After working myself in a Hong Kong trading company a few years ago, and then observing my clients’ suppliers, I have noticed a lot of similarities among these companies.
I think we can distinguish between three types of trading companies:
1. Good salesmen
They are good at getting new clients… but not necessarily at keeping them.
They are often creative. In the garment/fashion industry, they often have at least one designer who proposes ideas. It is very easy for overseas buyers to develop new products with them.
I have observed a few such companies. They are often managed by a European or an American who regularly wins new accounts from his own country. But very little attention is given to work flows, structures, formats of critical working documents, staff training, IT systems, and the like. The management seldom gets out of Hong Kong to visit factories, except when customers ask for a visit.
The downside is often that the production follow up is inconsistent, and they have a hard time keeping their good clients for more than a few years.
2. Small brokers
These traders find small factories that are interested in small quantities but don’t have the capability of dealing with export customers or processing export documentation.
The obvious advantage is that MOQs (Minimum Order Quantities) tend to be low. And prices tend to be on the low side, too.
What importers should question is the type of production follow up that is taking place, and the grade of the workshops used (generally quite poor). And this is NOT the type of supplier that will help you develop your complex, custom-made cool new product.
3. Real partnership with a good factory
A few trading companies are closely associated with one factory. They might place small orders, or (especially) products not made by that “primary” factory, in other factories. But most of their orders go to that one factory. One can expect the factory owner to consider the trading company as an extension of his organization — maybe as a sales office.
The enormous advantage they get is control over what the manufacturer does. The lack of such control is what frustrates all other traders to no end. (Note that this is not always the case, though.)
It means these trading companies usually offer reasonable quality, can communicate well and be responsive, and generally speaking they “walk their talk”.
What they might lack is creativity, understanding of export markets, breadth of product offering, and… low prices (though not necessarily).
Overall, this category is severly under-represented. I wished there were more of them.
Do you see a 4th and maybe a 5th category?