US-China Trade War: Why You Should Consider Sourcing From India?

The US-China Trade war is getting more intense day by day.  The tariffs were raised from 10% to 25% on the $200 billion products that are being imported from China to the US. President Donald Trump has been threatening to slap tariffs on the remaining $300 billion products imported from China that have not been affected so far. This has sent jitters to the e-commerce sellers who have based their business on the Chinese manufacturers.

The increase in labor cost, stricter environmental regulations and the rise in raw material cost have been stressing out the sellers enough already. And the tariff hike is only adding fuel to the fire. It is safe to say that sellers are now forced to move their supply chains away from China to cut down their costs.

So what are the alternatives?

It is a no-brainer to conclude saying one should source away from China to save themselves from the tariff rise. Countries like India, Vietnam, and Mexico offer low labor cost and quality on par with the Chinese products. However, China has been the world’s top manufacturers amounting to almost half of the products used and sold globally for a reason. They have decades of experience in providing a complete supply chain with smooth logistics. This is precisely what the other countries lack.

Labor cost comparison

Source: www.8020sourcing.com

India clearly has an upper hand over Vietnam in terms of labor cost. Although it is now removed from the GSP beneficiaries the products that Amazon sellers would normally procure are still exempted and even otherwise the overall cost is much lower compared to sourcing from China or other countries. And also India is way more advanced in technology and have years of hands-on experience, especially in areas like apparels, agriculture, automobile, and machinery.

Let’s weigh down the pros and cons of sourcing your products from India and how you can bridge the gap.

Ease of Communication

Chinese suppliers are notorious for their poor English which leads to misunderstandings between the sellers and suppliers. However, English is one of the primary languages and widely spoken in India and we can expect to have fewer mishaps with the Indian suppliers.

Unique Products

India is a house of labor-intensive handcrafts and hand-made products, jewelry, apparel and is very strong in customized products with original designs. You may find a lot of unique products which you can’t find in China or anywhere else.

Low Labor Cost

As seen in the table above, labor cost is very low in India compared to any other competitor countries with less strict law and regulation.

Smaller Orders

Since Indian suppliers are trying to establish new business contracts with the US sellers, many of them tend to allow unbelievably low MOQ (Minimum order quantity). This will definitely help the sellers to test new products and also to start the business with minimum capital investment.

Cons of Sourcing from India

While India seems to be cost-efficient, it has its own set of drawbacks.

  1. Geographical location – India is further away from China. This will lead to a delay in delivery of the goods. One can expect anywhere close to two weeks of additional shipping time compared to China.
  2. Poor Logistics – Unlike China, Indian suppliers are not equipped with the right logistics to provide end to end supply chain management.
  3. Inspecting the products and performing quality checks – there are not many agencies in India to do an extensive inspection of the products and analyze the standards.

What to source from India?

In 2018, India exported goods worth 58.9 billion dollars to the US and it is only going to increase in the coming years. India has been the most preferred sourcing destination for its labor-intensive hand made products such as woven cotton-based products, fashion accessories, gift articles, and home décor items. India is the largest manufacturer of Organic cotton in the world with a 51% share being exported every year and also a front-runner in exporting leather products such as bags, belts, and handbags. There are also many other noteworthy categories which Amazon consumers will be highly interested in.

India's export to USA

India’s top exported products in the year 2017-18 are as follows.

Handmade jewelry and fashion accessories

Organic chemicals

Pharmaceutical products

Electrical and electronic spare parts

Apparels, clothing accessories

Home décor products

Leather products

Agriculture and food sector

How and where to find the right suppliers in India?

Finding the right supplier in India is the most difficult part of all since the Indian suppliers are not maintaining their updated online catalog.

  1. You can refer to the directory of manufacturers list on Alibaba or Global Sources. The more local option is to browse through Indiamart.com and www.tradeindia.com. Almost all the suppliers who deal with the exports have registered in these portals. However, you most likely won’t find their complete catalog online. Reach out to the supplier through email or phone and they will be glad to share the product catalog through personal message. You can also visit Trade shows that are being conducted exclusively for Amazon sellers where the suppliers exhibit their products at one place.

Also, in India there are specific cities known for different products; such as Meerut and Jalandhar are famous for sports goods, Agra for Shoes, Kolkata for leather items, Tamilnadu and Noida for Textiles, Assam and Darjeeling for Tea and so on. It is easy to apply a filter on the city that specializes in your product category.

India's export commodities

Source: http://ficci.in

 

  1. Enquire and ensure that they have experience in exporting the goods to US or EU. It is understood that those that deal with overseas exports have better quality standards than those that deal with only domestic sellers.

 

  1. Plan a sourcing trip once you have shortlisted a good number of sellers. A lot of times the information provided in Alibaba and Indiamart are inauthentic and it is good to visit the factories in person to understand their capacity, quality, logistics, etc.

 

  1. Do a thorough background check – get the company’s business registration numbers and check their credibility on the government portals.

 

  1. Invest in a small amount and test the product with the lowest MOQ possible. Take advantage of the weaker rupee.

Meghla Bhardwaj from the Global Sources had recently released a 47-page e-Book on Sourcing from India which gives you a detailed walkthrough on the product procurement from India.

Meghla has been working with manufacturers and importers for more than 15 years. More recently, this includes online and Amazon sellers. She organizes the Global Sources Summit for intermediate and advanced online sellers twice a year every April and October, co-located with Global Sources trade shows in Hong Kong. She also hosts meetups for online sellers in Hong Kong and Singapore. She is also organizing the upcoming IHGF Delhi Fair – the largest gifts and handicrafts sourcing fair in India on October 2019.

Is it a good idea to source from India?

There is no straight answer to it. In my opinion, the pros clearly overweigh the cons. Yes, the logistics are poor and finding the right supplier who has experience in exporting is super tedious. Getting the samples, performing quality checks and auditing the products may warrant multiple trips to the factory.

However, all these can be tackled easily if you find the right Sourcing Partner that can help you easily bridge the gap and escape from the tariffs.

A Sourcing Partner or Agency is someone who is responsible to find you a reliable supplier for your product category, assist in negotiating the price for your products, conduct factory audits, perform quality checks, coordinate with freight forwarders and do the end to end supply chain management.

If you are convinced to diversify and source from India, give us an opportunity to be your Sourcing Partner. We have our office based out in Bangalore, India and have a huge contact list of suppliers that deals with exporting goods overseas. We can definitely be your local sourcing partner to deal with the potential issues and ensure product quality before it reaches your homeland.

Write to us at Support@fabongo.com to have a quick chat on this.