Mention sourcing agent, and many beginners will have similar questions. They want to know things like: “How can a sourcing agent benefit me? Why should I have a sourcing agent? How do I find a sourcing agent that will meet my specific needs?”
This article is going to answer these questions and provide some basic information on what sourcing agents do. The goal is to help your business get off the ground and become profitable.
Our recommendations include:
- Finding purchasing agents near your product’s industrial cluster;
- Finding purchasing agents with their own warehouse and inspection teams;
- Finding legally registered companies, and avoid freelancers;
- Finding the most suitable purchasing agent for you and your products;
- There is no perfect purchasing agent;
- Not all buyers need a purchasing agent;
- When sourcing from China, it is more beneficial to hire Chinese;
- Commission is the most mainstream purchasing agency fee;
There is no better time than now, so let’s get right into it!
What are sourcing agencies?
Sourcing agents have a few different names. In the Western world, buyers call them a procurement agent, purchase agent or buying agent. Other common names include trading agent or export agent. The Chinese people in this industry call themselves China sourcing agent.
It is the specific role of a sourcing agent to help individuals or businesses find products in another country. If you are here, it is assumed you are looking to source products from China to the United States. You will need to find and sign a contract with a China sourcing agent. The agent will then help you find a manufacturer in China. The agent then makes sure the manufacturer chosen meets the specific needs of the product in several ways like:
- Other requirements you may have
What does a sourcing agent do?
A sourcing agent sources products from manufacturers for your specific niche business. This is a very basic definition. Sourcing agents do much more than find products. A quality sourcing agent will do much more than find products. In fact, a good sourcing agent often includes the following services:
- Price negotiation
- Follow-up productions
- Design product packaging
- Quality control
- Product compliance
- Cargo transportation
- Customs clearance
This is only a small part of what does a sourcing agent do for you.
Each purchasing agent works individually with the buyer. If you are doing product sourcing for Amazon, then you need private label solutions.
Your sourcing agent can help you with that. They can also help you with custom product and packaging, apply labels and even take product photography.
Why do you need a sourcing agent?
New buyers often try to buy products directly from manufacturers. They visit sourcing websites: Alibaba, Aliexpress, Dhgate, Global Source, 1688 and the like.
The results are always mixed. Do not be surprised if the product quality is lacking.
Related post: Top China Wholesale Websites that You Need to Know
At the center of what a purchasing agent does is supply chain optimization. The purchasing agent’s goal is to find the lowest total procurement cost for you. This means the agent looks at the entire production process – everything from raw materials, product packaging solutions, shipping, customs duties, documentation costs and more.
Links within the chain are also looking to their own competitiveness and profitability. All the links want and need to work together to save on waste and keep long-term competitiveness within the chain.
If you are looking to buy directly buys from China factories and ship your products directly to Amazon, you will need the following at a minimum:
- A third-party inspection company to review product quality
- A shipping agency to arrange export
- An Amazon FBA prep service company to ensure product packaging and labeling compliant with Amazon’s requirements
The logistical work behind finding and importing products is time consuming. The process can also turn into a nightmare quickly. Any lack of communication and coordination between you and the manufacturer may lead to price increases and worse.
This article outlines the 11 leading reasons why you do need a sourcing agent in 2023.
Should I hire a sourcing agent?
This is not an easy question to answer.
All businesses are different with different needs.
Consider: If you have a simple product and need a small order quantity, a purchasing agent may not be your best interest.
Here is an example of what we mean.
A client contacted us about sourcing 100 pillows. The industrial cluster for pillows is in Hebei Province (this is a province in northern China, and we are in southern China).
The Chinese trading company on Alibaba quoted $5.00 U.S. This is an all-inclusive price. We know the factory cost is $3.50 U.S.
The customer will pay $500.00 U.S. on Alibaba for the pillows – an all-inclusive price. The customer would pay us an additional $100.00 U.S. service fee to us plus an additional amount to cover shipping from North China to South China. There is very little value to the customer in this case. They would be better buying directly from Alibaba.
This scenario is true for any customer buying a small quantity of products.
What makes a good sourcing agent?
The top China sourcing agents list is common on the websites of purchasing agency companies. All of them will have an article stating they are the best sourcing agency in China.
We freely admit there are some really good sourcing agents. Are they the best China sourcing agent?
If we had to choose the best sourcing agent in China, it would be Li & Fung.
Most of the “best sourcing agents list” have never mentioned Li & Fung.
You should not be looking for the best sourcing agent in China.
It is far better to look for the best/right sourcing agency for your niche product.
Here are the methods we recommend to make that determination.
1. Check where the main industrial clusters of your products are.
How do you find the industrial clusters for your product?
Use Google, and search “Where are the main industrial clusters for [specific product niche] in China?”
If your purchasing agent is near that industry cluster, move to #2.
2. Check the infrastructure of purchasing agents.
When we say infrastructure, we mean warehouse space. A good purchasing agency needs significant warehouse space to check product quality and temporarily store products.
A third-party inspection service can help with quality control, but since we have our own exclusive warehouse, it makes the process much more convenient for you.
Did you know the majority of buying agents do not have a physical office?
This is done on purpose.
They have no investment in infrastructure and can offer very low prices. So low that it is highly unlikely they will touch your product at any point in the supply chain.
3. Check the distance between the purchasing agent and the port.
The closer the purchasing agent is to a port, the more control the purchasing agent has for exportation. This means you will have cheaper shipping costs and faster shipping to your location.
4. Check the sourcing experience of the agent
There are millions of products in China. No sourcing agent is familiar with all products. Purchasing agents familiar with certain products have a complete set of processes to help them purchase products efficiently and reduce the total cost of purchasing.
No sourcing agents are familiar with all products. Your first order of a strong niche product may require a smaller, initial order. This can help the agent learn your specific needs for your product and minimize chances of defects on future orders.
5. Distinguish between sourcing agent and manufacturers agents
A buyer who hires a sourcing agent should represent the interests of the buyer and no one else.
A manufacturers’ agent or manufacturing broker is self-employed and represents one or more manufacturers on a commission basis.
Neither one of these is ideal for you or the manufacturer.
A good purchasing agent will have you and the manufacturer’s interests in mind. The purchasing agent is looking for a win/win situation, so both customer and supplier relationships are important.
So, what do you really need to know?
A reliable agent should never receive kickbacks from suppliers. Their attention needs to be on you and the supplier. Corruption is an insurmountable red line, and bad sourcing agents accept bribes from suppliers who often offer inferior products.
6. Buying directly from Chinese factories vs. marketplace trade
Marketplace trade is for purchasing directly from wholesale markets. Most dropshipping agencies do not work directly with factories.
Dropshipping agencies source products for customers from distributors in the wholesale market. For example, the common shopping agent and Taobao agent are all such businesses.
Compared with professional sourcing agents, dropshipping sourcing agents have less start-up capital and do not need to master complicated international trade knowledge.
Dropshipping sourcing agents are usually suitable for beginners and freelancers.
How much do sourcing agents charge in China?
China sourcing agent fees are based on a commission of the purchase order, often five to 10 percent as a common standard.
Sourcing agents on freelance platforms use other billing. These agents use flat rate by time or a one-time fee per set number of suppliers found.
These agents on freelance platforms often work for themselves. Some may not live or work in China.
Sourcing fees can and do vary. We have provided a comprehensive piece on China sourcing agent fees.
How do I find a sourcing agent?
You can search China sourcing agent with Google or attend the Canton Fair in China.
We do not recommend using freelance platforms to search for sourcing agents.
You can find buying agent services near many wholesale markets in China. There are always sourcing agent companies actively selling their services to overseas buyers in Guangzhou and Shenzhen.
How to start a sourcing company?
Running a sourcing agency company in China can be difficult. It requires many different abilities to successfully start and run a sourcing agency business. Abilities like:
- Data analysis is necessary to find the right manufacturer in the shortest time;
- Communication skills to deal with different partners;
- Systematic knowledge and skills of supply chain management;
- Knowledge and skills of international trade;
- Knowledge of international logistics and customs declaration;
- Writing skills and relevant product industry knowledge are required to do a good job in website content marketing;
- SEO understanding to make the website be found by potential customers;
- Experience with guanxi within the Chinese business world
The list is substantial. This is only a small portion.
If you were to ask a founder of a purchasing agency company: “How did you become a sourcing agent?”
You may discover they have backgrounds in foreign trade companies or logistics industries. Some may have experience with multinational companies. For example, relevant work experience in the purchasing department of Wal-Mart China or Li & Fung will be of great help to establish a purchasing agency company.
The best procurement agent for you and your niche product does many things:
- Optimizes the supply chain to reduce the total cost of procurement
- Is close to industrial clusters and logistics ports
- Considers both the supplier and buyer
- Has professional ethics and work skills
Sourcing Nova is in Shenzhen. We feature a warehouse of 5,000 square meters (54,000 square feet). We have a strong commitment in finding leading manufacturers in Guangdong for our customer base and getting their orders shipped at the best possible prices.
Sourcing Nova welcomes new customers looking for top quality products from China. It is important to note we will find the best manufacturer for your products and not the cheapest.
How can we help you get started with your products? Let us know in the form below!