A lot of our new China sourcing customers request us not to source products from trading companies. We are more than happy to abide by customer wishes, but I wanted to create this article to introduce people to the hidden aspects of a trading company that most guides won’t tell you.
A lot of the guides I read focus entirely on getting your products for the lowest price possible. But we say otherwise.
Any DIY importer looking to turn pro needs to streamline their sourcing process. And a great way to do this is to look at trading companies as much as manufacturers.
So, I am going to be super biased here and list a bunch of reasons why trading companies are are going to be better for you and your streamlined importing process.
Our Seven Reasons
1）Trading companies understand customer service more so than factories. Their focus is entirely on the customer so it is often easier to communicate with them.
2）They build the relationship so you don’t have to. A trading company will often work very closely with multiple factories and have very good relationships. They pass these relationships down to you in an effort to increase their worth to their customers.
3）They are willing to go the extra mile when the factory won’t. If you want multiple items sourced for one product, they can help. If you need special package or special labeling, a trading company can help.
4）Trading companies often use factories that are not big enough to have their own international sales team or export license. This means, they are working with factories that have lower prices than some easy to find competitors online.
5）Trading companies have little overhead, so they can offer lower prices. Their markup is sometimes as little as 0.5%. Rent is cheap in China and trading companies don’t need to be huge. A team of four to ten workers at a trading company can have a much lower overhead than a factory of 100 employees or more.
6）Trading companies are great for small quantity buyers. They often have great relationships with their factories or have product stock on hand, able to offer lower order quantities for the small sized importer.
7）They offer more products and are often happy to send you additional product samples for free. I always tell my clients to request their trading company send them three of their best selling product samples in every shipment. This is a great way to source more products and do so quickly and efficiently.
Thinking Twice about Trading Companies
So before you run away from the idea that a trading company is just another middle man stealing pennies from your profits, understand the massive benefits they can bring. It isn’t uncommon for serious importers to only use trading companies because of how much more enjoyable they are to work with.
Why would anyone want to buy through a trading company when they can cut out the middleman? Can’t I save money by going factory direct?
It’s easy to find a factory online. So if going factory direct is the best option, why are there still so many trading companies out there?
Most people seem to hold onto the common misconception that it’s always better to go factory direct. And sure, it’s great if you can find that perfect factory and you don’t need the benefits that a vendor or trading company can offer. But in reality, you’ll find that most factories will have issues and the prices you can get if you buy through a trading company are often lower. So you may want to think about if you and the factory actually have the resources to work together. Here are three great reasons why many importers continue to buy through a trading company:
1. SUPPLIER VERIFICATION AND QC
Trading companies operate as the go-between for you and a factory. They work with a factory to manufacturer your order, and in exchange, they earn a profit by charging you back a percentage of the order. A good trading company will make sure all the products made in the factory are up to your standards, so they can continue to earn your business.
Many trading companies have a long-standing relationship with the factories, so they’re aware of the capabilities of each. Trading companies are able to reasonably ensure the quality of the finished products. They might visit the factory to carry out product inspections and check up on an order. They may even go a step further and bring in a 3rd party QC professional to inspect if they don’t have their own people. It can be very troublesome, and costly in the end, to leave this responsibility in the hands of the factory.
2. FAVORABLE PRICINGtrading company
Buyers often assume they’ll get a better price when dealing with factories directly, but that’s not always the case, particularly for smaller-time buyers. If a factory and a trading company have been working together for a long time, they might be able to get you better prices and payment terms. Even if a trading company is dealing with a new factory, they’ll likely be offered a lower price by buying many products in bulk.
3. BETTER COMMUNICATION
Chinese education is getting better and better. Most factories currently have their own sales staff capable of communicating with overseas clients. But even with bilingual staff, there are still culture differences and communication gaps which sometimes can lead to disastrous results.
For example, when a Chinese sales rep talks to the factory manager, cultural norms dictate that the employee listen to the boss without questioning. A trading company is technically the client of the factory. So it’s often easier to have a trading company communicate your product requirements and expectations to the boss instead of a sales rep.
You may have a very unique product that requires you to communicate the specifications directly with the factory. Otherwise, chances are good that a trading company has already dealt with that or a similar product. Many buyers can benefit from better communication if they buy through a trading company.