There is no doubt the role of a sourcing agent or company 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.
Definition – Sourcing Agent
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 China.
Thus, there are several sourcing agencies and hordes of agents working with innumerable factories across the entire country.
Sourcing agent or Sourcing company
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.
The 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 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.
A company 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.
Duties – Sourcing Agent
The sourcing agent will find the product manufacturer that most closely meets the requirements of your specific product design. Specifically, the sourcing agent will do the following:
- 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 agent will be over all of the following while your products are being made:
- Communicating with the manufacturer
- 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
This is quite a bit of work. Not all sourcing agents will do all of the above tasks.
Why hire a sourcing agent?
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. Considerations like:
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.
Your sourcing agent will take care of all of this for you. You can spend your time developing your business marketing plan, website and the like.
Your agent will help you make contact with the manufacturer you select. 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.
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.
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
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.
The time necessary to find decent manufacturers of products who offer all of the specific details you want in a product is done ahead of time for you. This, too, is part of your fee structure – the time necessary to find you the perfect manufacturer – a task that could take you months to complete.
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.
Who needs a sourcing agent?
By now, it should be obvious who would benefit from a sourcing agent and their services. Many people are not completely convinced. However, it is important to consider a sourcing agent for the following reasons.
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, 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.
There are some products that require specialized manufacture and inspection. Certain chemicals made in China and imported are not easily found online. A sourcing agent is absolutely necessary in this case.
A sourcing agent is a very important member of international trade. Many do not realize the value associated with a sourcing agent.
Best product value
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.
Time is never on your side in business. A sourcing agent can help you with the barriers of culture and language like we have mentioned previously. They can streamline the entire process for you by making sure your product order is in line with all necessary documentation for import.
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.
Your sourcing agent performs services based on what you need complete. It is important you and the agent lay out the services and scope of those services before starting the overall process. There are general services, however. Those services include the following.
Find appropriate manufacturers
Of all the services offered, this is the fundamental one. The sourcing agent will find the manufacturer and negotiate for the best price. This will include fine details of the specific product in question.
Some business owners feel as if the manufacturer’s information should be shared because of running thoughts of cheating or illegal activities.
This is not true. The information the manufacturer gets depends on the information shared as well as the specific duties of the sourcing agent.
Follow up, inspection and shipping
After you have made your choice of manufacturer, it is time to begin production. The agent will coordinate the production process, monitor the process and ensure the products are made on time and at the quality you expect.
Expanding on quality, the sourcing agent will find an appropriate inspection service who will inspect random samples. The purpose is to minimize any defects and mistakes within the product run.
Lastly, the shipping. This step requires expert understanding and expertise. Your sourcing agent will find the best price and help you with the necessary documentation necessary for shipping, tariffs and customs clearance. Your sourcing agent is very familiar with this, and your product delivery is dependent on this step. Pay careful attention to what is needed, and ensure the documentation is correct. Any errors could be highly detrimental to your product order.
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.
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 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. However, your sourcing agent is 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.
This should be obvious, but there are lots of excuses that can be made as to why the agent or company does not have a license – it lapsed, is on the way or lost. Regardless, no license should equal no deal.
They take forever
“Fake it until you make it” is common. The agent or company will promise decades of experience with a huge network with the goal of being chosen.
If so, they will have little effort finding the best supplier for your products. Those who take more than a week do not have the experience or network promised. Better agents and companies will have manufacturers in mind as soon as you describe your product.
More than a week is too long. Drop them for another agent or company immediately.
Poor language skills
Some agents and companies will promise near native English or other language speakers plus Mandarin Chinese, the common dialect of China.
This is a common lie. It should be easy to note how well they can communicate in your language. They may have flawless Mandarin but are unable to explain anything to you in your language.
Products of a high technical quality and characteristics are common and likely include your products as well. If the agent or company cannot communicate clearly with you or the manufacturer, you will not get the products you want or have ordered.
As an example, if your agent or company cannot adequately explain to you or the manufacturer the percentages of chromium and nickel in your stainless steel, there is a problem.
Findinga quality sourcing agent online
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 phrase: “China sourcing agent,” 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 great sourcing agent.
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 for products from China, selecting a Chinese sourcing agent or company simply makes sense. Here are the best tips for finding a quality agent.
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.
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.
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.
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 sourcing partner. 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?
Charges for services
Of all the information covered thus far, one thing we have not covered is one many want to know – how much will this cost?
We have talked about previously what you are paying for. What we have not talked about is how much you will be paying for the services.
The answer, like so many other answers, it depends.
There is no absolute set charge. The sheer number of different agents and companies offering sourcing services in China and the world makes it impossible to determine an absolute cost. Fees are going to vary depending on what services you want, cooperation, product category and order size.
There is a common fraud that some 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.
This last portion covers some of the areas and aspects of finding a sourcing agent that does not necessarily fit within any of the other portions we have covered.
Why can’t I buy directly from the manufacturers?
This is a very common question, primarily from new business owners who are looking to maximize profits by cutting out what is perceived as the ‘middleman.’
Many Chinese manufacturers are not comfortable working directly with Western businesses and would rather work with local, Chinese, partners. The main reasons are to avoid issues with business negotiation: language barriers, cultural barriers, time differentials, documentation and trade processing are all reasons a manufacturer has no desire to work directly with you. All of these slow down the manufacturing processes and costs too much in time and money.
Why do sourcing agents avoid Alibaba?
Western businesses look to Alibaba because it is convenient. A reputable Chinese sourcing agent will not use Alibaba as a rule. They prefer 1688.com – a Chinese only site – and for three solid reasons:
- Alibaba is mostly trading companies with more marketing skills
- Alibaba has an exceptionally high operating cost – into the tens of thousands to operate
- Alibaba’s ranking algorithm lacks consistency for the majority of the companies
These three pieces of information point to how reputable sourcing agents recognize Alibaba as a sinkhole of time, energy, money and marketing.
What channels do sourcing agents use instead?
Chinese sourcing agents, like stated previously, use 1688.com as a primary online source. Outside of the Internet sources include: exhibition catalogs, industry recommendations, Chinese governmental websites and guanxi.
Evaluating the inspection service of the sourcing agent
The sourcing agent can only use hands and eyes to inspect products, and this does not carry legal weight in the case of litigation. The necessary instrumentation for more detailed inspections to check other aspects of the products are best relegated to professionals with training in these specific areas. This is why Sourcing Nova recommends a third-party inspection service. If there is a need for legal intervention, the certifications and professional training of the inspection service is necessary.
Who can be a sourcing agent?
There is no education, training or certifications for becoming a sourcing agent. The majority of sourcing agents are trading companies, e-commerce companies, technology companies and freight forwarders. The specific type is not important. What matters is the agent or company is legally registered and has the necessary rights of export and import.
How can you tell the difference between sourcing agents and companies?
For any one product, there are over 100,000 factories within China that can make the product. It is not the ability to find a manufacturer that makes a good sourcing agent. It is the ability to find a great manufacturer, reasonable prices and a solid, working relationship. This is not something that will happen overnight. It takes time to generate these relationships.
How can you avoid bad sourcing agents and companies?
The first thing to look at is the promise of a rebate. Better sourcing agencies do not promise rebates. They recognize this can destroy years of hard work in a second.
Use your common sense. Check the website. Look at what they say, and trust your intuition. If you feel there is honesty and trust with the agent or company, certainly try them with samples or a small product order.
This is one of the longest pieces we have, but it is exceptionally important. However, there may be things that we have missed along the way. Did you note anything in particular you think we should cover? Let us know in a comment below.
Also, if you have your product idea, let us know as well. We are ready to help you with your Chinese products and getting your business off of the ground.