100 times turnover than they did the previous year, some were clever and contained enough(or satisfied enough) to stop the listing because really soon the Amazon office decided to limit the listing to very few reputable or authorized vendors.
However, not everyone had a blast, the other traditional types of businesses suffered heavy blows in the pandemic because of the factories unable to open or their customers unable to practice business in brick-and-mortar shops.
However, after March, almost all the Chinese factories have resumed and the 2nd half-year of the business turned out generally good for almost each and every one.
What should we expect in sourcing from post-Covid China?
1.A sourcing trip to mainland China is almost impossible.
Aside from having to pay for the unbelievably expensive flight tickets, anyone coming to China regardless of nationalities would have to undergo 2 weeks of quarantine in a Chinese hotel and probably another 2 weeks of extended quarantine in the community.
2.There’s almost no one Chinese supplier under lockdown unless they have really bad business.
Occasionally clusters of Covid19 occur in isolated regions in China such as Hebei, a northern province close to Beijing. But up to this day, there are no “high-risk” provinces or cities in the entire mainland, China. So if your suppliers claim they are in lockdown, they may be lying or just giving excuses for delayed delivery of any designated task.
But some suppliers or even factories may get really affected because their big customers cannot practice their same scale of business as before the pandemic. They are likely to take a few more weeks of holiday for the Chinese new year or even stay off for quite a few months or simply close down completely.
3.The price may be increasing and the product delivery may be delayed.
Uncertainties loom large in the access to various types of raw materials, for example, copper increased in price exponentially just days after the suppliers resume from the CNY (Chinese New Year) holiday.
Moreover, some factories may resume office later than expected also due to quarantine reasons because they worry if lockdown would be imposed again after they go back to the workplaces. However, at the time of writing this blog, this concern can be gone as in March pretty much all suppliers prove to be well conditioned to open up.
Another possibility is it is getting harder to hire workers in major migrant cities like Shenzhen because, under the shadow of Covid in the whole year of 2020, the cities see an exodus of workers back to their hometowns because the companies are experiencing bad business and have to cut their salaries or discharge them.
While, on the other hand, some suppliers may tweak the fact a little bit and make a lie about some stably acquired materials to increase the price. In that case, you need to do your due diligence really well and make sure you ask about the pricing conditions among multiple suppliers in order to stay up to date.
4. Shipping could be frustrating, missing shipments are also expected.
Due to the escalated quarantine regulations, some shipments may experience unexpected delays, for example, in the last few months approaching the Chinese New Year, containers were highly difficult to book and increased a lot in price because the China customs don’t allow containers being carried back to China after unloading in the USA.
Out of China, the uncertainties may be even larger because of the weak response to the pandemic, unlike in China most courier companies stayed on the front line to make sure the medical supplies and daily necessities are circulated timely, the logistic companies in any other country may be more likely to have fewer workers and less due management in place.
The worst-case could be the shipments got completely lost. I personally experience 1 lost shipment in Korea on the way to the USA, 1 missing shipment in Italy on the way to an inland country San Marino, another shipment with just 1 carton missing in Puerto Rico. The experiences were a nightmare but we cannot do anything about it other than covering the losses for the customers or sending a new shipment.
How should you adapt to sourcing from China in the post-Covid era?
1. Hire a third party to do the due diligence of your suppliers.
With tracked records, traditionally due diligence of your suppliers can be done by using specialized 3rd party inspection agencies such as UL, SGS who would carry out the inspection with high precision: your supplier’s business type(trading company or manufacturer), capabilities(staff, machinery), business background, etc.
If the agencies form and express their view on a supplier based on a corporate premise, a sourcing agent or sourcing company helps you to realize the same purpose with more of a personal touch: a handshake, a coffee or tea, a cigarette, a gesture of gift-giving, a cordial talk and a walk around the supplier’s workplace in the company of your point of contact with the supplier. Therefore, a sourcing agent if not better is a good supplement to the traditional type of agency inspection, has the potential to represent your product sourcing interests in the longer term. Imagine the difference between sending a random McDonald staff or someone named Mc Donald to deliver the burgers to a guest in continuous years, which person between the two would be better remembered to the guest?
2. Use trade assurance to deal with unfamiliar suppliers.
Trade assurance for the transactions with the Chinese suppliers can be achieved by using trade assurance services in renowned B2B platforms such as Alibaba or PayPal, the latter gives the buyer protection within 6 months after the action of purchase with the only downside of high surcharges of 4.4%, not to mention the extra costs for the suppliers to import the money to the Chinese mainland.
However, it’s highly advisable to use both of these tools for beginner importers or whoever prefers to sourcing from a “platform” than a supplier. Additionally, PayPal would be highly recommended for another reason, that is, the relatively much cheaper handling charges as compared with banks when it comes to small funds for example, product samples.
In other cases, of course, you could process the transactions using bank transfer or TT as the suppliers usually term the means, if you have high confidence over the suppliers or if you have done business with the suppliers for a long enough period of time.
3. Keep seeking safer shipping methods or buy insurance.
As the previous chapter suggested, the post-Covid shipping condition has become much more unstable or even risky, both the international buyers and the Chinese suppliers have to regularly seek more reliable shipping methods.
For a fairly long period of time, in order to bypass various types of hurdles such as concerns for batteries, liquid, powder, human health, inadequate certification, the cutthroat competitive shipping market comes up with every possible measure to export goods to the destination countries via Hong Kong, a place mainland China has given much fewer restrictions in processing any shipments. However, with the all-time highly unstable political and pandemic situations, their tactics could go wrong from time to time. That helps to explain to the majority of the importers, why I am ordering from mainland China but the tracking number suggests the shipment is picked up in Hong Kong?
But how can we make sure we diversify our shipping methods in order to avoid all the risks in one basket? Keep looking for more shipping agents, or get a shipping or sourcing agent that keeps looking for diverse shipping channels to send your goods.
Another plus is buying insurance for your shipments whenever it’s a high ticket shipment as a whole, though in the case of mishaps the compensation is nonetheless difficult to materialize, it gives us more peace of mind than not having it at all times.
4. Value your old suppliers more than before
If you are not new to importing from China and already had quite a few successful suppliers, congratulations! You can feel more confident that you are in good hands and your supply chain is a more dependable and stable one.
Send greetings, wishes, or even gifts to your suppliers, in other words, reliable business partners, to foster a sense of friendship and gratitude. After the global pandemic, it has never been more difficult for anyone to travel in and out of China, so if you already have a Chinese supplier that treats you like a friend, treat him like your family, if you have a Chinese supplier that’s like a family member, revisit your relationship together and cherish it even more.
Whenever you realize the relationship is not a zero-sum game, you and your supplier actually are on the same boats, you should help each other not gamble with each other, you may not be getting the cheapest price in each and every import, but your supply chain is more solid than every other buyer that has to develop suppliers from scratch.
5. Engage a sourcing agent in China for your business
Engaging a sourcing agent after the Covid 19 might turn out to make a difference in your supply chain if in the past you simply take it the same as a trading company or a middleman.
A tested reliable sourcing agent in China can help do the due diligence of your suppliers, pay the factories in local currencies, consolidate and ship all the different products in one single shipment, in all, covering all your sourcing processes like yourself are present in China.
You can narrow down your options of sourcing agents based on their English communication skills, geographical locations, export setup, industries of expertise, business background, commercial acumen, business values, and visions, among others.
6. Use video or voice conference calls more to assist your communication
The household video conferencing app Zoom didn’t just rise to the peak in the stock market, but also in the very way office workers practice their daily coordination, more and more companies have their staff working from home or anywhere in the world.
In the meantime, you could also apply video or voice conference more than ever before also with your Chinese suppliers. If in the past you worried if this would be deemed acceptable and normal to the suppliers, now you don’t because you have a good reason of having to do it because you cannot travel to China as you could before.
This also helps better to organize yourself and your suppliers as a team, they are like your colleagues working towards a common aim, in the past, you had to travel afar to form this close team spirit with them, but now your team is right a call away.
In the final analysis, the black swan, global pandemic Covid 19 poses numerous challenges of building our supply chain, in the meantime, it also presents multiple opportunities. Let us all, on the one hand, pray for the global pandemic to pass on the earliest day possible, on the other hand, use all our possible measures to lessen the caveats and strengthen the new opportunities.
