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?