There is no doubt the role of a Chinese product sourcing agent or agency is more and more important in the global trade community. Many do not know much about the sourcing agent outside of a name and their role in finding products. Sourcing Nova is going to address all of the information you need about sourcing agents in the following post. This way when you are ready to source products from China for your new business, you will be well prepared for the experience.
What is a Chinese Sourcing Agent？
In its simplest definition, a Chinese sourcing agent is a person whom you hire to find appropriate products for your business. When you select a product and contact Sourcing Nova for quality Chinese products, we choose a member of our team to work on your behalf as the buyer for your products. Additionally, the sourcing agent will ensure all of the following: finding the appropriate manufacturer, price negotiation, follow-ups, quality control, compliance, testing, shipping, logistics and more. Other services outside of these can be negotiated at the outset.
There is no argument that China is a world leader in manufacturing of a variety of products, and those looking to start a new business selling private label products will find a manufacturer in and source of goods from China.
Thus, there are several sourcing agencies and hordes of agents working with innumerable factories across the entire country.
Sourcing agent or Sourcing agency
Today’s global economy means many people often see sourcing agent and company as synonymous. For most intents and purposes, this is true. However, these are both two distinct concepts. It is important for you to know the difference between them.
A sourcing agency is just that. It is a group of people working together but have different roles within the company. Individuals each have specialized tasks – sourcing, quality control, warehousing, logistics and shipping. They have considerable flexibility with finding manufacturers and often help more than one customer simultaneously.
The vast number of sourcing agencies are located in and around the majority of the industrial clusters within China – Yiwu, Guangzhou and Shenzhen.
Product purchasing agent
The product purchasing or sourcing agent, and focus of this piece, can be an individual and hired as a full time employee to help you with your products. The agent is actually somewhat a misnomer, as there can be a few people working in a small office or home office.
Some of these agents may have considerable experience with trading or Chinese sourcing companies. You can often find individual sourcing agents on various freelancer platforms: Fiverr, Upwork and the like. Some may have websites and are indexed in Google.
What does a purchasing agent do?
The sourcing agent will find the product manufacturer that most closely meets the requirements of your specific product design. Specifically:
- Step One: You generate a product design – material, size, function and the like.
- Step Two: You share your product design or idea with the sourcing agency.
- Step Three: The sourcing agent will find five to ten manufacturers that meet your specifications, along with making sure the company is compliant with necessary laws.
- Step Four: You select a manufacturer from the list provided.
- Step Five: The sourcing agent acts as your buyer in China, facilitating all necessary communication between you and your manufacturer. This is a very detailed element of the process.
- Step Six: The products arrive at your specific location, and you begin sales.
Specifics of Step Five
Step Five is actually considerably more detailed than the other steps. The following are procedures what your purchasing agent will do during the product production phase:
- Communicating with the manufacturer and negotiating prices
- Coordinate production
- Checking production and updates
- Sample check and quality inspection
- Necessary updates
- Storage while preparing for shipping
- Shipping to your location
- Necessary paperwork – BoL, Invoices and the like
These services are common across many sourcing agents and companies. You can change services based on your specific needs.
The services above are considered the mainstream and basic services. Some larger, professional sourcing companies will be able to help with private label solutions. The private label option has three main components:
- Product customization
- Packaging and label customization
- Product photography for e-commerce
It is important to remember there are good and bad sourcing agents within this industry. It is common for many business owners to feel the services of a sourcing agent are not necessary or are afraid to use those services. The best thing to do is find a reliable sourcing agent who offers excellent long term relationships and a strong supply chain for your products.
Our primary job is helping you find products. We also help our customers with consulting. Our extensive knowledge of the industry and selling on various platforms positions us to find products with long term viability.
There are some products that appear hot and move quickly. These are often fads and will be gone as quickly as they appeared. Some recent examples include wrist bands in various shapes and fidget spinners.
Why hire a purchasing agent at all?
Many who sell products on Amazon are not necessarily from the U.S. It is common to have sellers from across the world.
The world of business in China is unique. Navigating their complex unspoken, soft elements is all but impossible for anyone that is not 100 percent familiar with the system.
There are stories of sourcing agents taking product ideas for their own sales or sold to competition.
This is rare, however, and we will be sharing red flags that you need to look for when selecting an agent. Follow those tips, and you will be in excellent hands.
However, there are more reasons behind hiring a sourcing agent to source products from China. Considerations like:
Full understanding of the manufacturing supply chain
Your better Chinese buying agents are going to understand the manufacturing supply chain. This means we can get a full overview of the various suppliers from the supply chain perspective. This way, the product sourcing agent can see the strengths of the supplier and learn the fundamentals of the factory and employees.
It is very common for there to be outstanding suppliers who have no online presence. They may have an old, out of date website or page on Alibaba or 1688.com but are the primary suppliers for many Fortune 500 companies.
Compare this to a company with a great website, product pictures and video. They are gold members on Alibaba, have significant transactions and are nothing more than middlemen sitting in an apartment using low prices to lure customers into shoddy deals.
Our understanding of the supply chain means we at Sourcing Nova can find the diamond in the rough – the essence of what it means to be a successful product sourcing agency.
Save you considerable time handling the details
Time is a precious commodity, and it is one a business owner will never have enough of for their business.
There are countless manufacturers on the Internet, and not all of them have your best interest in mind. You will be spending an inordinate amount of time ordering samples, vetting and negotiating over your product specifications. Do you honestly have the necessary time to set aside to finding the best possible suppliers? Keep something in mind – you will need to order samples from several different suppliers before you find the one you want and like. Then you still have to organize product orders, MOQ, changes, inspections, forwarding, freight, customs and delivery to your location. This is assuming you have found a supplier you can trust 100 percent.
This is a major undertaking. If you make too many errors along the way, you will jeopardize your business and success.
Sourcing Nova and your sourcing agent will take care of all of this for you via sourcing services.
You will have time to devote your energy to what you do best – sales and marketing of your new products.
Initial contact with preferred manufacturers
Your purchasing agent will select a few different manufacturers of your products before settling on a single one for your sourcing solutions. Many times the manufacturer will not be proficient in your language, and the agent will function as a translator for you and the manufacturer.
Your agent should be familiar with your product by this point so they can share the information without misunderstanding or mistake.
Negotiations – a vital part of Chinese business
Negotiating prices and pricing is a very large part of the Chinese business structure and culture. The sourcing agent is often familiar with prices and pricing and can negotiate the best possible price with the highest quality.
Many who do not use sourcing agents think haggling the manufacturer incessantly will achieve the goal of lower prices. This may happen, but the cost cuts come at the expense of lesser quality materials or production quality.
The only way to properly handle negotiations is to be fluent in the language and familiar with the business culture of China – two things a sourcing agent is capable of doing on your behalf.
Certification standards –
Historically, China was well-known for labor rights violations and environmental destruction. Both have changed and changed for the better. The more reputable companies will have certifications and licensure from the government certifying their business practices.
It makes good sense to want to see these and make sure those practices are adhered to on a regular basis.
However, this will do you no good if you: 1. Cannot read Chinese; 2. Do not know precisely what you are looking for.
You can request copies and hire translators, taking precious time and investment capital in the process. However, what guarantees do you have the documents are legitimate and correct? The translator will not know nor is it their job to make that determination on validity. It is not difficult to forge documents.
A sourcing agent knows not only what documents to look for but also the correct inspection services that provide that documentation. The chances of being deceived are exceptionally slim in this case.
You get what you pay for with a purchasing agent
Hiring a sourcing agent means more than paying for the services. You are paying for the years, perhaps decades, of experience and networking capabilities the sourcing agent has at their disposal.
Sourcing Nova has worked with many manufacturers in a variety of industry clusters. We know what manufacturer is the best for you and your products.
It is important to note that Sourcing Nova will find the best manufacturer of your products. Best does not necessarily equate to cheapest. Keep this in mind at all times when sourcing products.
Why not buy products directly from manufacturers?
By now, it should be obvious who would benefit from a sourcing agent and their services and why it makes sense to use a sourcing service. Many people are not completely convinced and think they can save money working directly with manufacturers. However, it is important to consider a sourcing agent for the following reasons.
Initially, consider that many manufacturers are reluctant to work directly with overseas buyers.
From a communication standpoint, many manufacturers would rather use Mandarin Chinese and communicate with fellow countrymen familiar with the business world and structure. Doing so does cut somewhat into profits, but there is less headache from a communication standpoint.
Many manufacturers want payment upfront for raw materials, maintenance and worker salaries. Most overseas buyers will not pay until they have a product inspection in person or even after sales are complete.
There is also the question of time. Many times in Chinese production, lead times are exceptionally tight with many different things happening at the same time. The time it would take to communicate with an overseas buyer is simply too long in these situations.
A professional purchasing agent is familiar with manufacturers and their timelines. The agents can select appropriate manufacturers for their customers, saving time for the manufacturer and buyer equally.
Lastly, a purchasing agent can communicate product details correctly and summarize the buyer’s needs via the Product Requirements Document – a tool that invaluable from keeping errors and mistakes in the order chain.
No export/import experience
Ordering, paying for and shipping products from China is much more complex than many consider. Many things like the right supplier, production follow up, testing, quality control, logistics and the like are all important and vital.
There are tariffs, taxes and customs paperwork for when the products arrive in the destination country. If you are unfamiliar with any of this, your product order will be delayed, returned or even destroyed leaving you empty handed.
Even if you may have some small understanding of overseas purchases, export and import, a sourcing agent will streamline the process for you.
You have more than one product
If you are looking for a single product to source from China, you may need to make contact with over ten potential manufacturers. The more products you wish to sell, the more contacts you will need to make. A sourcing agent will not only find the proper manufacturers but also consolidate your product order for ease of import.
The idea that a large company has no need for sourcing agents is ludicrous. In fact, the exceptionally complicated supply chains mean a sourcing agent will streamline their processes.
A grocery chain, for example, needs thousands of products in multiple categories. It is not possible to purchase every product individually.
Even large, multi-national chains like Walmart have sourcing agents and trading companies.
Specialized products from industry clusters
There are some products that require specialized manufacture and inspection. A sourcing agent is absolutely necessary in this case.
A sourcing agent will find the manufacturer best suited to you and your specific product. This is because they have already worked with a number of different businesses and products. Over time, the sourcing agent has built a solid network of contacts and businesses.
Risk reduction of seizure at customs
The agent will make sure all of your order is complete, in full compliance with local customs, has all applicable taxes and tariffs paid and shipping to your specified location. Covering all of this means the opportunity for mistakes are considerably lessened.
Common tricks of unscrupulous agents and companies
So far, you have heard the great things about sourcing agents and companies. Sadly, there is a dark side as well. There are unscrupulous companies that take bribes and kickbacks, creating a sense of distrust for using these services.
Here are the common tricks you are likely to see.
Kickbacks and bribes
These are common with both agents and companies. Once a price is agreed on and there is transparency at the outset, any time an agent or company requests kickbacks or a bribe from the manufacturer it becomes illegal and unethical.
Here is an example: You get two prices from manufacturer A and B. If B offers a kickback or bribe to the sourcing agent, the chances of selecting B is greater regardless of the product quality. Agents and companies taking kickbacks usually end up with low quality products, products that fail compliance and requirements of the market. These are illegal to import and/or sell.
In the case of a dispute and the sourcing agent got a kickback, the sourcing agent will not work on your behalf afterwards. Instead, the sourcing agent will defend the manufacturer with a variety of reasons and excuses.
There is one thing to consider with kickbacks or bribes. They are common only with orders into the tens of thousands of dollars. Most sourcing agents will not bother with kickbacks on smaller orders of thousands of dollars.
The kickback and bribe element is considerably downplayed from four to five years ago, particularly with daily products. You have the option of finding these product through places like Alibaba, Made in China and the like. You can make your own comparison on prices and determine if a sourcing agent is necessary.
A better sourcing agent or company will be a vital part of your product supply chain. Those who are decent and serious are always looking for long term partnerships, vital for long term success.
Ways to tell your purchase agent is unscrupulous
Since you are working with someone in a completely different country and across the world, it can be difficult to make a fair determination as to whether or not your sourcing agent is good or not. Fortunately, many of those who do not have your best interest in mind have similar characteristics.
Paid by the manufacturer
Loyalty follows the money. An agent or company working for a manufacturer has the manufacturer’s best interest in mind – not yours.
Let’s return to our chef’s knife as an example.
Manufacturer A offers a quality knife, has a decent hardness, forged and proper ratios for stainless steel. They have been making knives for many years and are in the industry cluster for stainless steel and knives.
Manufacturer B is fresh into the knife world, is well outside of the industry cluster and makes stamped blades. You additionally discover sourcing agents are on the payroll and receives commissions or referral payments for this manufacturer.
Which of the two will most likely make your knives?
Inspections and commission
This is sadly common, more common than we want to admit. A sourcing agent who offers inspections but based on commission is a huge flag.
The average contract will state the agent or company will not get paid unless you accept the product order. If so, why would the agent of company bother telling you of product defects?
This would cost them income if they find defects. So, if an agent is pushing for anything but a third party inspection, something is not right.
Characteristics of a quality sourcing agent or company
China is hands down the largest producer of consumer goods in the world. The majority of sourcing agents and companies come from China.
There are sourcing agents and companies in other countries around China. Typically, these agents and companies source for their own country and rarely work with foreign companies.
If you are looking into buying products from China, selecting a Chinese sourcing agent or company simply makes sense. Before we discuss how to find a quality purchasing agent, it is important to understand what makes an agent a quality agent. Simply choosing one based on what you see in Google is not sufficient. You need to be certain the purchase agent you select has the experience and understanding of the particular products you are interested in carrying.
This starts by looking into the industry cluster of your product.
Find specialists by industry cluster
There are two sorts of companies sourcing from China: companies looking for a variety of consumer products and those looking for a single product, possibly with related products for extra sales.
China’s manufacturing industry is divided chiefly into industry clusters. These are groups that have the entirety of the procurement and supply chain management in one place or within close proximity to one another. This way gettting raw materials for products does not require a great deal of time. This means less time for you from the start of your order to its completion and preparation for export.
If you are looking for specific industrial products, looking for a sourcing agent or company who not only specializes in that product but located closely within the industry cluster. This way you can be certain 100 percent of your product order is coming from the best of the best.
More on the industry cluster
China has industrial clusters, locations within the country with similar and related manufacturers creating the same products.
Yangjiang City, Guangdong Province, is the industry cluster for food and kitchen utensils including kitchen knives.
The advantage of Yangjiang City is because of access to raw materials, including iron ore. Over 1,500 manufacturers are in and around Yangjiang City, many of which specialize in knives.
The most powerful tool in advertising is word of mouth. Locating product buyers in closely related fields of yours is a good way to find the perfect purchasing agent.
Anytime you are looking for services, it is always a wise decision to ask for and receive referrals. Better sourcing agents and companies will have plenty of happy customers and will share the customer information with you. This way you can check to see if the sourcing agent or company is right for you.
It is not recommended you ask direct competition. You are likely to be given poor recommendations or wrong suppliers. Either way, it will cost you time and money. Your competition will be laughing all the way to the bank.
No one starts out as a professional. What you want is a competent company or procurement agent to source from China. If the agent is in the appropriate industrial cluster and has strong referrals, this should give you enough information. The purchasing agent will have the sourcing solutions you want and need for your products.
Experience is a major part of the sourcing industry. Agents with over 10 years experience working solo is better than a freshly started sourcing company.
Years of experience is proof of the success of the individual or the company. After all, shoddy business owners and practices do not survive long. These companies will also be familiar with all of the other elements you should be well familiar with now – quality control, logistics and auditing.
Here is a list of other questions you can ask your potential China purchasing agent. These are certainly not inclusive, but you can get a better idea of the quality of the sourcing agent or company with the majority of these.
· How do you find the specific manufacturers?
· How well do you know these manufacturers?
· Do you have a checklist for determining manufacturer quality?
· If I come to China, can you take me to the manufacturer?
· If I become a regular customer, do you offer discounts on services?
· How big is your business? How many employees?
· What can I expect from you and the business?
· How often will I get quality inspection reports?
· What are my options if the manufacturer scams me, gives me a poor product or there is a delay in shipping?
Finding a quality sourcing agent online
You know now what to look for in a quality purchasing agent. There are several places you are likely to find trustworthy and reputable sourcing agents. Here are the three best places to look.
The almighty Google
There are few who would argue that all searches start with the search engine Google. Google is great for many reasons and has plenty of useful information. If you are interested in finding a sourcing agent in China, the phrases: “China sourcing agent” or “sourcing website” with quotation marks, will bring up a list of companies.
Be sure to review the website carefully. Content of the site, years in business, photos, contact information, size of the team, infrastructure, reviews, testimonials, blogs and more. Honest and true sourcing companies will take the necessary time to make sure their websites are indexed into Google and its first page.
Freelancing sites like Upwork and Fiverr do have some potential individual sourcing agents. Some are only part-time, offering to find you a manufacturer and report. It is then on you to contact the manufacturer and the remaining processes on your own.
These sites have revolving doors for freelancers. They can be there one day and gone the next. Use exceptional care if you check these sites for sourcing agents.
There are a number of trade fairs across China and the East as a whole. The Canton Fair is the largest of its kind in China and has exceptional opportunities for networking. Finding a sourcing agent or company at these locations is both quick and easy.
Fairs are great if you are a large importer with millions of dollars for imports annually with hundreds of thousands of products on a regular basis.
Smaller companies, ordering in the tens of thousands of dollars in product, may not get a second look. Worse, you may get set up with a less than ideal sourcing agent.
Chinese sourcing agent fees
Of all the information covered thus far, one thing we have not covered is one many want to know – how much will this cost?
The answer, like so many other answers, it depends.
There is no absolute set charge. The sheer number of different buying agents and companies offering sourcing services in China and the world makes it impossible to determine an absolute cost. Buying agent fees are going to vary depending on what services you want, cooperation, product category and order size.
There is a common fraud that some buyer agents and companies will use to attract customers. They will offer low fees or perhaps free services for a trial order. However, the procurement costs (product cost + shipping cost + time cost) is anything but low much less free. Lastly, you are likely to receive products of poor quality but are promised to have passed the quality inspections.
You can get a basic idea of those fees. Here are four common methods of fees from sourcing agents.
Hourly is just that. You are paying the sourcing agent or company for the amount of time worked.
Of the choices, this is one of the poorest decisions. You are not on the ground in China and do not know how long a particular task will take. What may be done in four hours may end up a charge for 20 hours.
A set salary
The individual sourcing agent will often charge a set price, a salary, for your products or for a period of time. This means a cost of less than $50.00 a product. This sounds like a reasonable deal, and you can work with the manufacturers about the product line with a direct professional relationship. This will be the only fees you will pay.
The agents working this way are often not familiar with sourcing and do not find the best possible manufacturers on your behalf.
The business owner that is more familiar with the process find individual sourcing agents full-time for a period of time. This way all of the work of finding manufacturers, translating and communicating with the manufacturers. Full-time agents charge approximately $800.00 a month on average.
The set salary structure may seem great, but you pay if you select a manufacturer or not. There is a chance your agent will not do much on your behalf since they are paid.
The second payment model is mixed. This means you will pay a flat fee up to a point. After that point, the payments switch to a commission fee.
With mixed payments, there is no immediate commitment. You can order small amounts or samples so you can determine if the manufacturer is best for you. More importantly, you can make a determination on the quality of the agent or company based on your findings without too much investment.
The most common charging method is a percentage cost of the overall order. The reason is because of the additional services offered – follow-up, quality control, shipping and the like.
The service charge for this is approximately five to 10 percent of the order value. Categories and product size affect the percentage. High price competition and demand products, such as rolled steel, or when the value is over $500,000.00, the charge may be as low as three percent or less.
The sourcing agents and companies working on fees less than five percent are few and far between. There are those who would tempt you with a three percent or less fee, but the costs will be higher than you can find on online locations like Alibaba. Worse yet, low quality even if the sample is pefect.
The most important thing to remember: Evaluate whether or not the agent or company can reduce overall costs, improve efficiency, ensure quality and the like.
The handful of questions that follow do not fit well into any of the above. We have included them here for your reference. Please feel free to contact Sourcing Nova if you have any additional questions we do not cover.
What do I pay for when I use your services?
This is a valid question. You are, of course, paying for our services. You are also paying for our experience, connections and vast network of suppliers of various products across China.
Why don’t companies in the West work with factories directly?
There are some buyers who do buy directly, but these are established customers – often major corporations. Chinese manufacturers would rather deal directly with their own countrymen. Doing so means there are less issues stemming from language, culture, time zones, documentation and international policies. All of these keep the manufacturer from their best profit margins.
Why don’t you use Alibaba for products?
Western buyers often select Alibaba for products, but sourcing agents do not use Alibaba. We use 1688.com. There are three reasons why we do:
· Alibaba has trading companies and lack decent marketing.
· Alibaba has high markups for operation. Many suppliers do not want to invest in opening and maintaining a store front.
· Alibaba’s ranking algorithm makes it difficult to maintain decent ranking. Many of the trading companies have full time employees strictly to stay relative.
Alibaba costs us the big three: time, energy and money.
What channels are available outside of 1688.com?
Sourcing Nova has access to the exhibition catalog, industry association recommendations, Chinese governmental websites and guanxi.
How worthwhile are your inspection services?
Our direct inspection is limited to visible and felt defects. This is not valid in the case of a legal issue. We also lack the correct instrumentation and skill for chemical composition, intensity, hardness or water content of the products. This is why we strongly recommend a third-party inspection company which holds legal weight.
What certifications or criteria is there for a sourcing agent?
There is not any particular training or apprenticeships to become a sourcing agent. Most of the product sourcing agents are trading companies, e-commerce companies, technology companies and freight forwarders. Who or what the agents are is secondary to legal registration and import/export rights.
How can I distinguish between one sourcing agency to another?
It is very simple to find over 100,000 factories who can make the fundamental products. This is not a valid assessment of the sourcing agency. What is more important is to find the best possible factory for your specific products, build a professional relationship and work for reasonable prices. This takes time to do well.
How can I avoid bad sourcing agents?
Some agents and even western companies will demand refunds and rebates on products. Reputable sourcing agents will not do this as it destroys the image of the agency. It takes considerable time to build a quality reputation and seconds to destroy it. It is important to use rational judgement and checklists – not feelings – to make the best determination for your sourcing agent. However, if you feel strongly the sourcing agent is trustworthy, by all means – give them a try. We wish you luck.
This is what Sourcing Nova recommends when looking for a quality sourcing agent. We strive to meet all of these qualifications for you. We sincerely hope you will consider our services for your specific products.
Let us know in a comment below how we can help you get started with quality products.
Which type of sourcing agent have you previously worked with? Were you happy with their performance?
Let us know and drop your comment below this article.