Step by Step Guide on How to Manufacture Private Label Products in China

If this is the first time you manufacture a product in China, this process might seem very scary. And you have all the right to be! You are pretty much handing a huge sum of money to someone in China to produce the product you want! A lot of things that can go wrong! However, once you have done it a couple of times, you will realize it is actually quite easy.

In this article, I will teach you each step I use when I manufacture a product in China and guide you step by step. However, you first have to establish what product to sell on Amazon FBA. If you haven’t picked product yet I advise you to check out: this guide on What to Sell on Amazon 

1). Contacting Suppliers

The main website to find Chinese suppliers is: Alibaba.com
You simply search for the product you want to manufacture and you will find loads of suppliers that will manufacture this product for you!

I am a big fan of the “shotgun approach”. This means you send out the same standard email to as many suppliers as possible. With this email, you want to ask some basic questions and reach as many potential suppliers as possible. I simply copy & paste 1 email template and send them to as many suppliers on Alibaba as I can find. Below you can check out the template I use.

Hi,

I am looking to manufacture product X. I have attached a picture as a reference.

Specifications:
– Color: x
– Size: x
– Material: x

  • Can you manufacture this product?
  • Do you have similar products? Can you send your catalog if you have one
  • What is the lead time?
  • What is the FOB price for x amount of units
  • Can I customize the product by adding my logo on it?
  • How is the product currently packaged?

Thank you and have a nice day,

<Name>

Based on these reactions you can already make your first selection. Some suppliers will reply very late, or some won’t even reply at all. Some will reply with a very high price. To those suppliers, I simply reply that I have received better prices, and if they want to be considered as my supplier they should lower their prices. Once I have received all replies, I usually compile all suppliers in a spreadsheet to make things easy to compare.

2). Samples

Based on the reactions from the suppliers I have gathered above, I can select the top suppliers and request samples from them. Now I don’t request samples from just one supplier, I usually request samples from the top 5 suppliers. This gives me options to pick the best suppliers based on the sample quality and negotiate prices between them.

Normally the sample cost is free and you only have to pay for shipping. Now if you have to pay shipping cost to your home country for each sample your order ( x5 ) this can add up quickly. That is why I always have them ship all my samples to 1 address in China ( which is usually free, as shipping within China is very cheap ), then I combine all the shipments there, and ship it as 1 package. This way I can save massively on shipping. There are a couple of companies who provide this service, but I use Tips Trans

3). Negotiating price

Now before we even start talking about the price we have to know about Incoterms:

Incoterms: FOB vs EXW
If you start dealing with Alibaba suppliers and discussing the price you will run into Incoterms.
Incoterms define how your goods are transported and when the ownership of the goods are transferred. There are a lot more Incoterms, and the most common ones you will run into are FOB & EXW.

FOB: Free On Board
This means the supplier will deliver the goods from their warehouse to the port and load them on your freight forwarders ship.

EXW: Ex Works
Ex works simply means the supplier will manufacture the goods and have them ready for pick at their factory.

So the very important difference between these Incoterms is that when you request your supplier a FOB quote: The supplier will pay the shipping cost from their factory to the port. And when you request an EXW quote, your forwarder will have to pick up the goods at the factory ( resulting in a higher fee from the forwarder ).

So now that we know about Incoterms we can start negotiating about the price! Once we have received our samples, I pick the best ones. I make a top three of the best suppliers ( based on quality & price), and negotiate between them. A very good negotiating tactic that I have learned is simply to tell them you have a better offer from another supplier. Even if this is not the case, I can always skim a little bit of the price with a simple email like:

Thank you for the quote, I really like your product. However, my boss demands I get the lowest price as possible. And we have received a price $1,3 from supplier x. Since this is lower than your quote my boss wants to go with supplier X. Please let me know if we can negotiate the price, else I am afraid we have to go with Supplier X

You will find out that you can negotiate a lot with Chinese suppliers, and I personally think this is a very interesting game. Now after going back and forward with my top suppliers, I pick the best one based on price & product quality.

4). Payment & Production

In order for the supplier to start with the production, it will usually require some sort of a deposit. From my experience, it is normal to pay 30% upfront, and 70% once the production is finished. This will also be referred to as 30/70 tt.

I just to make a normal wire transfer in my supplier’s currency, Chinese Yuan (CNY). However, recently I found out you can save some serious money with this. As banks charge a very high conversion fee when changing USD -> CNY. Actually pretty obvious as this is how they make money lol. But it took me a while to find an alternative. Apparently, there are loads of services that can offer you a better conversion rate than banks when making overseas payments. I personally use TransferWise as I think this is what most sellers use.

5). Quality control

I ALWAYS have my production process inspected by a 3rd party. It doesn’t matter if I have been ordering from them for a couple of years, I always check the quality of the product while it is still in the factory! If you do a bit of research you will find plenty of horror stories about people who received a great quality sample, have the supplier produce their product, and then get ripped off by their supplier who produces a sub-par product. I had this happen myself as well, and I can tell you right now: If you find out in the USA you have a bad quality product it is too late!

I personally use Inspection in China. I let them schedule a date with the supplier when almost all the products are done. They go to the factory, take out a sample size of the production and inspect every detail of it. They send me the report on the same day with pictures and all the details. They also highlight any possible defects the shipment might have. Once I have received the quality control report and approved this, I can pay the remaining 70%.

6). Shipping

You will have a couple of options when shipping your products from China to the USA. Each option has its own advantages and I will cover each one:

Ocean
– Slow: Average shipping time 30 days
– Cheap!

Air
– Fast, average 7-day shipping
– More expensive than ocean shipping

Air Express
Air express is pretty much a faster and more expensive version of Air shipping. Air express will be the services such as DHL & UPS. They will charge you an extremely high rate. However, your product will arrive very quickly. I also believe that import duties are already included in the price with Air Express. However, you should double check that as I have not shipped with air express for a while.

My choice
I ship 90% of my products by ocean shipping. This is simply the most cost effective way of shipping your products. There are a couple of occasions when I prefer to ship my goods via Air:

Quick restock: If I am doing my stock forecast and notice I will run out of stock before I am able to restock with ocean shipping. In this case, I will gladly ship by Air or even Air express as you never want to run out of stock on Amazon

Quick launch: If I am really excited about a product, and want to launch it as quickly as possible. In this case, I will ship a couple of carton by Air Express that I will use for giveaways and increase my sales velocity. Once I have done this and increase my ranking organical sales on Amazon will start to pick up. Ideally, my ocean shipment will arrive by this time.

Direct to Amazon or via own (ware)house?

When you are dealing with your freight forwarder you will have the option to ship the goods directly to Amazon or to your (ware)house.
Some people choose to ship the goods to their (ware)house first so they can inspect the goods themselves. I never really understood this. I rather have the goods inspected in China. In case there is something wrong with the goods, my supplier can correct this before I pay the remaining 70%. I never understand why people inspect their goods at home. What are they going to do when they will find a high defect rate? Ship all the products back to China?

Besides Quality Control there are still reasons to ship the goods to a warehouse first. The main one is you might pay lower storage cost at another warehouse compared to Amazon. Especially during the fourth quarter you pay an extremely high storage fee on Amazon.

Step by Step Guide on How to Manufacture Private Label Products in China
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48 Comments

  1. Hi,

    Nice article, very useful. Can you recommend a inspecting agent or company in China? How much they charge?

    Thank you
    Jorge

  2. Excellent blog, thanks for sharing this. I see you mentioned there is a way to save the bank transfer fee. Can you pls elaborate what that is ? Is it transferwise.com

  3. Great article. Can you post the link to the sample aggregator in China? I couldn’t find Tips Trans anywhere

    Also it would be useful to have an example for a product with all the costs described. I want to start but have no idea how much initial capital I need to have to do this right.

    1. Hi,
      yeah sure the samples company is tiptrans.com

      If you want to get a clear overview of all cost & profit. I have explained this in detail for 1 of mine products in the case study here

  4. Really appreciate all your info!

    You said this in #4 above… “However, recently I found out you can save some serious money with this.”

    Could you expand??

    1. Sure, so I have been using normal bank transfers to pay my Chinese Suppliers. I can get a pretty low price if I offer to pay my supplier in Chinese Yuan ( CNY). However, I never noticed how big the fee is banks charge on currency conversions. Which is pretty obvious when I think about it now as this is how bank make their money lol. So there are loads of services that offer a way lower exchange rate when making overseas payment. I use transferwise, as I think this is what most people use.

  5. Very helpful post, thanks for sharing these details.

    Quick question:

    What is your preferred freight forwarder? Do they handle all the customs paperwork and send you a bill? I am unfamiliar with the customs portion of sea freight.

  6. Thanks for this guide. I am in the process of getting prices and I am a little confused how to compare the suppliers. For example, if one seller quotes me for $2 an item FOB and another $2.50 an item with EXW how do I compare? Also, is shipping usually the same price for each shipper or should that be part of the negotiation?

    Basically how do I get down to a TOTAL cost per item in order to see which supplier is best? I appreciate all your help!

    1. I always ask all my suppliers to either quote me FOB or EXW prices, so it’s easy to compare. Shipping is kinda hard to estimated, as this depends on the quantity you ship. But as a rough estimation you can take: if it fits in a shoe box $1 or less, everything above but not oversize: $2 est shipping cost.

      1. Thank you. Then for shipping, do you have another service you use for ocean shipping or do you ask the supplier to do the shipping?

  7. Hey,

    I’m 29 and starting my own PL business via FBA. Would love to bounce some ideas off of you as it seems like you’ve been successful!

    Pete

  8. I’ve done some further research and see that labeling & shipping is a big part of the process. Can you shed some light on the following:

    What label is needed?
    Do you have the supplier label the items for you?
    Do you recommend any 3rd party (e.g. FBA Transport) to do labeling and forwarding?
    What is the advantage of using Flexport versus having the seller just do shipping for you?

    I look forward to your guidance.

    1. Yeah man all very good points. Il update the guide soon, but to answer your questions now:

      – You need a FNSKU label, you can create this in seller central
      – Yes
      – No I have my supplier label it, and inspect the goods in China
      – Flexport is much cheaper & reliable.

  9. Hey man, your case studies are really helpful to all of us that are new to this game. I’m 24, about to graduate, and I’m in the process of product research and forecasting. I was wondering if I could shoot you some emails on a couple product ideas and hopefully gain some insight regarding shipping costs, payment options, and some other nit-picky things.

    Much love from Canada, keep doing your thing.

    – Joshua

  10. Thanks for letting us know many important details.
    My question to you is what address in China do you use to let those manufacturers to send their samples to and could we use the same address for our business, if we decide to pursue this thing.

    1. If use a Chinese address to consolidate all packages together. You can get a address via Tiptrans

  11. Hey, great content. I have few questions:

    1) Do you use Alibaba only to find the product and suppliers, right? the rest of the process you do via email conversations only? you don’t buy the stuff from the website, right?

    2) Can you explain more about the interaction with the freight forwarder? I didn’t get where comes the part that you need to contact \ close details with the freight forwarder and how he knows what to do for you, when and where.

    Thanks a lot!

    1. 1). Yeah the alibaba site is just to find contacts.
      2). You request a package list from you suppliers. This has all the stuff like weight, volume & port on it. With this info you can contact freight forwarders, and request a quote. Pick the best quote and share the contact details of the forwarder with your supplier. They will meet up and handle the rest.

  12. Hey,
    I have a question regarding the tiptrans service.

    1)How is the payment done? I saw a page on their website that is called “tiptop” and you need to insert an amount? I didn’t understand that concept.
    2) How do they know when all my samples from different suppliers arrived at my chinese address in order to execute the shipping.

    Thanks!

  13. This article is truly stellar, along with the rest of your blog. You’ve managed to fill all of the holes for me and I feel confident to go ahead and contact suppliers!
    However, I have one question that I keep getting hung up on. I don’t really know how the personalized packaging works.
    Do they have stock options that I can throw a label on for just a few cents and no real work on my part?
    And then, if I’d like, I order from another warehouse more premium packaging and have them send it to the supplier?
    If I can get started without hiring out someone to design the packaging, I can get started tomorrow. But if not, I’ll need to save up a few bucks again for that part.
    Thank you for your time!

    1. IMO the packaging is one of the methods you can make your product stand out. So I prefer to spend some time & money on this. Yes you can just throw your label on existing packaging. This is called label slapping and I don’t think a viable way to do business. I ask my supplier for a die-cut. This is like a blank template where you can design the packaging. You can either do this yourself or hire a freelancer. Yeah, most suppliers are really easy to work with, and if you want you can order packaging from another place and ship it to them. But most likely they are partnered with a packaging factory they you can use.

  14. Hi, thanks for sharing your experience! I’m very inspired by your blog. Could you share more on your inventory strategy? How many items would you order in the beginning and later how often/how many would you order as you ramp up? How do you manage that with the storage cost paid to Amazon? Thanks and please keep up with the great posts!

    1. Sure! Production & shipping time for me is around 2-3 months. So when I order I tend to order 5x my monthly sales. Of course this depends on my capital situation & if for example the holiday season is approaching.

  15. Is there an effective way to estimate the freight forwarder cost (for example of flexport), given the carton dimension ,weight and number of cartons, before actually speaking with him?

    I am trying to understand if I can evaluate profit margins of a product before going through all that quotes/offers and negotiations phase.

      1. Thanks. I know my CBM and weight. 2 questions:

        1) Flexport requests FBA shipment ID. I don’t have it yet. Can I still request a quote?
        2) How is the custom duties being handled by the freight forwarder?

        Thanks again!

        1. 1. Yeah you can request without ID.
          2. They help you pick the right HS-code for the product. Then they file all the customs forms & handle everything customs wise. At the end they will add the customs charge to your freight charge.

          1. Thanks for that.

            So my main struggle is estimating Profitability of a product.
            Basically, when we do product research and analyze if a product is profitable, we should calculate: production + inspection + shipping + customs.

            All of these are difficult to estimate while just going through Jungle Scout and looking for products. We actually have to contact suppliers, freight forwarders and inspection companies to get all those quotes, and even then it will not be accurate because customs can surprise us.

            So how can we know if the product margins will satisfy us?

          2. Haha sorry mate, but yeah this is real work that you have to do. But just like any other business you will also have to take a risk. You are never 100% sure if you are going to succeed or not. Best you can do is get as close as possible with your estimation and quotes and take a leap. But yeah you for sure have to contact suppliers & forwarder to get real quotes. Amazon FBA is not some magic get rich quick scheme like some of the Youtube Guru’s make it seem like 😉

  16. Flexport requires me to be registered business in order to get onboarded, so I can use their platform to request quotes.
    I don’t have a registered business. Is there any other way to get freight forwarder quotes?

    Thanks!

    1. Ah ok. You can also try Freightos.com. From there you can get multiple quotes from all kinda forwarders.

  17. Hi Admin,

    I am using TipTrans as you recommend. However, I have few problems – I needed to ship one package back to my supplier to fix the sample. Any idea how I can do it? I contacted their support, but they are not very responsive.
    And also – do you use their premium service? or the “free” one? Any other recommendations ?

    Thank you!

    1. Hi mate,

      Hmm sorry I have no experience with shipping samples back. Can’t you enter the supplier address and ship the package back to them?

  18. Hello,

    Thank you for sharing useful informations.
    I have a questions about the negociation with suppliers.

    When you ask for a better price between suppliers, are you not afraid suppliers cut the cost just to be competitive and win the contract resulting a cheap manufactured product ?

    Thank you for your answer.

    1. Yes I am. That is why I always have the quality inspected by a 3rd party in the factory to make sure I receive high quality products.

  19. Hi, is selling the same product as another seller a viable strategy for a FBA beginner ? The listing is already there, it has a few reviews, stock is low and it makes sense financially. I’ve been doing digital marketing & ecommerce for a long time.

    1. Yes this is called wholesaling. If you are able to buy the exact same product, so also the same brand of course. However, if you see another private label seller you probably can’t sell on his listing. Because you will not be able to sell his brand and if you sell a generic product you will be counterfeiting.

      1. Yes, it’s the same product under the same (chinese) brand. How can I tell if I will be able to sell under the same listing ? Thank you !

        Amazing blog by the way, I think I’ve read all the articles from start to finish.

        1. If you are able to buy the same brand products from the authorised reseller you should be able to sell under the same listing. An easy way to tell is if there is only 1 seller you probably aren’t allowed. But if there are multiple sellers under that listing then it’s a product you can wholesale.

          Thanks man. How far are you in your FBA process? Are there any parts that are still unclear that you like a tutorial about?

          1. Still doing research on the whole process and starting to look for a niche/product. So far your website has been super helpful in understanding all the stages and what you should expect.

            I’m still a bit unclear about the legal/financial aspects (registering a company, paying taxes etc) but that is country specific (UK).

          2. Ah yes thats very case specific. You need to incorporate in the UK & pay sales tax in the US. However, sales tax in the US is quite a controversial topic right now, as it should be paid per state. I rather not touch that subject as I am not an accountant lol.

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