Last month I had an amazing experience traveling to India for the first time. India was a blank slate for me. Previously I was only able to experience India from a distance – I had only tasted their delicious food, seen their festivals on TV, and admired their colorful clothes from abroad. Now I was about to experience it firsthand.
Like most e-commerce entrepreneurs, I sourced nearly all my products from China. Some may say that I’m a “China sourcing expert”.
But before we get into my trip and what I learned let’s first take a step back and ask:
Why source from India?
Four main reasons
- Circumvent China tariffs and increased costs
- Take advantage of India’s lower labor costs
- Differentiate your products from competitors
- Diversify your sourcing and supply chain
Perhaps the strongest reason to source India stems from the recent US-China trade war. Chinese manufactured products have been slapped with a 25% to 30% import tariff on top of existing import duties when importing into the US.
This means that a product’s landed cost is going to be a lot HIGHER than before which makes it more difficult to maintain profit margins.
By sourcing away from China, you can circumvent these tariffs and potentially lower your product costs drastically.
Secondly, India produces many handmade and customized products. They rely less on machinery and more on manual labor which makes it easier to make customized, high-end products that can potentially be sold at a higher price point.
Thirdly, India has an abundant labor force. Their population is 1.3 billion people and will overtake China as the largest country in the world in the not so distant future.
Moreover, India’s labor rate is much lower than China. According to a study done by my good friend Dan Krassenstein who heads the Supply Chain for a major American bag company, he sources his products from China, India, and Vietnam. With Dan’s permission here’s how the three country’s labor costs stack up in 2018.
According to his study in 2018, India’s labor rate is 37% less than China’s. Obviously, your mileage may vary depending on your product and niche but we can make an assumption that India’s labor costs will be significantly less than China and Vietnam’s.
Finally, it makes sense to diversify your sourcing and NOT put all your eggs in one basket. Besides the tariffs, China’s labor costs are rising. China’s material costs are rising. China’s environmental regulations are tightening up. And policywise, China is encouraging manufacturers to move up the value ladder and rely less on cheaply-made products.
In fact, many of the big players such as Walmart, Uniqlo, Nike, etc. have begun diversifying their supply chains away from China since 2014 or even earlier.
So given the above reasons, I decided to take the plunge to India!
In Oct 2019, I joined the India Sourcing Trip hosted by Meghla Bhardwaj. It was an amazing action-packed week where we visited Delhi and Agra. The trip included a 3-day guided tour of the Delhi Fair, a 1-day conference on best practices sourcing from India from e-commerce sellers and service providers, as well as several cool cultural excursions including a Delhi city tour and a tour of the Taj Mahal (one of the 7 wonders of the world!). More on that later.
It was like a crash course on Indian culture, language, sourcing, and doing business all rolled into one!
As the saying goes, business before pleasure so let’s start with that.
Delhi Fair, the “Canton Fair” of India
The Delhi Fair is probably the largest trade show in India focused on showcasing locally made products for export. It takes place twice a year in April and October. Over 3,000 vendors are at the fair and they have both temporary exhibitors and permanent booths. While not as large as the Canton Fair, I suggest to spend several days there in order to see everything.
Some of the product categories featured at the fair include:
- Home Furnishings
- Bathroom accessories
- Carpets and Rugs
- Sustainable and Eco-friendly products
- Wood handicrafts
- Ethnic crafts
- Art and Frames
At first I was looking for replacements for the products I was already sourcing from China at the Fair. I wasn’t too successful at that because those products are more along the lines of mass produced machined products commonly found in China.
However, after walking the floor I realized that there were products there that were NOT FOUND in China due to different materials, different customizations, and different types of craftsmanship. More on this later.
In any case, my key takeaway is that I was surprised to find numerous new product opportunities at the Delhi Fair that are NOT commonly found in China. And they are NOT commonly found on Alibaba as well. In fact, in an informal poll of about 50 Indian suppliers I asked how many of them listed their products on Alibaba and only about FOUR of them raised their hands. This is not a scientific poll but if we assume that this is a good enough sample size then less than 10% of Indian suppliers are listing their products on Alibaba.
This means if you find these suppliers at the Delhi Fair most of your competition will not unless they fly to India. This puts you at a tremendous advantage in terms of finding suppliers for products that your competitors cannot easily find.
This is one of the key traits of a 7 Figure Seller – “Building a moat around your business.” For more on that please checkout the 7 Figure Seller Summit.
Indian Factory Visit
After the 3 days spent at the Delhi Fair we visited a leather goods and apparel factory in Delhi. This factory specialized in leather products such as leather jackets, bags, purses, etc. They also had a second factory that produced clothing and apparel for major US and European brands.
I always love visiting factories because this way I get to see “how the sausage is made”. This may sound nerdy but by visiting the factory I was able to get a sense for how things work in India.
I saw that the factory was clean and workers were engaged and friendly. The factory was heavily dependent on manual labor and less so on machine and automated production.
For example I saw the workers cutting, shaping, and sewing pieces of leather by hand and traditional sewing machines people have used in the past 100 years.
In a similar type of factory in China, you would see fewer workers and more automated machines, for example, digital sewing machines where you can program sewing patterns.
In terms of their equipment, I saw that they are virtually all imported. In fact of the key embroidering machines was made in China!
Sourcing from India – what I learned
After my visit to the Delhi Fair and tour of an India factory, here are my key takeaways.
First, the advantages of sourcing from India:
- No tariffs! This can immediately save you 25% off your product landed cost if you’re sourcing from China to the US!
- India is strong in handmade and customized products – I witnessed very high-quality lighting fixtures, furniture, handicrafts, bags, and more unique products that aren’t commonly found in China or on Alibaba.
Given that most e-commerce sellers source “me-too” or similar products from China via Alibaba, this can be a fantastic way to differentiate your product away from competitors.
- India is strong in natural materials such as artisanal wood, certain metals, natural fabrics (cotton, jute, silk) an eco-friendly products (Recycled PET, products made of leaves, etc). In fact, China imports a lot of natural materials from India such as artisanal wood, cotton, and leather to manufacture their products. So by going directly to the source you can potentially have a better selection and at a lower cost.
- Many of the products are surprisingly high quality! I’ll be honest – before going to India I expected to see cheap and poorly made products. But at the Delhi Fair and at the factory I visited – the majority of the products were very well made.
Note: This is what I observed in my short time in India and please don’t assume this means that all products in India are high quality. Within any country, there will be a range of products that fall on the higher and lower marks on the quality scale.
- More environmentally friendly products. Besides being strong in environmentally friendly materials such as organic cotton and recycled materials such as recycled PET and materials that use leaves,, I was surprised to learn that Delhi has adopted a policy of not allowing any plastic bags to be used in the city.
This is especially shocking to me because in Shanghai when if I ordered breakfast takeout from KFC, I counted at least FOUR plastic bags and several more paper bags for two sandwiches and two drinks!
Moreover in terms of logistics and shipping, I learned that shrink wrap is NOT allowed when palletizing. Though India has some of the worst air pollution in the world, they really emphasize environmentally friendly products and behavior.
- No language barrier – Most everyone speaks or at least understands English in India. Whether their promises can be upheld is another story, however!
To give you a balanced view, here are some of the disadvantages of sourcing from India
- Expect slower delivery times – up to 10 weeks! This can be more than double the delivery times you’d expect from Chinese suppliers. So you need to plan your inventory forecast more carefully or else you will be out of stock for several months.
The main cause of the long delivery time is the reliance on manual labor in India compared to reliance on automation and machinery in China.
- Certain products can be more expensive in India than in China – While India has an advantage in natural materials, it is disadvantaged in synthetic materials such as polyester, nylon, and blended materials.
This is due to the lack of equipment needed to make and process these materials effectively.
In certain cases, if you wanted to have a polyester bag to be made in India for example, the supplier may have to import the material from China. This adds to the time and cost of the final product. Not surprisingly, I was quoted a higher price from an Indian supplier for sourcing a comparable bag made in China.
- Certain materials may not be available in India – for example, a few of the private label products that I sell are made out of aluminum alloy and food grade “304 stainless steel”. Based on the metal product suppliers I met with at the Delhi Fair, none of them were able to make this product out of the same materials. Either the materials were not available at that quality level or they simply lacked the process to make them. So for these products, I decided to keep production in China
- Lack of export experience – According to the logistics experts I’ve spoken with, on the whole, Indian suppliers are less experienced with the whole export process than their Chinese counterparts. So expect a longer delivery time as they get their licenses ready and all the shipping details worked out.
Again I’m generalizing but on the whole, China commands a lead in the manufacturing and exporting game by about 10-15 years. So I would expect more bumps in the road when dealing with the export process when sourcing from India given their relative inexperience.
- Indian suppliers may lack experience with Amazon FBA packaging requirements. Unlike their Chinese counterparts, most Indian suppliers have never dealt with Amazon FBA before. So it will be your responsibility to show them how to create barcodes, packaging size requirements, and palleting instructions to make sure everything satisfies Amazon FBA’s requirements.
It’s ironic that just four years ago, most Chinese suppliers were not familiar with FBA as well and in fact, I remember having to teach my suppliers how to fulfill these requirements. Nowadays Amazon has offices in China and leads huge conferences that teach Chinese sellers and suppliers thousands at a time how to package and sell on Amazon.
Looking ahead in my crystal ball, I wouldn’t be surprised to see a surge of Indian suppliers selling on Amazon.com in the next few years. I had the privilege of speaking to a group of Indian suppliers and they seemed more interested in learning to sell on Amazon themselves than learning the best ways to work with Amazon sellers like us!
- Expect delays due to transportation, Indian Customs, Monsoons, etc.
Aaron Hughes, an American whom I met in Delhi and has spent 5 years living in India and working for a sourcing agency shared with me that “monsoon and the major festivals occur in the fall around September and October and cause BIG delays”.
From the entrepreneurs whom I’ve spoken with who have sourced products from India, the consensus seems to be to add a TWO week buffer time from the promised delivery date. This is to compensate for “Murphy’s Law” – anything that can go wrong will go wrong.
Now let’s switch gears and look at what I learned in terms of…
Doing Business in India
First and foremost, this is by no means a complete guide to doing business in India. This is based on my initial observations having spent a week in India and meeting with numerous vendors in and around Delhi Fair.
All of the Indian suppliers I met were very cordial and eager to get to know me better before we discussed any business and numbers and figures.
For example, I met a sourcing company in Delhi and they invited me to lunch and to visit their office to learn more about their business and their product line. As we chatted we learned about each other’s families, backgrounds, and hobbies. In addition to that, they were kind enough to drive me back to my hotel afterward. This is all without any expectations to immediately place an order with them. In fact, we only talked business about 30% of the time.
I sensed that building the relationship was important before potentially doing business together. This is similar to building “guanxi” or relationships in China,
In India for instance, it’s a wise move to ask factories about their history. Often times it could be a multigenerational business involving fathers, sons and daughters, and brothers and sisters. Moreover, I found that Indians are typically proud to share their history. As a result, this helps to lay the groundwork to build a better business relationship.
Regional Differences in India matter
One of the biggest surprises for me was that not all Indians speak the same language! Most everyone understands English, however, they also have native languages which they speak with their friends and family. However, these languages differ depending on the region. For example, I learned a few words of Hindi and tried using it with some new Indian friends I met. I was shocked to learn that they didn’t understand Hindi at all! In fact, they were Tamil from Southern India (Chennai) and Hindi is not used in that region. So when they traveled North to Delhi they only spoke English. I believe they have a native language to their region as well.
Secondly, different regions in India have different manufacturing strengths and specialties. Certain parts of India are strong in leather, handicrafts, wooden products, apparel, etc. And it makes sense to source a certain type of product from a certain region to make sure you are getting the best quality.
For example, if you were sourcing leather bags then the key regions to focus on would be Chennai, Kolkata, Kanpur, and Jaipur. Even within these regions, there will be differences in types of leather. Sometimes you can notice in Jaipur they use a lot of goat leather which is more thin and brittle than other leathers used in Chennai or Kolkata.
Moreover, there are certain environmental conditions you must take into account when manufacturing in certain regions. For example, in high humidity areas, you need to be careful with the risk of mold in your packaging so a dehumidifier is recommended when exporting this product.
Also when shipping your product, you need to pay attention to which PORT you will export from. India has a west coast and an east coast. For example shipping from the Kolkata port to Long Beach, USA will take 38 days. Conversely, if you shipped from the Nheva Shiva port to New York it will only take 21 days. This will save you several weeks of time in delivering your products.
There are NO RULES in India
The perfect example can be found in the streets of India. Even though there are four lanes in the streets of Delhi, you will see SEVEN rows of cars driving through them. Mark Palfreeman from SBI summed it up perfectly by comparing it to water flowing in a river. This system, while chaotic, gets the job done. No rules!
A second instance of this is in my pre-registration for the Delhi Fair. Even though I pre-registered for the trade show several weeks in advance and got a confirmation email, I was still forced to stand in line for 30 minutes to get my badge to enter.
However, others in our group received a BARCODE in the confirmation email and they were able to quickly scan the barcode from a self-service kiosk and printed their badges in seconds.
Why did some people get the barcode and others did not? I posed this question to the staff at the fair but nobody could give me a good answer. No rules!
“Pakka” Rule, for sure?
Mark also explained that when scheduling a meeting with Indian acquaintances the concept of time can be loosely interpreted. For example when you schedule a meeting with someone for 2PM they may show up a lot later. This was explained to us that when two people meet they will devote their complete attention to that person. And even though another commitment may be coming up and they risk being late, they will continue the prior meeting until they completely finish their conversation. This way, when they come to your “2PM” meeting they will give you their complete attention rather than worrying about unfinished business from their prior meeting. I believe it’s a matter of respect in some ways. Obviously, the unspoken trade-off is punctuality.
Mark also shared with us however there’s a way to make sure that the meeting time is confirmed. The key word is “Pakka”, or “for sure”? So when scheduling a meeting with someone and you want them to be on time, you ask them “2pm Pakka?”. Then their eyes may slightly widen and then they will tell you if they really can meet at that time or suggest a more realistic time.
Switching gears, now let’s turn to the cultural side of my India trip.
All work and no play doesn’t make Gary a happy camper. Fortunately, we stayed at the Delhi Shangri La Hotel. The rooms were clean and comfortable, the service was great, and the food was awesome. Also, I especially enjoyed their 24-hour gym so I could get in my early morning workout to start the day.
In terms of cultural excursions we went on a ½ day Delhi tour and visited Qutb Minar Complex, Humayun’s Tomb, and drove by the Prime Minister’s office as well (I guess it’s the equivalent of the White House for the US).
I learned a quick history lesson in that India besides being ruled by the British, also were ruled by Mongolians, Muslims, and Persians at differing times. And there are various buildings and sites that reflected this diverse heritage that made India what it is today.
But the most amazing thing that I saw in India was the Taj Mahal. It’s one of the seven wonders of the world and just seeing the marble building from miles away was amazing. And it’s so vast that as you approach it, the building seems to stay the same size even after your walking and walking and walking.
Once inside, seeing all the intricate designs and carvings in marble was a feast for the eyes. If you haven’t gone yet I highly recommend you visit it someday.
The trip to Agra to see the Taj Mahal was a long bus ride which took 5 hrs EACH WAY! Fortunately, we had some good company and fun games (Hitman anyone?) to pass the time away.
My close friends know that I love enjoying local food and I was really conflicted about this. On one hand, I wanted to try as many authentic Indian food as I could but on the other people told me to be careful of “Delhi Belly”. Many visitors experience stomach issues. But I was able to try some amazing butter chicken, samosas, and “egg curry”. So good!
What I learned about myself and my Mindset
Taking a trip to India was really taking a step outside my comfort zone. I’ve never traveled to India before and many people have told me about the good and bad things there such as “Delhi Belly”, getting ripped off as a foreigner, the dirtiness, safety concerns etc.
In addition, as some of you know, I became a dad for the first time last year and this was my first business trip away from my family. So it wasn’t easy.
But India was a blank slate for me and I was very curious to learn more about the business, culture, and the people there.
I’m really glad I did the trip, I learned a lot about the fundamentals of sourcing from India, made important business contacts, and made some new friends and contacts from India and all over the world.
At the trade show I identified a number of new potential product opportunities.
After the show, I did further research to “run the numbers” to validate whether they would be good products to sell. Several of them have great potential and I will send more formal Request for Quotations (RFQs) and have samples made to test them before deciding whether to place an order.
And finally I’d also like to send a special thanks to Meghla Bhardwaj for organizing such a fantastic trip to help us learn about her amazing country.
Dhanyavad (Thank you)!
PS: TL DR (Too long didn’t read?) Check-out this podcast by my friend Tim Jordan where he interviewed me on sourcing best practices from India!