Excerpts from Smart Company’s interview of PassageMaker’s Mike Bellamy about sourcing from China.
Thanks to a massive improvement in quality, logistics and infrastructure over the past decade, it has become easier and easier for small businesses in Australia to expand beyond national borders and infiltrate huge consumer markets in purchasing powerhouses like China. However, it still can be a daunting task for small business owners to know where to start when it comes to getting their enterprises up and running outside of Australia. How do you choose the right suppliers? What countries offer the best quality and fabrics that you are looking for? How do you successfully communicate across language barriers?
Having worked with Australian customers for 15 years – at one stage they made up around 85% of my business – I’ve had the opportunity to observe first-hand the most common challenges small businesses have encountered when embarking on global expansion. Over the years I have developed a three-tiered approach, which I refer to as the ‘Holy Trinity’, for building a productive, mutually beneficial relationship with international suppliers to help take homegrown businesses to the world.
Mike Bellamy on Guanxi
I cannot express enough how important it is to build a strong, cohesive relationship with your international factories and suppliers; putting the human effort in is worth every cent. Mutual respect goes a long way and it’s vital for you to be regarded as a person, not just a purchase order number. I’ve found during my 20 years working as a Westerner in China that even the smallest things go a long way to developing ongoing, honest working relationships. It’s not necessarily all about learning to speak another language fluently or understanding all the cultural nuances; it’s about finding ways to connect and build a bond based on trust. Simple gestures like sending Christmas cards, encouraging your kids to be pen pals or visiting your factories in person are all great strategies for building on both your personal and professional relationship.
Mike Bellamy on Contracts
Small businesses can sometimes find the development and implementation of contracts overwhelming, especially when they face the challenge of communicating in a language (both figuratively and literally) that both parties can understand. Even if legal documents need to be bilingual, it is absolutely imperative to apply the common sense that you would use if you were doing the same type of business with an Australian company or supplier. Integrate simple and easy to understand clauses in all contractual agreements and if you’re working with China, ensure you register your intellectual property there before you even begin the sourcing process. Since the rise of the middle class and increase in China’s consumer market, there is a now a well-defined patent system in place that is cheaper and more streamlined than the domestic process. In fact, the most recent statistics from the World Intellectual Property organization show that 7% of international patents were filed in China.
Mike Bellamy on Supplier Verification
When doing business at home, there is no way that you would commit your time and money to a supplier who hasn’t been validated and verified as operating within lawful industry parameters. In saying this, it is essential that when expanding your enterprise internationally you perform your due diligence and do your research just as you would at home. This can sometimes take weeks, or even months, but it can mean the difference between your business sinking or succeeding. The majority of companies and individuals who provide sourcing services or run a factory out of Asia are almost totally unregulated in terms of truth in advertising, codes of conduct and service standards.
Mike’s 10 quick tips for starting your international sourcing business:
- Know your product
- Understand where you want to sell it
- Establish access to the market that no one else has
- Ask yourself what is important to you as a buyer
- Think from the factory’s point-of-view
- Sell the factory on why they should work with you
- Structure payments to a supplier’s performance
- Request samples throughout the entire production process
- Manage your expectations
- If you find a good factory, hang onto them
Mike Bellamy is the founder of the PassageMaker Group and is an instructor at China Sourcing Academy. He will be presenting in-depth seminars at the upcoming International Sourcing Expo Australia in Melbourne.