September 28, 2016 Guest opinion piece
Many online sellers are interested in sourcing their own brand products from China or the Far East – most commonly achieving this through a practice known as private labelling.
The practice of private labelling is when a product or service is manufactured or provided by one company but brought to market under another company’s brand.
Previously we discussed how an online seller can source a generic – no name – product from an Original Design Manufacturer (ODM). Now, we’ve teamed up again with chinaimportal.com to address a key issue when sourcing private labels – the product specification.
Setting the scene
When browsing on Alibaba or Globalsources.com – or even visiting a trade fair – you may get the impression that importing a private label product is as simple as browsing a glossy catalogue and having your logo printed or engraved on it. But the reality is more complicated than that.
So, what does this mean for the products you find listed on Alibaba or GlobalSources.com? They fall into one of the following categories:
- Manufacturer developed products
- Customer developed products
- Reference products
Manufacturer developed products make up a minority of what’s showcased, the factories offering these products are ODMs which we discussed in our previous article.
The bulk of manufacturing is done in the Far East, in particular China, where actually only a few manufacturers develop their own products. In fact, the vast majority of Chinese suppliers are geared towards a ‘make to order’ approach – they’re Original Equipment Manufacturers (OEMs).
What do we mean by an OEM?
OEMs don’t handle the full product process for you.
They manufacture a product based on a design supplied by their customer – which means that most of the products you’ll find listed on Alibaba or Globalsources.com are in fact either customer developed products or reference products. You should avoid selecting a customer developed product from a manufacturer, as you’ll likely run into intellectual property issues if you were to add your own brand to one of these products.
Reference products on the other hand are items that the factory has never made before, placed in suppliers’ catalogues to demonstrate the kinds of products they could potentially make. This is the most common type of product you’ll find listed on sourcing websites and will take effort on your part to get a product ready to go to market.
Sourcing from an OEM
A key consideration before sourcing a product from an OEM, is your own level of product expertise and how much resource you can invest.
Working with a manufacturer to either modify or develop a new product of your own, means that you’ll inevitably need to invest in new tooling, prototyping etc.
It’s important to keep in mind that factories aren’t service providers and it’s not their job to design a winning product for you. Likewise, they aren’t lawyers so they won’t keep track of things like product safety standards in the markets you’d like to sell to.
The all-important product specification
For most Chinese suppliers the products you’ll find advertised in their catalogues are simply reference products, which means you can’t simply choose an item to import and start selling. When you do refer to a certain catalogue product – they still expect you to provide them with all the product specifications.
This is an area where many importers run into issues as they assume that the supplier is actually manufacturing a showcased product according to a set list of technical specifications and quality requirements.
Without a comprehensive product specification this means that the manufacturer will choose how to make the product on anything you’ve left out. This often results in some poor outcomes – low cost materials, substandard quality or improper labelling, and that’s just for starters!
But a way to avoid this is to list every relevant specification when purchasing from an OEM – and it’s worth keeping in mind that even when sourcing from an ODM you should reverse engineer the specification.
So, let’s say you’re buying a private label wristwatch. Before you can place an order from either type of supplier you’ll need to confirm the following:
- Case material
- Case thickness
- Crown material
- Indexing material
- Plating
- Movement
- Strap material
From an OEM supplier you’ll need to fill in the specification yourself. For an ODM product though, you’ll need to ask your supplier to fill in the specification – at which point you’ll likely find out they don’t really have one. So again you’ll need to fill in any gaps they leave yourself. Once your product specs are complete, it’ll look something like this:
- Case material: stainless steel 316L
- Case thickness: 6.5 mm
- Crown material: Miyota 1L22
- Indexing material: stainless steel 316L
- Plating: IP rose gold
- Movement: Miyota 1L22
- Strap material: calf leather
A full product specification is crucial to making sure you’re getting what you’re paying for. The quality and detail that goes in to how a product is specified sets the tone for its manufacture – which influences how your customers will think about your brand and products.
The point I’ve tried to make is just how important the product specification is. You can’t just buy from a catalogue of a Chinese manufacturer and start selling. When you’re sourcing you’ll need a clear idea of what you want the product to be, what materials it’ll consist of and the quality of its production.
About the Author
Fredrik Gronkvist is the co-founder of Chinaimportal.com, a London and Shanghai based company, providing various information products for Startups and Small Businesses manufacturing Private Label and Custom Designed products in Asia.
You can contact him here.