David Wu
Bachelor degree, majored in Electrical and Electronic Engineering
5 years of foreign trade experience
7 years in V-Trust specialized in electronic products inspection
AQSIQ Inspector Qualification Certificate

Jan 21, 2013

Trading Companies VS. Factories

When sourcing from China, which is the best choice; to deal with a trading company or directly with the factory?


The obvious choice would be to deal with the factory directly, because they should offer the lowest price. However, many buyers, including large chain stores are still using trading companies to source from China, and these trading companies are highly completive, but why?


Let’s talk about the pros and cons of dealing with a trading company.


Pros:


1.It makes sourcing simple.
It is simple when you are purchasing a small range of simple and cheap goods, such as gifts and toys. However most of the time, that is not the case. Most buyers will want a large range of products in one single order. Trying to source 30 or so different models from 10 or 20 different factories is bound to drive you crazy. Hence buyers turn to a sourcing company to take care of this for them as well as to keep track of the order, including production and delivery.


2.Trading companies are familiar with the industry, so they are able to find the appropriate manufacturer for your order. Especially when you are going to buy something new, their experience in this specific industry can help you.


3.They are specialized and experienced in international trading.
Generally speaking, salesmen in trading companies are much more experienced, they are well educated, specializing in international trade (including international rules, laws, procedure, documentation, etc…), and they can speak much better English. This enables easier commutation and fewer mistakes. New buyers will especially prefer trading companies because trading companies will help them solve the difficulties associated with order control.


In many factories, salesmen are less educated and their English is poor. They are also not very experienced in international trade, so communicating with clients is more difficult.


4.Some large trading companies may even offer you better trading terms than the factories, who will often ask for a large deposit.


5.Large trading companies are trustworthy and stable. This is very important during the current unstable global situation, because many factories (no matter what size) can go bankrupt and close unexpectedly. However one should also note that precautions must be taken when dealing with smaller trading companies.


6.When placing a relatively small order directly with the factory, you might find that the delivery time for your purchase will be unusually long. This is because factories will not be so accommodating for such a small quantity, especially if they have other larger orders already booked.


Cons:


1.Firstly, it is clear that trading companies will almost certainly offer a higher price, compared to the right factory.


2.There will be a lag in communications. Any question that you ask will have to go through the trading company and then to the factory and vice versa.


3.Salesmen in trading companies are less experienced in the product or the production process than those in the factory. This is because they are usually office based, away from the factory itself.


4.Trading companies may choose different factories for different orders, they may even change the factories, which makes it possible that the quality is not stable. For example, your first batch will be good quality and your second batch will be bad quality, this is likely to happen if the trading company switches factories.


Both trading companies and factories have their advantages and disadvantages and either may be a good choice for your company depending on your specific needs.  It is suggested that buyers compare those advantages and disadvantages before placing the orders. It is more important to find an appropriate person who can cooperate with you properly, than to find a good product.

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