Thinking outside the box – why more and more sellers choose to source from India
Lately in our community circles we’ve discussed different sourcing options, and more and more sellers are exploring options for sourcing from India. We decided to share our take on the current situation, because we believe that thinking outside the box is always a way to get ahead of the competition.
There are two main reasons why sellers are shifting their focus from Chinese suppliers to sourcing from India:
- Trump tariffs on China imports – it’s no-one’s fault in this case. Suppliers from China since last August are trying to adapt to the new situation with pricing. Some of them are trying to keep the business levels even while slowly increasing prices. Some of them were forced to raise prices because their businesses would be unprofitable otherwise. Some of them are maintaining the same pricing but heavily degrading the product quality. In any case, there are no winners to this game, because China also answered on tariffs through suspension of US agricultural imports (https://www.bloomberg.com/news/articles/2019-08-05/china-asked-state-buyers-to-halt-u-s-agriculture-imports). Among many of the affected businesses, there are Amazon FBA sellers, slowly losing their patience to play with ever-changing rules of the game.
- More and more Chinese sellers on Amazon – we felt this on our own skin. As soon as we developed the product mould for our new PL product, the next day it was available on Alibaba.com even though we signed an exclusivity contract. We then had to fight for our rights with our own supplier and eventually won. But who needs this kind of uncertainty and mistrust? Amazon sellers are slowly beginning to accept the fact that Chinese sellers are taking over the Amazon platform more and more each day, and have two major advantages to do that: highly developed logistics and shipment systems; and pricing advantage. They can afford to use dumping prices to win the buy box, and are doing it at a large scale.
Every seller should keep in mind that sourcing from India is going to be a bit different because the Indian manufacturers don’t yet possess the versatility and infrastructure that you can expect when working with Chinese suppliers. So, not every Amazon category can fully benefit from sourcing in India, although we’re expecting to see this change in the upcoming years as Indian manufacturing picks up popularity.
Here are some additional advantages from sourcing from India:
- You minimize your business risk by diversifying your sourcing partners
- Indian suppliers are usually willing to accept smaller minimum order quantities
- English is their official second language so there are no language barriers as high as when working with Chinese suppliers
- Domestic availability of raw materials – a lot of the materials used for production are available locally in India, in high quality: cotton, silk, jute, marble, metal, wood, bamboo and others.
Sellers have also experienced some of the main disadvantages of working with Indian suppliers:
- Finding and vetting suppliers is a lot more difficult because there is no unified directory like Alibaba.com that brings them all together in one place. You will need to make a lot more effort to reach the right suppliers, some of which include: visiting trade shows in person, agents and the like.
- Suppliers don’t always understand FBA – especially the small suppliers don’t understand FBA so you will be in charge of providing them with guidance around: certifications, labeling, logistics and similar.
- Limited logistics support leaves sourcing from India convenient for more experienced sellers. For example, Chinese suppliers can quote you a DDP price for the shipment and manage all aspects of the shipping process. They can even buy a customs bond on your behalf, and also be the importer of record. But that’s not the case in India. Freight forwarders will expect you to be
- the importer of record, and know the certifications needed.
Differences between sourcing from India and China to keep in mind
Chinese suppliers usually posses the machinery and workforce to pull off large scale orders, while Indian factories are mostly small and midsized. For most private label brands, the manufacturer would be a smaller factory, out of which many are family operated businesses.
Chinese suppliers are able to cover all product categories while Indian manufacturing landscape is still developing and limited. However, Indian materials are distinctive in high quality which makes them great for certain product categories. Here are some of the categories that we feel are perfect for sourcing your product in India: home décor & gifts, kitchen and tableware, furniture, furnishings (cushion covers, rugs), jewelry, apparel, accessories, textiles, organic cotton, leather, eco-friendly products, and foods (especially superfoods, tea, coffee, spices).
Communication with Indian suppliers in English is incredibly easier than with Chinese suppliers as English is their official language. When working with Chinese suppliers you need to invest extra efforts into overcoming the language barrier. There will always be some English-speaking person in a factory in China, but engineers, assembly line managers and similar roles often won’t speak English. This can sometimes cause trouble in product development and making sure that safety & quality standards are satisfied.
There is one basic difference in labor market between China and India – China is a socialist society and Indian society is democratic. This requires just a little bit more understanding of local culture to be able to organize your workflow accordingly. Indian workers strive to achieve better work-life balance than Chinese workers. Also, unlike China, labor unions in India are active and often are negotiating better rates for their workers as well as better working conditions.
In terms of infrastructure, still nothing beats China. India lacks developed infrastructure, with its main problems being during the monsoon season in June and July when many businesses have disruption in transportation. This is not a rule but it can happen, and it’s just one thing to keep in mind. With China, you will always have a Chinese New Year when the factories are closed for a whole month, and you have to plan your orders ahead to stay in stock. With Indian suppliers you just have to be precautious and not order too much (or any) inventory during the monsoon season.
Let’s say you want to find Indian suppliers. How do you get started?
We already mentioned that working with Indian suppliers is going to be a little bit different from Chinese suppliers as the whole process is not yet so streamlined. Getting access to the best Indian suppliers is going to require a little bit more effort and knowledge from you, but it can also be extremely rewarding.
There are two main ways in which currently Indian suppliers:
- Third party sourcing websites, such as Alibaba.com, Indiamart.com and Globalsources.com. Alibaba and Globalsources still have Chinese suppliers as their main focus but you can filter out by country of origin and easily find Indian suppliers. This has proven to be a good method to identify some of your prospects, but it can still be difficult to vet suppliers that way especially if you’re working with them for the first time.
- Sourcing at trade shows, the most relevant exhibition for Amazon sellers is to attend the IHGF Delhi Fair (held in October this year http://ihgfdelhifair.epch.in/ ) where you can meet some of the best suppliers for these categories: houseware, Christmas and festive décor, home furnishings, fashion jewelry and accessories, furniture, carpets and rugs, gifts, bathroom accessories, lamps and lighting, garden decorations. The fair is open only to foreign buyers or buying agents in India. All exhibitors are export-focused and generally have a good understanding of import requirements of various countries. Most of them do not understand Amazon FBA requirements though. Some of the main advantages of visiting trade shows to find suppliers include: getting new product ideas, speeding up your sourcing process, you are able to touch and feel the product quality without waiting for samples, establish a high-quality relationship with your suppliers, talk to manufacturers directly.
India Sourcing Trip (https://www.indiasourcingtrip.com/), organized by Meghla Bhardwaj can significantly speed up your learning curve, and enable you access to best sourcing experts who would be your mentors in this process. Through their experience and knowledge, you will also be able to step up your sourcing game with Chinese suppliers too. One of the main advantages that Amazon sellers pointed out about this trip is, that they made lifelong friendships with fellow sellers from this trip.