Why should you consider sourcing anywhere else other than China?
Despite its long history as a supplier for Amazon sellers, several factors have recently made China a less reliable region to source from. The trade war between the US and China has caused the prices and availability of goods to become uncertain, and the development of neighboring countries means that China isn't the only option for sellers anymore.
What Are the Benefits of Sourcing Your Products Outside of China?
There are important benefits you reap when you make the switch to a supplier outside of China, especially when it comes to costs. Though manufacturing in China is much more cost-effective than manufacturing in a country like the USA, countries like Mexico and India have 80% lower production costs than that of China, which are substantial savings, to say the least.
Another money-saving advantage to sourcing your products outside of China is that you can order your products in smaller batches. Because China's factories are more developed, they often require large order minimums. Other countries are more flexible, allowing you to order more manageable shipments.
Which Country Should You Be Sourcing Your Products From?
If you're considering sourcing outside of China, the next logical question is: Where? Sourcing from China is easier in many ways since it's a familiar supplier for Amazon sellers while switching to a new country poses risk and uncertainty.
To pick the right country to source from outside of China, you'll need to ask yourself the following questions.
What Natural Resources Do They Have?
First, you'll want to know if the country you're considering sourcing from has the natural resources to manufacture your product. If they don't, they can probably still manufacture it, but they'll have to import resources from other regions, adding overhead and time to the production process. To avoid these extra costs and time constraints, try to pick a country that already has the resources you need available.
Additionally, you can determine which countries specialize in which exports. Some countries are better at delivering textiles, while others are best for jewelry or furniture.
What Is the Export Process Like?
Next, you're going to want to see what a particular country's exporting process looks like. How are they going to get you your merchandise? How much is it going to cost and how long is it going to take?
In many ways, these factors are immutable. Shipping something from India is invariably going to take longer than it would to ship from China, and no country is going to be able to ship to the US faster than Mexico.
However, there are variable factors to look out for. This includes duty rates, which can raise or lower costs in unexpected ways, and overall costs vs. shipping costs. It's no secret that shipping from China is going to be cheaper than most of its neighboring countries in Southeast Asia. However, the overall cost could be cheaper somewhere else when you factor in lower manufacturing costs, duty rates, and so on.
What Are the Product Regulations?
It's also important to know what product regulations are imposed on and by a specific country. Most countries will have more lax regulations than those in the US, but that doesn't necessarily mean that your product can be manufactured or shipped from there easily.
That last part is especially important: making sure that your product can easily be shipped from that country to the United States. Some products are surprisingly difficult to have imported to the US, while others require specific licenses. Make sure you're aware of (and that your manufacturer is aware of) all of this before settling on a country to source from. This is why using an established freight company to ensure your products are compliant is a best practice for sellers.
The Top 8 Places to Source from Outside of China
If you've been in the Amazon seller sphere for any length of time, you've probably heard about sourcing from India, and for good reason. They have one of the lowest costs of manufacturing in the world, speak English natively, and specialize in a broad range of exports.
The drawback to consider when sourcing from India is that while the cost is low for now, there are legislators in India looking to raise prices. India also has a fairly decentralized government due to its size, so prices and regulations can vary drastically depending on where a factory is located.
QUICK FACTS:
Primary Exports:
- Jewelry
- Ceramics
- Chemical products
- Textiles
- Leather goods
Average Export Times:
- Los Angeles: 32-50 days
- Houston: 38-50 days
- New York: 20-35 days
Taiwan is a great alternative to sourcing from China for a few key reasons, namely its shipping times. Because Taiwan is geographically closer to the US than China and its ports/factories are in closer proximity to one another, they can deliver goods slightly faster than China.
The drawback of exporting through Taiwan is that they have significantly higher export costs than China. Although the country doesn't have as wide a range of natural resources as other Asian countries, they have abundant resources of coal, gold, copper, and marble, making them a great option for electronics and jewelry.
QUICK FACTS:
Primary Exports:
- Electronics
- Jewelry
- Textiles
- Cement goods
Average Export Times:
- Los Angeles: 12-17 days
- Houston: 18-23 days
- New York: 27-32 days
For Amazon sellers looking to source electronics outside of China, the Philippines is a solid option. The area has abundant resources of metals like copper, nickel, gold, silver, and cobalt, as well as lush forests full of timber.
On top of its ability to manufacture electronics easily, it also has competitive exporting times and pricing. The main drawback is that the region is limited in resources outside of the ones mentioned already, so it'll mainly be beneficial to electronics sellers.
QUICK FACTS:
Primary Exports:
- Electronic devices
- Copper wires
- Precious metals
- Medical instruments
Average Export Times:
- Los Angeles: 17-21 days
- Houston: 23-27 days
- New York: 28-34 days
Vietnam is a much more flexible option compared to the other China alternatives on this list. They have a broad range of natural resources available, including rare elements (bauxite, phosphate, chromate, gold, manganese, etc.), agriculture, and timber.
This variety of products has made Vietnam a go-to for producing machinery, which in turn allows Vietnamese companies to manufacture other kinds of goods, like textiles and plastic. Vietnam does have longer export times and prices, but for the extra investment, you have access to more resources than many of the options on this list.
QUICK FACTS:
Primary Exports:
- Machinery
- Textiles and garments
- Footwear
- Plastic and rubber
- Metals and jewelry
Average Export Times:
- Los Angeles: 19-24 days
- Houston: 24-30 days
- New York: 30-32 days
Malaysia is one of the best alternatives to China for Amazon sellers that want an easy sourcing experience. The World Bank listed Malaysia as being even easier to do business with than China in 2018. On top of this ease of use is a lack of VAT on exports, a country located directly on the Strait of Malacca, and a highly-skilled workforce.
The downsides of sourcing from Malaysia mainly have to do with the political sphere, which has been in a state of instability since late 2018. Alongside this instability is a minimum wage that's nearly double that of China, making the country a costly sourcing alternative. However, you'll have a much smoother exporting experience with that extra cost.
QUICK FACTS:
Primary Exports:
- Machinery
- Mineral products
- Animal and vegetable byproducts
- Plastic and rubber
- Chemicals
Average Export Times:
- Los Angeles: 20-25 days
- Houston: 24-28 days
- New York: 31-34 days
If you want a flexible sourcing process that's comparable in structure to that of China's, Thailand is the region for you. They have a manufacturing/exporting system that's very similar to that of China's, so your experience with China will translate to Thailand well. On top of that, they have many of the basic resources that Amazon sellers look for, like machinery, metals, plastic, and rubber.
Alongside having an equally developed exporting process to China, Thailand also has similar pricing, which may be a drawback for some sellers. Because the costs, export times, and material exports are so similar to China's, the only real advantage gained when making the switch to Thailand is more flexible sourcing contracts.
QUICK FACTS:
Primary Exports:
- Machinery
- Transportation
- Plastic and rubber
- Foodstuffs
- Metals
Average Export Times:
- Los Angeles: 15-19 days
- Houston: 22-27 days
- New York: 30-34 days
Pakistan is an excellent option for Amazon sellers looking to source textiles, clothing, and other cotton goods. It's one of the country's primary exports and natural resources, alongside leather, making it a flexible and affordable alternative to China.
What holds Pakistan back is that it has the longest export times of any country on this list. This is compensated for slightly by lower exporting costs, though not by much. Still, if you are looking to manufacture clothing goods or furniture outside of China, Pakistan is likely the best option available.
QUICK FACTS:
Primary Exports:
- Textiles
- Clothing
- Leather
- Furniture
- Precious stones
Average Export Times:
- Los Angeles: 34-40 days
- Houston: 37-45 days
- New York: 45-50 days
The advantages Indonesia has for Amazon sellers over other countries are its political stability and low costs of labor. They've been affected far less by the US trade war with China than others and are less likely to experience political upset than areas like Thailand and Malaysia. Their abundant natural resources also make them great for manufacturing different types of goods.
Unfortunately, Indonesia isn't as developed as some of the countries it's competing against. They don't have as strong of a manufacturing industry as China or Thailand, so you'll have a harder time manufacturing complex goods such as electronics. Still, if you have simple manufacturing needs and are looking for a low-cost alternative to China, Indonesia is a great option.
QUICK FACTS:
Primary Exports:
- Mineral products
- Animal/vegetable byproducts
- Machinery
- Textiles
- Plastics and rubber
- Metals
Average Export Times:
- Los Angeles: 12-15 days
- Houston: 20-24 days
- New York: 27-32 days
The Cons of Sourcing Outside of China
Though Amazon sellers can work with more flexible suppliers and save money by sourcing outside of China, it isn't the right decision for everyone. Here are some important drawbacks to consider when sourcing outside of China.
INEFFICIENT LOGISTICS
Because of China's extensive experience in manufacturing for the US, they've put together about as efficient of a logistics system as possible. Couple that with the fact that they are geographically closer to the US (Los Angeles specifically) and it's easy to see why they're tough to compete with.
They may have higher manufacturing costs, but the export process in China is as cheap as it gets. It's faster as well, sometimes taking half as long as competing countries. Taiwan is one of the only countries that has faster shipping times than China, though their shipping costs are significantly higher. If you want a fast and painless export process, China is the way to go.
POOR SUPPLY CHAINS
As mentioned earlier, you should try to pick a country that has as many of the natural resources that you'll need as possible. It's difficult to find one that has access to them all, though, which means supply chains are more or less inevitable.
That may not sound like a bad thing; supply chains are a normal part of the manufacturing process, after all. But, like logistics, many of the alternatives to Chinese factories don't have the experience, reputation, or relationships to facilitate a streamlined supply chain process.
It's not uncommon for factories in one country to be sourcing their product from an international supplier that is delivering that product from another company. These convoluted supply chains tack on extra time and costs to the manufacturing process.
Sourcing Outside of China in 2020
If you're ready to make a money-saving change to your business this year, sourcing outside of China is a great place to start. It requires a little more work to find reliable manufacturers and have your products shipped to you, but in the long run, it can help you cut costs and improve your profits, helping you remain competitive in the Amazon Marketplace. Here are some resources to help you get started with sourcing products outside of China: