Are you looking to source your leather goods from a Chinese supplier? But you are worried about how to choose a secure payment method. Rest assured! we got you covered here.
Whether you are thinking of buying or selling in the international market, you always need to use secure and reliable payment methods. Timing matters a lot. One hurdle in going international is the time, your product sourcing to delivery takes place. If your payments are on time, you won’t face any of these issues and your products will get to you timely.
Let’s talk specifically about the leather market which is growing fast these days. China is the world’s largest manufacturing hub and a giant contributor to the global economy. Major companies, retailers, sellers, and wholesalers use Chinese leather goods suppliers. Stats suggest that more than 70% of products on Amazon are sourced from China.
So, if you are just starting to source leather goods from China, better get all the information about the types of payment methods first. To help you a bit more, we have compiled the top 5 secure payment methods when working with a Chinese leather goods supplier.
Let’s get started!
Understanding the Risks of International Payments
Before getting into the methods of payments, you must first know the risks involved in international payments. This will help you in making the right decision in choosing the most appropriate payment method from the list.
1. Foreign Exchange Risks
When you start to deal with a Chinese supplier, the currency exchange rate in the market can sometimes hurt your business. When you convert the funds overseas, you will often get a lower exchange rate which can affect your budget since these rates keep fluctuating in the global market. To avoid this issue, your business should have a strong exchange policy and tools to hedge these risks.
2. Political Risks
The political situation of a country has a significant impact on the trade industry. If the country’s political system is unstable, there must be strikes and protests going on which will obviously impact the whole supply chain. Moreover, the policymakers often change trade policies and tax rates occasionally. This can also harm the already established business stability and hurt your profitability.
3. Country Risks
Country risk has a direct effect on your business’s global operations. So, the economic stability of the country from which you are sourcing the products is really important for the success of your business. The political unrest or currency risks can be easily overcome if the supplier’s country has strong economic health.
A country like China has an impeccably strong economy, which is why almost every industry is standing firm here including the leather goods supplier industry.
4. Non-payment Risks
A fraud or a non-payment risk is an annoying thing for a business operating globally. It not only costs you the money but also your valuable time giving your booming business a big blow.
To avoid this kind of risk it is important to either take 100% cash in advance or 80% or more payment upon placing the order. This way non-payment issues can’t haunt you. But if you are new in this business, negotiate a little but not too much. Too much of anything is risky.
5. Documentary Risks
You have found a reliable supplier in China, and have no currency exchange or non-payment issues but you forgot about the proper documentation for cross-border transactions. This can result in significant delays and you can lose potential customers too.
So, before placing an order make sure to read the customs clearance rules, and gather necessary documents such as commercial invoices, billings of lading and shipping, the price of the goods, etc. If you fail to provide all required documents or there are errors in them, you should get ready for the consequences including delayed shipping, fines, and even rejection of goods.
How to Mitigate these International Transaction risks?
The simple answer to this question is using the secure payment method or gateway especially if you want to stay safe from spam, fraud, or ghosting.
Reliable payment methods provide you with a sense of security when you start dealing with Chinese suppliers. For example, when you use an online platform to transfer your money such as PayPal, you will get a good foreign exchange rate with minimum taxes and a super quick method to send and receive payments.
Similarly, other payment methods help you in safe international trading and we are just starting to talk about them in the next section. Keep on reading!
Top 5 Secure Payment Methods When Working with a Chinese Leather Goods Supplier
A lot of Western importers have a lot of queries about how they pay their Chinese leather goods suppliers, here are our 5 recommended payment methods.
1. PayPal
PayPal is a popular online international money transfer method used by many businessmen and importers like you for quite a long time. It has established its name as one of the most secure payment methods worldwide with the ability to send money to more than 200 countries. It is reported that PayPal has 426 million active users, it’s a huge number with 6.6 billion transactions.
The good thing is you can send and receive money using PayPal in China but it is not one of the favorites of Chinese suppliers. Firstly, for any international transaction, PayPal charges a 5% fee which is a bit higher than other methods. Secondly, the withdrawal fee is even higher (3-5%) and the Chinese suppliers want you to pay this fee yourself. Thirdly, the suppliers need to use a 3rd-party app to transfer the money from their PayPal account to their bank account which usually takes 2 days making this process lengthy.
This was only about the transactions but there are more fees coming your way. You will also be charged with currency conversion fee (4.5%) and not so good exchange rate. This further makes it a less feasible method for you as well as your supplier. Apart from all these fees, some Chinese suppliers don’t even have a PayPal account to start with.
Knowing all this, PayPal is not a good option if you are looking to make a large transaction. But it is not bad to order samples from your Chinese suppliers. Smaller transactions won’t hurt you much.
| Pros | Cons |
| PayPal is perfect for both small and sample orders. | Not a good method for large orders. |
| It offers quick and secure transactions | High transaction fees |
| You can convert your currency easily | Comes with not-so-good currency exchange rates |
| Chinese suppliers can use 3rd party apps to transfer money to their local banks | Not all the suppliers have PayPal account |
2. Letter of Credit (L/C)
If your transaction is a huge amount, you want to go with the most reliable and professional way for your payments. And there is nothing more secure, than a Letter of Credit. It is issued by the importer’s bank which guarantees that the buyer will get full payment once the order is completed or the conditions that you have mentioned in the letter are fulfilled.
L/Cs ensure the timely payment to the supplier making him work on it diligently. Another good thing about this letter is, that you don’t have to pay anything in advance, this letter has an expiry date on it which means your supplier needs to complete your order before that. This also puts pressure on the supplier because of which your shipment will dispatch likely on time.
But never try to overburden your supplier, add flexible points to the L/C. Most Chinese suppliers prefer the Letter of Credit over other methods as it is the most secure one. Never forget to mention the inspection of your order and other laboratory testing reports before making the transaction on the safe side.
One thing that you should keep in mind is the lengthy paperwork and documentation involved in this method. Because you are going through the channel of the Bank.
| Pros | Cons |
| Letter of Credit is the best fit for larger payments and orders | Not a good choice for smaller orders |
| It is the most secure method of transactions with clear structured conditions and terms. | Usually, a lot of complex paperwork and complicated documentation is involved. |
| Generally, the L/C method is limited to larger companies | Banks mostly don’t provide L/C for newly established small businesses since good credit standing is required. |
| It is a bit expensive method making it, totally unsuitable for startups. | Since banks are involved, the whole process is time-consuming. |
3. Escrow Services
Escrow services are more or less similar to the Letter Of Credit, which benefits both the buyer and seller parties. Online Escrow means as an importer you pay all the charges before the shipment upon placing the order and the fund is held by some third party (escrow platform). This 3rd-party won’t pay the supplier until all the goods have been received. This is an excellent payment method that protects both parties equally.
Online Escrow is an acceptable method of payment among Chinese suppliers but international transactions are still not that popular. Chinese suppliers prefer to get paid through Alibaba’s dedicated escrow services known as Alipay. But it’s not like they won’t be ready to use international escrow platforms, some of them happily use this service upon asking.
You can use Escrow.com to send your payment to China. It is a renowned and safe platform used by many businesses like you. There is a fixed 50 USD standard fee for each transaction along with a payment processing fee of around 3.05% for an amount up to $5000. Escrow.com also offers a payment method where 50% is paid by the buyer and 50% by the seller which seems to be a great option too.
| Pros | Cons |
| Online Escrow services are a good option for small transactions usually below $5000. | Not a recommended method for bigger transactions. |
| It is usually more beneficial for suppliers since they are their bigger customers than the importers. | Can be a little costly |
| It reduces the non-payment risks to almost zero. | For larger companies, it is a bad option to throw your money into the escrow account, as it can be held there for a longer time. |
| Escrow helps build a healthy relationship between the seller and buyer. | Unfortunately, not accepted much in international trade. |
4. Telegraphic Transfer (T/T)
Telegraphic Transfer is a type of electronic wire transfer used for international transactions. It is probably the classic payment method trusted by most traders. You can transfer the funds directly from your local bank to the seller’s bank situated in another country using this method.
Mind that the T/T method takes around 1-5 days or rarely sometimes a week to transfer money to the desired country depending upon how fast the banking system of that country is. And yes, there is a certain fee involved for both the sender and the receiver which is deducted from their banks. The T/T fee depends upon the receiving country which varies from country to country.
Telegraphic Transfer is accepted by almost all Chinese manufacturers. Even most of them request their clients to send money to their local banks. Because it is the most convenient way for them. However, you will have to negotiate who will pay the intermediary fee and other incoming/withdrawal fees with your supplier.
Clear-cut points about the fee payment should be included in your contract which will improve your relationship with the suppliers.
| Pros | Cons |
| Telegraphic Transfer is the most convenient method to wire funds internationally. | You will be charged a fee with every transaction and some intermediary fees are also involved in the T/T method. |
| It is also one of the fastest ways to send funds taking only 1-5 working days. | If you have transferred the money, it is difficult to revert the payment posing risks of disputes. |
| It is a globally recognized and secure payment method. | Banks offer terrible exchange currency rates. |
| Ideal for smaller to medium-sized transactions | Not suitable for larger transactions. |
5. Trade Assurance Services (Alibaba Trade Assurance)
Alibaba Trade Assurance is the payment protection service offered by Alibaba. This method worked similarly to Escrow services, here Alibaba acts as a 3rd party mediator between the buyer and the seller. This will work with the Chinese suppliers that support Trade Assurance on Alibaba.com.
Alibaba protects your funds if your supplier doesn’t complete the order timely or violates the conditions of the contract. For Alibaba to protect your funds, you need to make online payments to Alibaba or wire transfers to Alibaba.com. If you pay outside the platform, you won’t get the trade assurance services.
| Pros | Cons |
| A secure method to protect your transactions | There is very little communication between you and the supplier. |
| Alibaba doesn’t charge you anything while using their trade assurance service. | The Alibaba Trade Assurance is limited for the Chinese suppliers selling on the platform. |
| A variety of payment methods are accepted by Alibaba. | If your order is not fulfilled, the disputes and refunds take longer to resolve. |
| It is most suitable for smaller to medium-sized transactions | Not recommended for larger transactions. |
Tips for Safely Conducting Transactions
Until now you must have all the information about the different payment methods involved. So, here are some tips for you to conduct international transactions.
- First comes, before even making a payment you must first make sure you are dealing with a secure and official thing. Confirm with your supplier the details they provided and double-check before making your transaction.
- Secondly, choose the method that suits you the best. Don’t go with the notion that this method is globally accepted so you should also opt for it. If you are making a larger transaction, look for the options we have discussed above. If it is a smaller transaction, consider PayPal.
- Thirdly, in most payment options, the biggest problem you face is the lower exchange rate than the market. Exchange rates keep on fluctuating in the international market, which can sometimes affect your budget. Keep an eye on the rate and find the payment method where you get a good exchange rate.
Final Thoughts
The Chinese luxury leather goods market is a soaring market that has generated $9.66 billion this year and is subjected to growth with an annual growth rate of 4.77%. Whether you are an importer or a seasoned Amazon seller, this is your sign to look for a leather goods supplier from China.
The question of how to send a payment to Chinese suppliers is pretty much addressed in this article. Before starting your sourcing, you must know about the risks involved in international trading. After that, you should know everything about the best payment methods to pay your Chinese leather goods supplier. If you are a startup, you should either go with PayPal, Escrow services, or Trade Assurance services. But if you are an established company, you can use L/C or T/T.
You should choose what suits your business and do market research about it to be on the safe side.
Other than adopting the best payment method, you should also look for a reliable leather goods merchant. Try Mherder which is the leading leather goods merchant in China. You can get a wide range of leather products from leather handbags, purses, tote bags, backpacks, messenger bags, wallets, cards, or passport holders to belts. Check out the website and we are sure you will find things of your interest.
