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China's Underground Wholesale Markets (youngmoneychina.com)
136 points by gdilla on Aug 19, 2014 | hide | past | favorite | 49 comments



You know, I don't think I'm alone when I say I'd actually get a lot out of a blog post on 'how to open a foam recycling plant in China.'


Indeed, it was a fascinating article. I've read similar things from the guys at Dangerous Prototypes who shipped out there to prototype products; plenty of blog posts where they come back with a suitcase full of tactile switches or find out the best way to print onto heatshrink. Always carry a calculator seemed to be the main takeaway.

And then I read the bio and read "I bought a factory" and "For my second factory". It sounds like it's a fairly straightforward deal to do that in China (if you have the cash). I'd also be really interested to see what kind of hoops you have to go through, the regulatory process, hiring/maintenance and so on. And of course how much does it cost?


Straight forward is way way off the track. When doing business in China it's more like hunting in the jungle. There are some people better suited for the jungle than for the well structured city life, though. And because these are only a few, they have a relatively easy life in China. Don't take that as a hint that everybody can go there and buy factories like Pokemon trading cards. Even big, successful companies are constantly failing in China.


I would also love to find that information out. I want to start a simple manufacturing business as I know there is a big market for the product in my home country. But I would be worried about not speaking the language and all the special loops you might have to jump through, such as playing of all the locals.


Strangely, this reminds me of some sci-fi story, "First Contract".

In a nutshell, aliens buy Jupiter (most of the mass in the solar system) for the space-colonial equivalent of shiny beads, wrecking the world economy with an influx of tech-goods. One down-on-his-luck CEO struggles to get Earth out of "third world" (solar-system?) status by--how else--using cheap labor to export kitschy crap :p


Where can I find this?



Thank you!


Thanks for the comments.

Yes there are some of these places that are not "underground" but obviously there are the suppliers and areas that are less known and more used by traders like me as opposed to the more touristy types.

Regarding bitcoin, yes it does away with the payment issues but thats not the only problem with ordering from china i guess, things like ensuring the product is the correct quality, arranging freight on large consignment orders and needing to buy from multiple suppliers are why a lot of buyers like this guy buying the tv's come to china in person.

Thanks again.

Daniel


Pretty good read. I'd love to go down there and visit some of these shops, just for the hell of it. I buy quite a lot of accessories from AliExpress myself

The server seems to be down/extremely slow to load. Try the Google cache version: http://webcache.googleusercontent.com/search?q=cache:UevJZk_...


AliExpress seems to have many sellers selling fake (copy) products. How else a Samsung Galaxy S5 would sell for < $200 whereas the market price is between $500 and $600.?


The AHAMAY outboard motor is worth the scroll.


Gems like "If some kids uncle really works for Panasonic then he will be far too busy flying around town in a drop top Lamborghini to be sat smoking 200 cigarettes a day in a shit hole of a wholesale market talking to me." was enough of a hook for me.


I have to wonder if it says "YAMAHA" on the other side, as if someone was handed a photograph of a Yamaha motor and they just flipped the artwork for the other side, not realizing it was text.


The police here ride AMAHAY bikes,

Im serious.

Its even written in the same font.


The Zhong Fa Electronics Market in Beijing looked like I imagined the DigiKey warehouse to: resistors stall, oscillators stall, FPGA stall, etc.

Photos (note: less crowded because I went on a Sunday morning):

https://drive.google.com/folderview?id=0B6vx0hWnq-f-V3Z5M0FR...


Unfortunately, the author seems to be doing a bit of hocus-pocus hand-waving to make these "underground" malls seem like some mystical place. If it's too inconvenient for any of you to make it into China, you can always stop by Hong Kong.

In the district of Wan Chai (a fairly touristy area of Hong Kong), there's a fairly well known place known simply as the "Computer Centre". In it, you'll find two floors of a giant warehouse packed floor to ceiling with shops selling everything from a refurbished matte black MacBook from 2006 to an "iPhone 7". I do have to say that the vast majority of the products are legitimate, but there are booths which cater to the less-discerning customers. The great benefit of buying in Hong Kong is that you'll often find products from the mainland side and from the factories in Taiwan.


Hi,

Sorry if you feel like that, i thought it was pretty straight forward no bullshit article.

You can't really compare these underground markets (That are actually markets, physically under the ground, many of them illegal and only for wholesale buyers) I'm talking about to the shopping malls in Hong Kong which are just flashy shopping malls that anyone can walk in to.

But sure yeah, you can buy things from Hong Kong, its safer, you likely won't get ripped off but at the same time your not going to get rich doing it.

Thanks for the feedback though.


For computer parts, Wanchai computer center is ok, but not the most interesting. I'd give that label to the Golden Computer Center in Sham Shui Po (exit D3 of the MTRC of the same name).

The one in Mong Kok has gone down lately, less shops, more high-end stuff, but there are still some good PC component shops. Also in HK, you can return something within 7 days if it doesn't work. Beyond that you need to contact the distributor.

These buildings don't have everything though. I'd say that China and Thailand have a lot more to offer in terms of variety.

In Bangkok, the Chinatown area is really interesting. You can buy almost everything if you can find the street or building where a particular item is sold. Last time I was there I stumbled upon a watch market; you could buy them wholesale, by weight (not really, but it almost seemed like it).


I've found the ones on The Mainland to be way cooler, from the badass feel they have to the sheer volume of random stuff you can buy.


Funny that, just purchased one of those fake iPhones. Looks and feels the same, runs an android OS that replicates iOS perfectly. Pretty good fake if you ask me. The lower price genuine android phones will dominate the lower priced foreign markets in my opinion.


Do a netstat on the open connections on your highly esteemed hardware and be amazed at the backdoors tunneling straight to china.


A Goophone? I have one and it is rather convincing looking, although the single home button makes Android a bit more awkward to use. If http://systems.cs.columbia.edu/projects/cycada/ was actually available, the experience could be even more authentic feeling.


Xiaomi is the best at that.


it runs iOS browser and everyting (since according to Apple that is the only browser that works at all)?


This is mislabeled. It's about Guangdong (likely mostly Guangzhou and Shenzhen specifically), not about China in general.

Chinese markets in general are about the domestic market, with very few exceptions in some border regions (a few regularly sell to Russia and Mongolia in the northeast, Southeast Asia in the southwest, and Central Asia in the far west).

Guangdong by contrast cut its teeth on export during the glory days of the Shenzhen special economic zone which began in 1980.

http://en.wikipedia.org/wiki/Economic_reform_in_the_People%2...


Ha. The bit about Poland reminds me about what my dad used to do. He would drive a van delivering things to Germany/Netherlands/UK and bring it back full of second hand things to sell in Poland - usually at 4-5x the value, because after the fall of communism people would buy literally anything in any quantity. Good times.


good article, thanks. What are the prices usually like on these wholesale markets, can you give some examples to get a sense of what the retail margins could be like?

Then shipping - containers? Costs? I have a feeling a lot of Chinese ebay retailers (the ones who ship from the UK, probably have a warehouse here) don't pay import duty/taxes - how do they get around it?


30-60% depending on the product. Some stuff carries a much higher margin but requires extremely high volume purchasing and sales like phone cases for example.


This is exactly like alibaba in physical form.


If you follow Jack Ma, this kind of market place online was also his vision when creating Alibaba.


Looking at this blog I feel a little reminded of Ultima Online. Everybody's out there doing their own little business.


Very skeptical of any article that begins with "The truth behind..." Also, a little annoyed by the authors misused of "underground" here -- these malls are not underground at all, and are often far more popular than the 'real' shops.


Hi, Sorry your not happy with this blog.

I was trying to give a real straight forward look at these markets.

The markets I'm talking about are underground in both senses of the word, if you look at the first pic you will see you actually have to go underground to get inside.

Maybe were talking about different places as there are certainly touristy malls similar to this but they are a waste of time for business use.

Thanks


"Like this guy below who has travelled here to buy two hundred 32” lcd tv’s his boss needs for the hotel bed rooms in his latest development because there is no place where they come from to buy such things. Many times I have shown them the price in the UK on my ipad and they have been close to jumping on a plane to make a call into an Argos store."

This seems like a problem that will be solved by Bitcoin. The reason people like this can't just buy 32" LCD TV's from Amazon or Overstock right now is becausue of the payment fraud risk. Bitcoin removes that.


Why won't direct wire transfer solve the payment problem? With a sizable order of 200 TV, the cost of wire transfer is miniscule. Unless you don't want the order to be traceable.


After doing some electronic goods trading with China, I can say that the main issue is to make sure that what you receive is what you paid for.

Specs have a way of changing without you being informed. Consistency of quality is pretty random as well.

So you have to make sure you inspect the goods before you take them. Also, almost all manufacturers and distributors will make you pay before at the latest at the time the goods are departing. No 60 day or 120 days credit here.

You get the cash, you get the goods, most of the time.

If you're a larger trading company, you can have the support needed to inspect and ensure that the goods are up-to-spec.

Then there is Alibaba. Small quantities for direct sellers are usually OK (although quality varies greatly). At least you have buyer protection and the sellers are very careful about maintaining their reputation so they are usually prompt and efficient.

Finding a factory for something you want to manufacture (or for large orders) can be fraught with issues, the first of which is that I'm yet to find a factory that can honestly tell me they can't do something; whatever you ask, you'll get a "yes". If you have no production experience, you're in for a ride.


Excellent comment Renaud, you know what your talking about.


Wire transfers are generally very expensive so they are only practical for very large transactions. Sure it might be acceptable if you are buying huge numbers of something but what if you are just a wealthy person that wants one or two of something.

Add to that the potential expense of currency exchange etc.. etc.. It's all hugely expensive


If you need 200 TVs you don't usually just do it with a credit card, you set up an account with a reseller. There are already mechanisms for doing this sort of thing, eg escrow accounts.


Do you mind if I ask how? I ask as one who is still quite bewildered by the whole Bitcoin thing, but would love to better understand how it works.


Imagine you live in Nigeria and happen to be the one actual honest to god legit well to do Nigerian prince. You want to go shopping online for a iPhone with your credit card. Problem is no one in their right mind on planet earth will sell you that iPhone because the chances of a fraudulent transaction originating from Nigeria are close to 100%.

With Bitcoin on the other hand when you transfer someone bitcoin that payment is as good as giving them cold hard cash there is no way to reverse that without the seller agreeing to do so so there is no risk of a charge back. The seller can ship the good and the poor guy who just wants to buy an iPhone can buy his phone w/o having to fly to a foreign country.

Bitcoin is like Cash that works over the Internet. The same way email is a letter over the Internet. Same result w/o physical presence.


Thanks. To me, it seems like bitcoin solves the problem of the buyer being bogus, but doesn't solve the problem of the seller being bogus. For instance the Nigerian prince might order an iPhone with bitcoins, and never see his iPhone.

There's probably no such thing as a risk free commercial transaction. The next best thing is if somebody assumes the risk and charges an amount that covers the risk plus makes it worth their while.


Couldn't you just demand a debit card instead of a credit one? Having had the pleasure of trying to pay with an empty debit card I can confirm that it does not work.


This problem was already solved by Western Union.


Have you seen their fee structure?


Bitcoin does not support chargebacks, which moves most of the risks associated with fraud from the merchant to the customer. This means it's no longer insane for merchants to sell to places with a lot of fraud.


Payment fraud risk? Honestly, I figured it was just to save money from the economies of scale.


No, if that was the case they wouldn't have gone to china, notice the article says that the genuine goods were _more_ expensive in China.

http://dealbook.nytimes.com/2014/08/19/overstock-to-allow-in...




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