If you’re thinking of trying your hand at importing to your country, you’ve probably already been searching online or attending trade fairs looking for suppliers.
What you may not be aware of is that many of the websites you have been visiting and the exhibition booths you’ve stopped at do not actually belong to manufacturers at all, but to trading companies.
Trading companies do not make goods, store them or own them. They act as intermediaries between the manufacturers and the importers who want to buy their products.
The easiest way to tell a trading company from a manufacturer is to look at their product catalogue. If it includes everything from electrical goods to rugs and ladies fashions, then they are a trading company. If there are only a few items that could have all been made on a similar production line, then they are more than likely a manufacturer.
Many importers prefer to source their goods directly from the factory if they can and the main reason for this is the lower price. If they can negotiate a good price with the manufacturer and avoid having to pay a commission to a middleman (a trading company), then they will do so every time.
Factories have direct control and knowledge of their raw materials and technology and can therefore usually offer to a lower price in order to win your business.
Get in touch
However, the problem when dealing with a factory is one of communication. Many foreign factory owners and their employees do not speak English, or those that do may not have the ability to interpret complicated information for their colleagues.
The factory is also located in another country, while you, the importer, are half a world away in Australia. That means, unless you have the time and resources to travel there frequently, your communication will be limited to hundreds of emails and long telephone conversations in pidgin English.
This is particularly frustrating and time-consuming if you are planning to have your product manufactured from scratch and are trying to communicate exact specifications to the foreign factory. The potential for error is enormous.
This is where the trading company has the advantage. Their business is built on service and, in a highly competitive marketplace, they offer the importer a complete solution from manufacture to shipping. If this is more important to you than getting the best price, then a trading company may be a better option for you in the long run.
Trading companies respond quickly to enquiries, are professional in their dealings and usually speak your language; but this is what you are paying for through the commissions they charge.
If, however, you want the best factory price without the hassle of trying to deal directly with the factory, there is another option available to you. This is to use an import agent based in the country you wish to import from.
Such an agent would have people ‘on the ground’ who could verify factory credentials and assist with negotiations, contracts, ongoing quality control and troubleshooting when production problems arise. In this way, you would receive the level of service you desire, without having to go through a trading company.
Advantages Of Sourcing Online
It’s low-cost and quick. If you’re starting with a small budget, sourcing from an online marketplace is the obvious choice. There’s no travel cost involved and you can source products from a supplier and send to FBA directly, without ever seeing the product.
There are a wide variety of products and suppliers. You have access to a large number of suppliers across China and elsewhere in Asia. Products popular on Amazon or on-trend categories crop up within a few days or weeks on online marketplaces.
Disadvantages Of Sourcing Online
It can be difficult to identify new products. Due to the sheer number of suppliers and products online, identifying products that are really new can be difficult. With online suppliers copying product images from any source, it is sometimes difficult to determine who the manufacturer is.
It can be difficult to identify manufacturers. Often, it’s difficult to distinguish trading companies from manufacturers, unless the online marketplace verifies manufacturers or the supplier is transparent about their business type on the website.
The end to end sourcing process can take longer. Receiving samples from multiple suppliers can a few weeks or even months, which makes the sourcing process longer.
There is a higher risk of scams and other trust issues. While most China suppliers are in business for the long haul, there certainly are bad apples out there. When sourcing online, you have a higher risk of getting scammed or encountering a fly-by-night-operator.
While it is easier than ever to inquire about products online, trade shows have some advantages that online sourcing can’t beat. Whether you decide to visit a show mainly depends on your business model, scale of business, and availability of financial resources.
Advantages Of Visiting A Trade Show
It can be easier to find new product ideas. Sourcing fairs are a great way to discover new products to source. Walk down the aisles and you might find an exciting new product you wouldn’t have thought about sourcing.
There are more opportunities to be the first to source a new product. Many suppliers launch new products at trade shows, which won’t be posted online until the shows are over. You get a first-mover advantage by discovering these products.
You can speed up the process. When sourcing online, you have to wait for the supplier to send you samples before you can decide whether or not a product is suitable for you. At trade shows, you can shortlist products much faster by seeing the product and asking all your questions. You can select products manufacturers are displaying, or have them custom make a product for you. Most of the manufacturers will do custom work.
You get to see the products. Viewing, touching, feeling, and otherwise generally experiencing the products gives you a better understanding than anything that a computer screen can deliver.
It helps you research a product category. If you are starting to source a product that you are not familiar with, trade shows help you do the research and determine the right questions to ask prospective suppliers.
It helps deepen current supplier relationships. If your current suppliers are attending a trade show, this is a great opportunity to meet up with them and deepen your relationship.
You can find suppliers you won’t find online. Some suppliers feel they get higher quality leads at trade shows, and will only market themselves there, rather than online. Buyers sourcing online only won’t find these suppliers and their products.
A business is called a business when you have products to sell. However, sourcing the business products from reliable and legit sources is what most retailers describe as tricky and daunting. This entire process can even be more cumbersome if you are sourcing the products from other foreign countries.
A lot can be at risk when you don’t have the right channels and connections when sourcing products. Multiple sourcing from different suppliers in foreign countries can be challenging. In addition, dealing with different products and numerous suppliers globally can expose someone to scam and fraudulent suppliers who easily can get away with your hard-earned money.
To avoid such scenarios and get your business on the move, it is wise to consult the services of a product sourcing company. Today, a lot of entrepreneurs have discovered the effectiveness of product sourcing and consulting companies and they are what every business needs to thrive in the ever-competitive business world. As a matter of fact, they are regarded as a necessity for building a business that will survive the test of time.
What exactly are product sourcing companies? Do retailers need their services? To understand more about product sourcing we have to first understand what the companies are and what they do.
What are Product Sourcing Companies?
Product sourcing companies are middlemen who facilitate relationships of retailers with suppliers. They mainly specialize in importing goods or products from various parts of the world on your behalf.
The companies have direct contacts with suppliers and they locate the best sources at the most competitive prices internationally and locally. This in turn helps you save anything up to 50% or even more on purchase prices.
How does product sourcing work?
With the help of sourcing specialists, the companies are able to obtain goods, materials and services by using strategic sourcing strategies and extensive knowledge of their commodity industry. This helps maximize on profit margins and save on costs.
Due to their close ties in the sourcing world, they work with multiple wholesale suppliers and manufacturers aggregating purchasers’ needs into one service. Most products sourced by these companies are mainly sourced from low-cost countries in Asia, mostly China.
How exactly do they accomplish these? The companies have a wide connection and people on the ground that facilitates the sourcing process ranging from production, price negotiation, and buying of products up to the shipping process. This minimizes the risks of retailers been taken advantage of and escape fraudulent services as well.
Who are the product sourcing companies?
They are sometimes regarded as trading companies, third-party sourcing, importers, brokers or drop shippers and they only represent the purchaser, not the supplier.
Services may include sourcing specified products at the best price to managing the whole import process and all possible services in between. They make their profit by leveraging group spend, buying in bulk, and selling for profit.
The advantages of using product sourcing companies
The reason why you need to seek the services of a product sourcing company is:
They save you on costs
Products sourcing services help reduces costs that you could have incurred such as labor costs. They also help save on time and management. They can source your products where they get the best price and pass the cost savings, up to 50% directly to you. Some companies will also do new product research for you and deliver you samples for approval and competitive pricing.
They get products direct from the source
The companies have direct connections to the factories. This makes sourcing the products more efficient as there is direct and swift communication to the factories in question. Therefore, it fastens up the sourcing process, time, as well as resources, are managed efficiently.
Eases the communication barrier
When sourcing internationally, language barrier is what most people encounter and it interferes and delays the sourcing process. With the help of product sourcing companies, this can be avoided because the companies have personnel who can handle this very well.
The idea of sourcing goods involves the products having to go through numerous channels before the delivery of goods to your doorstep. One of the main barriers that retailers experience is miscommunication and insufficient quality control can ruin entire shipments and waste hard-earned cash.
Qualified sourcing agents and companies can arrange quality assurance checks along every step of the process to ensure early identification of any issues and present viable solutions. From sourcing from certified suppliers to load monitoring inspections, agents can cover your entire supply chain with transparency.
Selecting the Right Product Sourcing Company
To find a reputable sourcing company is like finding a needle in a haystack. Many business owners don’t even know where to begin because it is complicated and time-consuming to find a reputable sourcing company. How do you find a reliable product sourcing company?
Reputation is the key
A good reputable company will have positive reviews from satisfied customers. A company’s track record is a good indicator of the service you can expect. References from previous customers’ will be a good sign to show the reputation of the company and you can be reasonably confident that they can perform the services you need.
Beware of heavy sales pitches
Product sourcing companies that have a hard sell approach and catchy sales literature without any backup evidence should be avoided. It is wise to avoid product sourcing companies that have no social media handles and have unsubstantiated claims, outdated, and incomplete website information.
Experience is everything
Sourcing companies with experience in the field are considered to be more reliable and trustable. Though there are great and up-coming new product sourcing companies, finding experts who have been in the sourcing market for a longer period guarantees efficiency and trust.
It can cast shadows of doubt on retailers especially when sourcing from foreign countries where you need a company that can maneuver easily to get you trusted partners.
Hiring experts and experienced personnel minimizes your worries because you are assured that they have cultivated deep relationships with suppliers over their working experience.