Why I Drop the Most Expensive China Factory

When I source a product in China, I drop the most expensive factory on the list. Cheap is not always better. But in my experience, a quote far above the market average usually means one of two things. The factory wants a fat margin, or its purchasing team buys materials badly. Neither should be my buyer's problem. There are real exceptions, and I will get to them.

Last episode I said I skip the most expensive factory and moved on. This one explains why.

The proverb you will hear in every showroom

Spend enough time in Chinese factories and you will hear 一分钱一分货 (yī fēn qián yī fēn huò). Word for word it means "one cent, one cent of goods." In plain English: you get what you pay for.

I hear it a lot, usually right after I say a price looks high. I don't disagree with it. Expensive things are expensive for a reason, and cheap things are cheap for a reason. The real question is whether that reason is worth my buyer's money.

Why the top quote rarely convinces me

Before I choose a factory, I have already researched the average price for that product inside China. I also ran a factory in China myself. So I have a rough idea of what the materials cost and what it costs to make the thing.

When one quote sits well above that average, I don't cut it on the spot. It depends on the product. First I ask why, because the answer helps me understand the product better.

Most of the time the answer is: "Because our quality is better."

That is where I pass. In my experience, about 99% of the factories that give me that answer have nothing special about them. Same materials, same process, nicer sentence. "Better quality" is not a reason. It is a slogan with a price tag attached.

The 1% that earns a second look

Some factories answer differently. They give me reasons I can check against what I already know:

• Tooling cost. When a product is new to the market in China, the mold cost is often built into the unit price.

• Development cost. If the product uses new technology or an app, someone paid to develop it, and that shows up in the price.

• Labor or materials. A factory that talks about Chinese labor costs or local material prices is speaking my language.

Those are common-sense answers. They don't prove anything yet, but I trust the factory a little more. So I keep asking questions until I really understand the product.

This is also why I can't turn my rule into a law. For a brand-new product carrying tooling or app development, the highest quote can be the honest one.

After that, it comes down to trust

Once the reasons make sense, the rest is trust. I explain the situation to the buyer. Sometimes the buyer asks for a factory audit, or wants me to go and check in person. We do that at actual cost.

In my experience, those requests come up in three situations: product quality is critical, the product is expensive, or the buyer has a very bad memory from a past supplier. I understand the last one. Once you have been burned, a nice proverb doesn't help much.

The lesson

A high price needs a reason you can check. Tooling, development, labor and materials can be checked. "Our quality is better" cannot. That is why the most expensive factory usually leaves my list early, while the mid-priced and cheapest ones stay for the next round. If you want to see how that list gets built, start with how I find factories in China.

FAQ

What does 一分钱一分货 mean?

It is a common Chinese saying, pronounced yī fēn qián yī fēn huò. It translates as "you get what you pay for." Sellers often use it to justify a higher price.

Is the most expensive China factory always overpriced?

No. A product that is new in China may carry mold costs in its unit price, and products with new technology or an app carry development costs. In my experience, though, most high quotes explained only by "better quality" have nothing special behind them.

When is a factory audit worth paying for?

From what I have seen, buyers ask for one when quality is critical, when the product is expensive, or when they had a bad experience before. At ENA, audits are done only on request or when we have doubts, and they are charged at actual cost.

Next episode: what happens when a buyer with a bad supplier memory asks me to go and check a factory in person.