Should you work with a Trading Company? // Types of Companies you'll find while Sourcing
If you’re searching for a supplier, these are the different types of companies you will encounter in China. When sourcing on Alibaba, Global Sources or other similar websites, be careful as many trading companies and wholesalers will present themselves as factories. It’s difficult to tell from a beginner's perspective, and it can take a second look to tell them apart. Always remember that the best supplier is buying from the factory directly and not from a reseller.
TIP: When a potential supplier sends you a picture of a product, zoom in and see if you can find a logo or factory name. If you can, you should try to contact the factory directly. Avoid trading companies, resellers and buying offices if you can and try to do business directly with the factory.
What types of Companies should you avoid Working with?
Trading companies are middlemen who make deals with a factory (or more often several factories) and sell a wide range of items. There are a few cases in which it is beneficial to deal with trading companies, specifically when you are looking to buy a small quantity of a wide variety of products. Trading companies also have a markup on the total cost of goods so you will pay more dealing with a trading company. Trading companies generally act as brokers.
Dealing with trading companies and wholesalers are similar but the key difference is that wholesalers actually buy and store the product and keep it in bulk and sometimes they may even import it from other countries. Due to the extra fees associated with warehousing and other expenses they incur, they will often be the most expensive option.
Though not as common, they are similar to wholesalers in that they buy their goods from the factory to resell; however, instead of buying a large number of items in bulk and storing them until they are sold, they will buy the items from the factory as soon as you buy the goods from them. The resellers have some similarities with the dropshipping business model.
What types of Companies should you work with?
They are the actual factories who make your products. By dealing directly with them you not only will get the best price, but you will get more control of the final product while having more control over the quality of the final product. Your quality standards will be greatly improved as well. If you want quality products at the best price then you should go straight to the source.
If you are sourcing one or two single products you should ALWAYS work directly with the factory. If you are sourcing a wide range of products, and a small number of each, then it may be easier to go with a trading company. Just be aware you are paying a higher price since the trading company needs to get their cut–but the convenience may be worth it.
TIP: Not sure if you’re talking to a factory? Ask the salesperson to take a photo of themselves in the factory holding up a piece of paper with your name and date on it.
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