If you are importing products from China to sell online, it makes sense to get support from a sourcing agent. Why? Since you are probably located far away and can’t just take a trip to China if you have any questions, a local sourcing agent can make sure all your requirements are met and help you find the best supplier for your bestseller product.
So if you want to hire a reliable and trustworthy sourcing agent, there are a few things to consider. To help you on this matter, you’ll find something you need to know on this topic in this guide.
What Is a Sourcing Agent and Which Type of Services Do Sourcing Agents in China Offer?
Product sourcing describes the process of finding a source (i.e. a supplier) for a product you want to sell.
Simply put, a sourcing agent is someone that helps you find the right supplier for you and ensure they meet your requirements. Services provided by sourcing agents include：
market research / supplier selection / price negotiation.
quality assurance / quality control /pre-shipment inspection.
customs clearance and many more.
Sourcing agents are usually located close to potential suppliers, speak the same language and are familiar with customs.
One of the most popular countries for sourcing is China as most products can be manufactured very cheaply there. China is the world’s largest producer of factory goods and a world leader for many product types. If you want to have a customized product, there is a good chance finding a suitable manufacturer in China for it.
That’s why there are so many sourcing specialists in China and why this blog post will focus on finding a sourcing agent in China.
Which Types of Sourcing Agents Are There?
As in many other service industries, there are also different types of sourcing agents:
Single Sourcing Agents Who Work Independently
Especially in China there are many sourcing agents who work on their own. They usually don’t have many clients at the same time and can therefore build up a very personal relationship with you.
However, there are also disadvantages to working with only one person.
You are 100% dependent on them and it will be difficult to find information about them before you start working together. In addition, their network is probably smaller than the network bigger sourcing agencies have.
Sourcing agencies are companies that employ several sourcing agents who have different product focal points. For example， one for consumer electronics, one for beauty products, one for furniture etc.
These sourcing agencies usually have a large supplier network and the human resources to provide you with a sourcing agent that’s experienced with your type of product.
However, in comparison to independently operating sourcing agents, sourcing agencies are usually a little more expensive.
Full Service Sourcing & Logistics Companies
The last type are companies that offer sourcing as one of many different services. They may also offer quality inspections and logistics services such as shipping and fulfillment.
Of all three types, full service sourcing & logistics companies are usually the most expensive. However, bigger companies like that have the advantage that all the tasks from finding a supplier to delivering a product to the Amazon warehouse can easily be handed over.
The in-house communication will also be better compared to hiring many different companies to work together. But in this case you need to be aware that your risk also increases, as you are strongly dependent on one single company if you leave all logistics duties to them.
How Much Does It Cost to Hire a Sourcing Agent in China?
Now let’s get to the part that’s usually of the greatest interest for most Amazon sellers: How much will you have to pay for the product sourcing services?
There are three common ways how sourcing companies usually get paid. Let’s have a closer look what they are and what their pros and cons are.
Commission-based Pricing Model
As mentioned before, sourcing agents often work on a commission basis.
This pricing model depends on order quantity, order frequency and order value. Usually the commission percentage is between 2 and 10 percent, often around 6%. The smaller your order, the higher will be the commission fee.
A simple example:
If the order value is only $1,000, you will pay about $100 (10%) for the sourcing service. If your order value is $50,000, you usually won’t have to pay $5,000 (10%), but around $2,500 (5%) or less.
Another common structure is that the commission for the first order will be high and for repeating orders lower.
The sourcing company does all the work in finding a suitable supplier for you. As soon as you’re ready to place an order, the commission is agreed. You will pay the amount to the sourcing company as soon as the goods are shipped. The problem here is that the sourcing agent has no interest in finding a low priced supplier. The higher the order value, the more the sourcing agent earns from the deal. So why should they suggest a factory that can make your product for $5,000 if they can suggest one that charges $10,000 where they earn a commission that’s way higher? So this pricing model may cause a conflict of interests.
Charging an Hourly Rate
In this model, the sourcing agent is paid according to his working hours.
The advantage is that no matter how much the deal with the supplier is worth, you will only pay the fixed hourly rate. However, in this case your sourcing specialist has every reason to take his time.
You might pay more than the work is worth and will receive the results later than necessary.
Agreeing on a Flat Fee
With this model, you pay a fixed amount that is agreed at the beginning of the project. The sourcing company starts the research right away and you will receive a list of suitable suppliers and an evaluation of which one is best for you.
There will be no further costs.
The disadvantage here is that you will pay in any case – whether you choose one of the suppliers the agent researched for you or not. The sourcing agent may not put that much effort into the research because they will get paid either way.
Mixed Payment Structure
In the mixed model you will pay a flat fee until a certain amount.
If the order value exceeds that threshold, a commission fee will be charged. The advantage is that you don’t have to commit immediately. Instead, you can first order a smaller amount to see how good the supplier is without paying much to the sourcing company.
This way you can test how well the cooperation with the sourcing agent works without entrusting them with a large amount of money right away.
How to Find the Best Sourcing Agent in China – 7 Steps Checklist:
To help you find the ideal sourcing agent for your business, we compiled this helpful checklist:
Step 1: Define What You Need
The first step is to become aware of what you need and what requirements you have for your sourcing agent and supplier. It’s helpful to write down notes describing what is important to you.
This includes the scope of services, language skills, location, level of experience, payment model, etc. Your requirements to the manufacturer should also be clearly defined: Which working conditions should prevail, which material type and quality should be used, how long should the delivery times be etc.
Step 2: Set Your Budget
In the second step, you should think about your budget.
How many units do you want to produce, how much can you spend on your products and how much can you pay your sourcing agent? It is best not to set a 100% fixed budget, but a range, as unexpected costs can always occur.
Step 3: Choose a Sourcing Agent
As mentioned before, there are different types of sourcing agents.
Each type has its pros and cons. Decide whether you prefer to work with a single agent, a larger sourcing company or a full service sourcing & logistics company.
Step 4: Research & Compare
Now that you know what you need and what kind of sourcing agent you want to work with, you can start your research.
But don’t just Google and use the first result that pops up. On platforms， you can get a great overview with all the info you need.