Recently, I met a French person working in Shanghai. He and his partner have founded a trading company — the word “traders” is part of their company’s name.
I asked him whether he felt this activity was harder and harder in the China sourcing field. He said no, certain buyers are actually looking for this kind of service.
We discussed the advantages, for an importer, of buying from a Western trader based “on the ground”:
- The manufacturer gets paid by the traders, so he has to listen to them. It translates in better compliance, as well as time savings. For example, they can do the QC inspection, and then wire money immediately after all is confirmed.
- They have experience buying a certain type of product, especially in the region where they are based. They also understand the destination markets’ requirements, and can make small adjustments/approvals on the fly.
- The importer can call someone and have a quick, effective, and sensible conversation.
- In the eyes of the importer, the trader is the supplier. He is more likely than local suppliers to take responsibility in case of problems.
- Similarly, the trader is not expected to play cat-and-mouse games.
All of this can be true, and it makes for a good sales speech! Some importers are very reluctant to buy directly from factories, and are happy to pay 10-20% extra for that kind of reassurance.
However, the smart buyer should keep a few principles in mind:
- It’s better to deal with a small trading company, with the boss and 2-3 assistants, rather than a larger company. They tend to be quite disorganized — I am thinking of the 15-people structures as well as giants like Li&Fung.
- I have seen many Europeans and Americans who, after living for a few years in Asia, have completely lost track of any moral compass. They use the same tricks as the savviest Chinese suppliers, at the expense of unsuspicious importers.
- The trader should justify his role (and his margin) by giving clear status updates according to a pre-determined timing. If they have not adopted project management tools (listing the tasks necessary to get the order shipped out, setting up milestones…), they should accept to do it for you.
- Do not give all your business to one trading company. Especially if they are not transparent about the manufacturing facilities and the sub-suppliers!
- For important orders, check quality by your own means (or through a third-party QC firm). Many intermediaries will not stop a shipment even when they notice issues, because it would run counter to their short-term business interest. And most of them only do a quick and superficial inspection.
- If you cannot afford to receive a late shipment, you should audit and approve the factories. It is one thing to trust someone’s character, it is another one to trust their competency.
Anybody has interesting experiences/thoughts?
We have had generally, but not 100%, good results using Chinese staffed trading companies. As suggested, the local presence of the trading company provides more continuous follow-up, and I think deeper connections with the factories. I also expect the trading company to earn its commission, and the good ones do. I look for them to bring awareness, and comfort, with Western business practice. The good ones also provide technical oversight. As the saying goes, “You can eliminate the middle-man, but you cannot eliminate his function”.
While recognizing that the trading company is a distinct business, in most ways we treat the trading company personnel as if they were the sales department at the factory; we honor their relationship by keeping pricing discussions private, but all other matters are fair game for discussion with the factory.
In two different situations, we have had problems with trading company people — coincidentally (I think!) with the same factory.
One disadvantage with the very small firm is the vulnerability to personnel change. One of our two problem cases was quite sad – the principal of the trading company was in a serious auto accident and was effectively disabled. It took us months to get this situation resolved. (Initially we tried to honor our original relationship with the injured fellow, but he was no longer capable of doing the job, and had no backup. Eventually we engaged another trading company to take over the account.
Brad,
Thanks for telling us about your experience.
I think you wrote something very important: “we treat the trading company personnel as if they were the sales department at the factory”. Many importers make a big mistake: they let the trading company hide the manufacturer. In that case, they don’t even know how many workshops are working on their orders, or whether the factory cares at all about their production!
Veronika,
You are right… Unfortunately, most trading companies in China act the way you describe. And that’s incompatible with a proper quality assurance strategy.
Renaud and Brad,
I’d like to join your comments. What I don’t like about the local traders is the way they often try to hide they are traders and pretend to be the factory representatives.
We’ve recently advised a client to cancel an order by a supplier who might have been a trader with many factory contacts (and that would be actually fine) but who tried to hide it and kept answering our questions in a fuzzy and confusing manner.
Hi Guys,
Just had a quick read of your site, and whats above, and thought to add my 5 cents. Nice blog by the way.
I’m Australian, and I run a small Trading Company located in GuangZhou, assisting people from all over the world to source and manufacture, have done so for the past 15 years. My office has just 5 people working in it, myself inclusive. I monitor the entire business closely, even proofing all correspondence going out to my customers, though my workers have university level English(in my 15 years in china I have never met anyone that can speak english like a native English speaker, far from it, I am also sure my chinese and Japanese does not sound 100% either lol ). I oversee the entire operation from submission of sample to packing and sealing of the containers ( my other business is shipping, so that company then takes over and we ship the goods), I run a tight ship so to speak, my company is very successful, and this will be our 15th year of positive trade in China.
As much as I would love to give away all of my resources and factory details to customers about their products and where they are being made, I simply don’t, and won’t. I admit, i do have something to hide, and its my livelyhood that i wish to protect. I did it years ago at the start, I used to reveal the factories that were manufacturing for my customers, and customers just circumvented my company.
If the customers did’nt go behind me to talk with the factory, then after one contact to the factory by the customer it was the factory that chased the customer to deal direct. Either way, we were loosing some of our customers. It took me just 4 months to wake up and change my ways.
Think about it like this also, customers come to me and expect me to keep a secret about their new invention or patent, which we do of course……so if they trust me to do that, then surely they can trust me to manufacture their goods. If there is no trust then there is no business IMHO.
I wont go on about my company here, as I am not intending to advertise my services and crash this blog, just wanted to add that comment based on what i have read above. It is true however, some Trading Companies are poorly run and certainly dont QC products as they should, this is mainly by the locally owned chinese traders, though this is not the rule.
But, keep in mind though, no one is twisting anyone’s arm here to use a trading company. The choice is always the customers, whether they pay an additional fee for someone to act on their behalf, or they buy a ticket and come to china and live for 30 days while their production is made, and hope their goods are finished within a month! My advice, make sure your passport and visa have plenty of validity if you want to go down that road, if manufacture was that simple you would not have too much to say in this blog would you Renaud?
Do your research people, every thing can be found on the internet these days, and at the end of the day, there is no better recomendation than that of fellow business people, so ask the questions!
Thank you.
Dear Paul!
We are a small trading company in Viet Nam. We are now interesting in pig skin leather (especially split lining leather).
Thanks!
[Edited by moderator – no contact info please].
hi paul,
Could i pls get your contact details or email id. I am from India. I am a small retailer here. jus started with kids and women wear. I am looking for someone who could help me source. i do not wish to do give my own designs. i am looking for good quality and stylish clothing already being manufactured by the factories there. looking forward to your mail.
Thankyou
Hi Paul,
Thanks a lot for your explanations and your honesty. It makes perfect sense to me. It is quite risky for you to be transparent.
If I were an importers, I would try to qualify the factories themselves, but the case can be made to put everything into a trader’s hands.
Hi Paul
Whats your website and company name?
Thanks
James
Hi James,
You can see Paul’s website if you click on his name (it’s a link, that’s why it’s in bold & orange).