Abstract: If you're a toy importer, you've probably done your research and have come to realize that toy manufacturers in China offer the ideal mix of quality and cost savings. But there's more that you can do to lower your costs than simply switching your business to a Chinese company.
There are a number of other considerations that can reduce your sourcing costs even further. This article will discuss the most significant method and offer guidance on how you can take advantage of them.
Your Position is Stronger Than You Think, So Always Negotiate
As the old saying goes, there are plenty of fish in the sea. The toy manufacturing industry in China is massive with firms of every different size fit to your business. Most have set prices and minimum order requirements, but very often these are not set in stone. If you need to bring your pricing down, you need to negotiate.
Toy manufacturers in China recognize that competition drives cost, so if you find a firm you like working with but need a reduction in price, get quotes from a number of other manufacturers. There’s no shortage of them, so keep going until you find more favorable pricing. Then take any more competitive bids you get back to your current manufacturer and ask if they’ll match the price.
In many cases, they will, as long as they’re still making money on the project. If they won’t match the price, they may still be willing to come down some, in an effort to keep your business. Having alternate quotes makes it clear that you’re willing to do your legwork, and that you may be willing to move to a new firm if the price difference is wide enough. The threat of losing business may be all it takes to make them more competitive.
If the toy manufacturer in China that you’re working with is unwilling to drop their prices and you don’t want to find another manufacturer, you can always increase your order size. Most manufacturers are willing to drop their unit prices when you order a larger volume. If you know that larger quantities will fit your business model there’s very little reason not to take advantage of bulk pricing to bring down your overall cost per unit.
If you went through the effort of getting alternate quotes and your current firm is unwilling to meet you halfway you can always jump to one of the other firms. Because you have price quotes in hand, you know those firms are willing to give you a better deal. Just make certain that you’ll get the same or better service from the new company that you’re enjoying with your current company.
Better Terms Help Ease Cash Flow Shocks
In addition to negotiating for better prices, you can have a conversation with your manufacturer about more favorable payment terms. Early on in your relationship, toy manufacturers in China will likely ask you to pay a certain percentage of your total order cost up front, with the remainder due when the order ships. This split is often 50/50 when you first start working with a firm.
With smaller orders, the upfront payment isn’t too onerous. But as your business grows and your orders scale, these upfront charges can begin to impinge on your cash flow.
Thankfully, many Chinese companies are willing to revisit payment terms as you demonstrate that you pay your bills on time and keep bringing them business, and toy manufacturers in China are no exception. But they won’t do this if you don’t ask.
They like getting as much as they can up front because it guarantees that they’ll get at least something for an order if the customer never pays their final bill. This initial payment also helps cover their manufacturing costs, which is better for their cash flow and makes it less likely that they’ll need to rely on credit.
This can be a tricky negotiation, but it’s worth standing your ground because most toy manufacturers in China would rather keep your business and charge you less up front than risk losing your business completely. This is particularly true if you demonstrate your ability to pay on time. They’ll offer you a smaller upfront charge because they’re confident you’ll pay the larger shipping bill when the time comes.
You can also negotiate the amount of time you’re afforded to pay your final bill after your order ships. Net 30 is common early on, but as you build trust you can consider asking for a more generous payment period, like net 45 or net 60. The longer you have to pay your bill before your supplier considers you in default, the better you can plan your cash flow to make certain you have the reserves available to pay your bill.
Don’t Let Quality Problems Drive Up Your Costs
Imagine you purchased something at your local drug store, drove home, and then discovered a problem. It’s a relatively painless process to take the product back to the store for a replacement. The same is true for a purchase you make from a domestic online store. They’ll usually cover the return shipping charges.
This same logic doesn’t translate to large purchases from toy manufacturers in China, or really any large international purchases. If you order 1,000 units of particular toy and then discover a quality problem once the shipment arrives in the your country., shipping it back simply won’t be an option. It’s far too expensive to return such a large order.
If this happens once, you can chalk it up to bad luck, but if it happens repeatedly, your per-unit pricing will be badly affected.
The best way to combat this potential pricing pitfall is to make certain quality standards are being met before the product ever leaves your manufacturer’s facility. There are a few ways to do this.
Firstly, you can make certain you’re dealing with a reputable manufacturer that holds quality and customer service in high esteem. Talk with other people that have purchased products from the manufacturer in the past and learn from their experiences. Firms that have instituted good quality control processes will rarely if ever ship faulty merchandise.
You’ll also learn to trust the toy manufacturers in China that you’ve chosen to work with as they deliver shipments of consistent quality. But if it’s too early in your relationship to know what to expect, you should engage them with occasional quality checks as your order is rolling through the production line.
There are two ways to carry out these on-site inspections. One is to ask the manufacturer to inspect their products for you, based on specific criteria you send them. If they put a high value on customer service, there’s a good chance they’ll honor your request. What' more, it is avoided that they will ship you faulty merchandise because they know they’ll be faced with an angry customer and potential extra costs. They make take on an extra fee, but that upcharge is worth it, compared to the costs you would face if damaged products were shipped to you.
If your manufacturer isn’t willing to take this extra step for you, or if you would feel more comfortable by entrusting this critical step to a third-party inspector that’s not a party to the transaction, there are inspection services in China that you can contract with. You’ll pay for the service, of course, but this investment could save you quite a bit of heartache if something were found to be wrong with your order.
This isn’t an issue that’s specific to toy manufacturers in China. Anytime you deal with foreign suppliers you want to make certain that quality is a priority.
Get Creative With Your Orders
We’ve already talked about the fact that you can save money by ordering greater quantities. However, if your business can’t support larger orders, this strategy isn’t available to you. But that doesn’t mean you can’t leverage larger orders in other ways.
One way to drive up order quantities is to find other businesses that need similar products and pool your orders. Most toy manufacturers in China aren’t concerned with how orders are split up once they leave their facility. If you can find partner companies to work with on order quantities you can enjoy significant per-unit price reductions without having to change your business model at all.
If this is a strategy you’d like to pursue, but you don’t know where to begin with finding ordering partners, there are businesses in China that provide this service. For a fee, they’ll reach out to their network of buyers, attempting to match you with like-minded companies. As long as the money you save on your orders outweighs the fee you pay to the matchmaking company, you’ll enjoy net positive savings. And the more frequently your order along with your new found partner or partners, the greater your savings will be.
This may not be workable for you. If it isn’t, you might try restructuring your sales model to allow less frequent, larger volume orders on your own. In this case, you’ll receive products less frequently, but each order will be larger, which means your per-unit costs go down. You’ll manage to save money without actually increasing your total orders.
However, because you’ll be receiving larger shipments less frequently, your warehousing costs could go up. But this is a net positive as long as your ancillary cost increases are less than the cost savings you achieve with your orders.
Do Your Research
We mentioned earlier just how large the market is for toy manufacturers in China. Trying to find your best price can be an exercise in frustration if you don’t know where to look. In order to make your job easier, you should avail yourself of various services that exist to bring manufacturers to you.
There are several online marketplaces/comparison sites that allow you to rate and interact with hundreds of manufacturers in one place. Made-in-China.com is one of the leaders in this industry. They pre-quality toy manufacturers in China and other product categories so that you don’t have to worry if the vendor you’re talking to is reputable. Plus the site makes it easy to get dozens of price quotes in a relatively short period of time. If you don’t know where to start, Made-in-China is the perfect place to start.
Alternatively, you could use a sourcing agent to do the research legwork for you. These are local Chinese businesses that source manufacturers for you. If you don’t have the time to do your own research, this can be a good option.
However, be very careful with the agency you work with. Because the industry isn’t regulated, it’s very difficult to tell if the business you’re interacting with is a legitimate sourcing agency or a scam. Make certain to get reviews from other businesses that have worked with the agency in the past. Otherwise, you may not get the quality service you’re hoping for.
Save Money on Your Shipping Costs
Shipping costs are another area where incremental price drops can add up to significant savings. Make sure that you’re taking advantage of the preferred shipping rates afforded by carriers to your manufacturer. Toy manufacturers in China have bulk buying power that allows them to enjoy preferential treatment.
Raising your order volumes can also reduce your per-unit shipping costs. And if your order volumes are sufficiently large you might consider switching from air freight to sea freight. The latter is more cost-effective. However, it also entails a significantly longer transit window, so you’ll need to make certain your business processes can bear those delays.
If you make the shift to sea freight you’ll want to make certain you’re doing the pre-shipping quality inspections discussed in the last section. Longer shipping times mean your payment terms window will tick away before you receive your products. This can be very problematic if there’s something wrong with your order when it arrives.
Save Money By Sourcing Toys From China
Toy manufacturers in China provide an excellent opportunity for international buyers to save a significant amount on their purchases without sacrificing quality. You simply need to know where to look and how to use the strategies available.
