April is a peak sourcing season in Hong Kong. Buyers from all over the world flocked to AsiaWorld-Expo with their luggage to attend trade shows, sourcing from a wide range of products. Two new shows, the China Sourcing Fair: Home Products and India Sourcing Fair: Home Products, are co-located with the China Sourcing Fair: Baby & Children's Products and were organized by Global Sources at AsiaWorld-Expo, April 20-23.

The three Fairs showcased a total of 1,500 booths from nine countries and regions. Among exhibitors, 25-25% were from Zhejiang. A large number of international top buyers attended the shows, including Atico (the largest sourcing and product development company in the U.S.), Auchan, Coles Group (the largest retailer in Australia) and Dollar General (the largest discount chain in the U.S. based on store locations).

Organizer Global Sources is a leading Nasdaq-listed business-to-business media company. The company provides sourcing information to volume buyers and integrated marketing services for suppliers. It holds specialized trade shows which run 29 times a year across 10 cities.

Large-scale trade shows are good indicators of how the economy is performing. Fluctuations in overseas markets are the major concern for China suppliers..

China remains a key supply base; 57% of buyers to increase imports from China

The global financial crisis is still spreading across the world and its impact is visible at the trade show. Buyers share the same preference for lower-price products.

Global Sources Exhibitions General Manager Tommy Wong said the financial crisis has brought a shake-up to the China supply market. Those suppliers and buyers that have survived are those qualified ones. He said: "Suppliers are being re-evaluated. Buyers now are inclined to deal with suppliers that are financially stable with good bank record and are willing to accept smaller orders."

Global Sources conducted a survey on suppliers and buyers before the shows.

Global Sources COO, Craig Pepples, revealed: "Close to 50% of surveyed buyers expect to maintain or increase their total import value in 2009. We see a slight decrease in average price per item, and we know today's buyers require more flexibility in terms of order size. But China remains at the center of their sourcing plans, with 57% of surveyed buyers expecting to increase or maintain their total value of imports from China in 2009, as compared to 2008. "

The survey also revealed that buyers indicated their biggest concern in 2009 is declining consumer spending (21%). This was followed by supplier-side concerns, including difficulty in finding quality suppliers (16%), increasing prices (15%), and concerns about supplier stability (15%). Concerns over supplier stability and changing product requirements are driving up the frequency of buyer communication with suppliers.

On the other hand, China's suppliers remain optimistic about sales growth prospects in 2009, with 47% of executives expecting sales growth of 10% or more in 2009. Among suppliers selling within China, 57% expect double digit sales growth, while 36% of export-focused companies project growth greater than 10%.

At the China Sourcing Fair: Home Products, Hangzhou pet product supplier, Tianyuan, drew attention from many overseas buyers. Director Xue Yuanchao said: "We target both domestic and overseas markets. The U.S. and European markets are our key export destinations. The pet products industry is a new industry and it's being hit hard by the economic downturn as pet abandonment in foreign countries has hit a record high."

To counter adversity, the company is focusing more on the domestic market as well as developing more products with greater value. "We only rented two booths in the past. But this year we have four. By expanding in tough times we intend to show our strength," said Xue. He's full of hope for the future.

Indian competition strong; innovation is the key

Colorful carpets, animal-shaped metalware, exotic bamboo handicrafts… India Sourcing Fair: Home Products showcased a great variety of eye-catching products. The show featured 100 booths of high-quality, decorative and functional home products from India. Buyers were able to source metalware; glassware; kitchenware; home décor; coir products; steel & plastics; home textiles; arts & crafts; leather products; and bamboo & cane handicrafts that are uniquely Indian in style.

China suppliers faced direct challenges from their Indian counterparts under the same roof. Can they meet the challenge?

One representative from Ningbo bamboo product supplier, Chen Min, said: "Most Indian products are hand-made, so efficiency is low and the prices are high. Their products appeal only to a niche market. On the contrary, we are focused on mass production and we sell to large shopping malls and supermarkets. Our target markets are different."

Tommy Wong said: "Indian suppliers' production capacity cannot match that of China suppliers. However, their products are rich in colors, with quality materials and very innovative. These are the qualities that China suppliers ought to learn and work on."

One Hong Kong buyer said: "We come to the show to see if there are new products and the prices are reasonable. We'll take a look if there're new products; if not, we'll simply say good bye!"

One Hangzhou supplier was showcasing cups made of stainless steel, aluminium and quality plastic. Other than regular cups, the company has developed a new cup with unique "case", which can't be found anywhere else. Their staff revealed that the company has a team of designers. To cope with the economic downturn, they have stepped up R&D on new products.

More and more China suppliers now realize that innovation is critical for them to survive and maintain growth in today's market environment. Equally important for their business success is the market-oriented approach and how they meet the needs of their clients.

Among 1,365 surveyed China suppliers, 64% believe product innovation is very important to the success of their enterprises; 59% believe process innovation, meaning more efficient production, will be their key to success as well.

Buyers comparing more, ordering less; suppliers should be in step with their cautious way

Most buyers at the show were carefully calculating and recording price quotes with calculators and stationery. They were comparing exhibitors all over the show floor to find the best deals. In the face of the economic crisis, buyers are re-evaluating their buying options and are more cautious than before in order to minimize risk.

Pepples said: "As buyers change the way they source, suppliers must also change the way they operate to win orders. With buyers looking at more options for each purchase, suppliers have to work harder. They must submit more competitive bids and lower minimum order requirements. As more cautious buyers use a wider range of channels to find products, suppliers also need to promote themselves across more of these channels to get buyers' attention."

Surveyed buyers also indicated that the most effective ways for suppliers to win orders are to improve product quality (18%), provide better prices (18%) and accept smaller order sizes (14%).

To ride out the financial storm, 43% of surveyed executives said they will build brands and/or increase efficiency and product quality; 21% indicated they will cut costs; 20% said they will focus on the domestic market and/or emerging markets; and, 16% indicated they will expand their online channels.

In developed markets such as the U.S., imports are controlled by a smaller group of top buyers. "The 80/20 rule applies in these markets," said Pepples. "A small group of buyers control the vast majority of market share. This is good news for suppliers if they focus their promotion on influencing those critical buyers who control the market."

According to U.S. Customs data, the top 3,000 importers accounted for two-thirds of all imports into the U.S. by volume and value in 2008.

Pepples concluded: "We have been telling our suppliers all along not to waste time and energy influencing those buyers without real buying power. In today's challenging times, this is even more important. We suggest that China suppliers should seek to work with high-end, international buyers to get more information firsthand about the world market. And cooperation with these top buyers will drive the suppliers to changes, helping them upgrade to a higher level."