The business world is changing, with more small businesses participating in a global marketplace. Although local businesses like to support domestic manufacturing suppliers, sourcing goods from foreign suppliers is increasingly more attractive because they’re more affordable, according to Sourcify. With that in mind, should a small business owner learn how to choose a manufacturer overseas?
Take the case of Sarah, a hypothetical small business owner of a children’s clothing retail shop. Sarah wants to offer high-quality children’s clothing to shopping parents in the community. These parents would like to support local merchants, but they are still concerned, first and foremost, about their own budgets. In the end, they will go for the lower prices offered by competitors who buy their products overseas.
How to Choose a Manufacturer Overseas
Alibaba.com and GlobalSources.com are good places to look for overseas products. Both of these sites vet their suppliers, providing useful information about each one so you can quickly evaluate them.
You don’t have to travel to foreign countries to choose or select a supplier, but face-to-face (either virtually or in-person) could help to create a better working relationship and potentially secure the best vendor prices.
Sarah might be looking for low-cost suppliers in China or Vietnam, but could also be searching for more unique children’s items from Italy or France. Whatever the choice, the plan is to locate suppliers with either competitive prices or specialty designs that give her retail shop a marketing advantage.
Pros and Cons of Foreign Suppliers
Building a working relationship with a foreign supplier is not easy, and there are pros and cons to consider:
- The world market has a large number of suppliers to choose from.
- Services like Alibaba make it easy to search, rank and select suppliers.
- Foreign suppliers can efficiently handle large orders.
- Certain foreign suppliers can offer more unique, customized styles and colors, giving small business owners an exclusive advantage over their competition.
- Communicating in different languages and across time zones can be difficult.
- Customers may perceive that the products are of lower quality.
- Foreign manufacturers may have lower quality and labor standards.
- Shipping times are longer.
- Shipping costs are higher than domestic transportation.
- Minimum order quantities are higher.
- It takes longer to get samples made and approved to evaluate quality.
- Setting up a relationship with a foreign supplier and a freight forwarder takes a lot of time and effort.
Should You Choose a Foreign Supplier?
Is finding a foreign supplier worth it? Over time, yes. The pricing is attractive, and the upfront investment in time and effort brings long-term results, such as:
- Being able to offer products at competitive prices.
- Differentiating your store from the competition and having prices that compete with the large chains.
- Getting to the point where you can design and create your own custom products.
If you’ve had your eye on a local supplier for a while, and are set on domestic manufacturing, a working capital loan could help to cover the inventory. But in many cases, a small business may have to adapt to the changing world market to remain competitive. Many domestic manufacturers aren’t able to compete with lower labor costs in foreign countries.
The access to foreign suppliers has made it easier, more practical and cheaper to buy raw materials and finished products from other countries. Small business owners will have to find a balance between their desire to support domestic businesses and buying from foreign suppliers to stay in the game.