10 Things You Must Know About Sourcing Agent
When it comes to importing, it’s inevitable to make a contact with China. As we all known, Merchandises in China are cheap price and good quality, so most of business owners in the world tend to buy products from China. However, importing from China has never been an easy task but requires a lot of expertise, time, energy and effort. Sometimes, importing from China will bring pains and great loss. In this case, a sourcing agent who can help to take care of all importing process from product sourcing to shipping would be necessary.
Well, many entrepreneurs and business owners still have no clear idea about what sourcing agent/company and trading company are, why you need them, and what they exactly do. You must know about their roles to decide if hiring a sourcing agent or trading company is a good decision for you. This article will give you a better understanding of the sourcing agent/company and trading company.
Table of content:
1. What’s the definition of a sourcing agent/company and trading company?
About Sourcing Agent/Company
A sourcing company/agent is defined as buying agent and purchasing agent who are people or companies that offer to buy goods or property on behalf of another party. This mean sourcing agent/company and customers are the relationship of business partners. During the international trading filed, a sourcing company/agent is aiming to take care of all process from product sourcing to shipping. The most important point is that as customer’s business partner, it’s a must that keep customers informed on the manufacturer’s info, such as EXW price, factory name, address, phone number, Wechat account, etc.
About Trading Company
As for trading company, it’s mainly referring to global B2B traders, highly specialized in one goods category. Usually, products are sold to consumer, business, or government. This means trading company and clients are seller – buyer relationship. During this relationship, sellers are not supposed to disclose any info related to manufacturers and price to clients. Sellers provide an offer, if clients are happy with it, they can proceed then. Everything is not transparent.
2. What does a sourcing agent/company and trading company do?
No matter the sourcing company/agent or trading company, they can carry out the similar services.
But there are still two significant differences between sourcing company/agent and trading company. One is the way how they cooperate, sourcing company/agent usually provides a very transparent working process, client has the right to know everything about product, but trading company don’t share any information about product to client except for the prices with marked up.
The other feature is the professional performance, for certain category product, such as medical and technological products, sourcing agent would find it hard to source them because of lack of necessary knowledge. Well, a trading company maybe specialized in this filed and perform the job well.
Product Sourcing/Supplier Sourcing
Product sourcing and supplier sourcing is the basic ability for Sourcing company/agent. In order to find a proper supplier, a sourcing agent needs to check with more than 20 different suppliers on 1688.com or Alibaba. The reason why they have to check so many supplier is that only when they check with as many as possible suppliers, can they get the best price. Another reason is that the same seller on 1688.com usually has more than 3+ difference shops. If you just check with 5 different sellers on 1688.com, it’s possible that you just check with one supplier. The same situation happens on Alibaba.
For trading company, they don’t have to source suppliers again, because they are working closely with local factories. What they need to do is to check with their cooperative suppliers and get an offer and add their detailed company info in invoice sent to customers.
Sample Making and Testing
Sample making is the most important step during trading. A perfect sample will please customers a lot and drive them to place an order happily. So no matter sourcing agent or trading company, they attach importance to sample making a lot. After sample is done, sourcing agent or trading company have to test the sample and ensure sample functions properly. Material, logo and packaging are finished per client’s requirement.
Follow Up with Mass Production
Regarding the production follow-up, it is involved with supervision on several aspects, like lead time, product’s material, production amount, logo type, packaging. It’s very common that client’s production is delayed in China. Calling the supplier to following up with production now and then is a very important way to have supplier finish the mass production on time and correctly.
Quality Inspection
Quality inspection is an important way to verity that supplier is making the production according to client’s requirement. Usually, it has two forms. One is that sourcing agent or trading company carry out the inspection and submit the inspection report accordingly. Inspection proportion is 20%-30%, or client can require 100% inspection, but it would cost extra money. The other inspection form is handled by the third party, they are more professional than sourcing agent or trading company. But it often happens corruption issue that third party inspection institution member asks bribe from the supplier, which leads inspection report can’t reflect the real product’s condition.
Arrange the Shipment
Sourcing agent/company and trading company, both have a great ability to organize the logistics. Shipping fee usually takes the same cost with production, sometimes, even more. Sourcing agent/company and trading company should consider things in the shoe of client to find a reliable and economical shipping solution to deliver client’s cargo.
Other Services
Sourcing agent/company and trading company also can handle factory audit, negotiate price with supplier, Drop-shipping. To summary, if clients have any problem with their business in China, they can try to ask help from their agents to see if they can figure it out.
3. Sourcing agent VS Sourcing company VS Trading Company?
Sourcing Agent
Sourcing agent is someone who helps you find the products you want to sell and identify reliable suppliers for you that meet your requirement. They usually work from home or in a small office and charge service commission for reach project, or you can hire them as a full-time agent for your company for a certain period.
They usually work on their own and don’t have a network of clients. You can find them on leading freelancing platforms like Fiverr, Upwork, Jungle Scout market, etc. However, some professional sourcing agents have their own websites and have a network of clients. Their service commission ranges from $20 to $350. Sourcing agents usually charge $50 for one product that is pretty cheap as compared to sourcing company commission.
Sourcing Company
Sourcing company is an organization that is focused on helping the clients get access to the right supplier. Sourcing companies usually employ experienced sourcing agents with years of experience. These sourcing agents have different product focal points like one has expertise in sourcing beauty products while some other agent has good experience in consumer electronics.
They usually have a larger network of suppliers and more number of sourcing agents, and they are experienced with almost all types of products. However, in comparison to sourcing agents who work on their own, sourcing companies are more expensive. These companies are paid on a percentage basis by the clients when they place an order.
The common service charges of sourcing company in China are usually 3% to 10% of the order value. You can find them directly on Google, Alibaba.com and even hire them after paying a visit to trade fairs like Yiwu international fair, Canton Fair, and more. With sourcing and quality inspecting, the sourcing company is also supposed to give necessary information about the factories to their clients.
Trading company
It is referred to as a company that sources a variety of products from one or multiple factories. It doesn’t produce any goods. It is similar to the sourcing company, but it is generally specialized in a specific product category, e.g., beauty products, toys, LED lighting, and others.
Unlike sourcing companies, they get a margin on top of the factory’s price. They don’t use the service commission pricing model. Traders have deep knowledge about the products and have a healthy network of manufacturers that help them to exploit the price difference and maximize their profits. Trading companies can be found on Aliexpress.com, Alibaba.com, Made in China, DHgate.com and other B2B platforms.
However, most of the trading companies usually don’t admit that they are trading companies, but the hefty price tags of their products are enough to give you a clue that it is a trading company. If you are looking to buy your desired products without breaking the bank, you need to distinguish them carefully
4. Who needs a sourcing company or Trading Company?
Who needs a sourcing agent?
Clients who have a limited budget need a sourcing agent. These sourcing agents help the clients to source reliable suppliers at affordable prices. If you have no experience in importing goods from China, a trusted sourcing agent can help you.
Who needs a sourcing company?
The people who are looking to import multiple products from China and are willing to pay a higher service fee, a sourcing company is the good option to go. Suppose you want to import 20 products, you may need to contact more than a hundred suppliers to get the high-quality product. This may be a tedious job for you, but a sourcing company can do it efficiently due to their workforce and experience. Unlike sourcing companies, sourcing agents have limited resources and time, so they can’t handle multiple products at once, especially when they are working with a lot of clients.
Who needs a trading company?
Trading companies may be a better choice for those who deal in particular product categories and large enterprises who want to manage their supply chains in a better way. Either it is large enterprises or people who deal in special product categories; the trading company can help to procure their products.
It is not possible for any company to go to each factory and buy their required product, so they have to entrust the trading company to manage their supply chain. However, they charge more than the sourcing company and sourcing agent. If you deal in special product categories like medicine or chemical, you can’t find the suppliers at the trade fair. Clients usually search for suppliers on Alibaba to find their required products. But they may find the trading company rather than suppliers. To get products at an affordable price, clients should try to contact suppliers on Alibaba
5. Why do you need a sourcing agent?
There are plenty of reasons to hire a sourcing agent, including language barrier, different time zones, familiarity with the local market, finding a high-quality product efficiently and quickly, and cultural differences.
When you source products from China, it is quite difficult to follow up the mass production and keep an eye on the products’ quality you buy. Due to the language barrier, your communication with the supplier will not be clear and efficient. Even if you or your trade salesman knows Mandarin, you can’t get the requirement because of the language level or cultural differences.
As there is no time difference between agents and suppliers, they can communicate with the supplier in no time, which saves your time. Moreover, the products you receive should be high quality and meet all the standards, so you can resell them at a good price. That’s why, hiring a sourcing agent is vital to find a reliable supplier.
The main role of a sourcing agent is a middleman between you and the supplier who is ready to invest his efforts and time to make sure you get the correct product at an affordable price. In short, you can access reliable suppliers, minimize costs, save time and maximize your profits by hiring a professional sourcing agent.
6. What type of sourcing company and sourcing agent?
People rarely have an idea about the types of sourcing companies and sourcing agents when it comes to sourcing subcontractors. If you want to import goods from China, there are two different options available for you, i.e., single sourcing agents and sourcing companies.
Single-Sourcing Agents
Single sourcing agents are those who work on their own. There are a lot of professionals who work independently in China. The main advantage of hiring a sourcing agent is that they don’t work with many clients at a time and may create a personal relationship with your business. The disadvantage is that they don’t have the larger network of suppliers. Moreover, it will be difficult for you to verify the credentials of a single-sourcing agent, which increases the risks.
Sourcing companies
Sourcing companies hire several sourcing agents, and they have years of experience in their field. Such companies have a larger network of local suppliers and have more resources. The only downside is that these companies tend to be quite expensive as compared to single sourcing agents.
Global Sourcer
There are some agents who are not only sourcing from China, but also sourcing from Vietnam, even USA. These sourcing agents exist on Fiverr, Upwork and freelancer.com.
7. How do you know if a sourcing agent or sourcing company is good?
Many importers and Amazon sellers are afraid of working with sourcing agents. The character of the sourcing agent matters a lot when it comes to importing goods from China safely. To identify the trusted sourcing agent, you should keep in mind these tips. Here’s what makes a good sourcing agent.
Have Business License
No one wants to work with an unlicensed contractor to build a home. The same applies to a sourcing agent or sourcing companies you work with. A good sourcing agent not only has years of experience but also gave an official business license.
Years of Experience
If sourcing agents or sourcing companies have more experience, that means they have served more clients in the past. Years of experience guarantee the agent knows the technicalities related to the sourcing process. Moreover, a good sourcing agent can also present a lot of referrals and testimonials.
Good Language skills
If sourcing agents or sourcing companies have more experience, that means they have served more clients in the past. Years of experience guarantee the agent knows the technicalities related to the sourcing process. Moreover, a good sourcing agent can also present a lot of referrals and testimonials.
Larger Supplier Network
A larger supplier network is closely interwoven with the experience of the sourcing agent. A good product sourcing agent is able to present you with a lot of suppliers that can provide your desired product. So, they should have more connections with the suppliers and know which supplier is the best for sourcing your product.
Transparency
Transparency is an absolute must when it comes to finding a good sourcing agent or sourcing company. A great product sourcing agent tells you what costs will incur and what costs could occur unpredictably before signing the contract. Also, they would be honest to you about price what they got from manufacturer and who the supplier is.
Possess Excellent Negotiation Skills
Transparency is an absolute must when it comes to finding a good sourcing agent or sourcing company. A great product sourcing agent tells you what costs will incur and what costs could occur unpredictably before signing the contract.
Good Market Knowledge
A good sourcing agent has good knowledge of the local market. They can deliver you good services with limited hitches.
8. How much does a sourcing agent or sourcing company charge?
Now let’s get to the part that is the greatest interest of most clients: how much does a sourcing agent or sourcing company charge for the product sourcing services. There are three ways sourcing agents or sourcing companies get paid in.
Commission
The product sourcing agent often charges a service commission on each order. However, it is not possible to give the exact commission percentage figure because it depends on various factors like order frequency, order quantity, and order value. Usually, the commission percentage is between 3% and 10%. Often, it is around 6%. If your order is smaller, you need to pay a higher commission fee.
Hourly Rate
The sourcing agent is paid for all of the hours that they work. The advantage of this pricing model is that you will only pay the hourly rate regardless of how much the deal with the local supplier is worth. The downside is that you can’t track how much time they require for research work. For instance, if they complete research work in 7 hours, they may charge for 12 hours that means if their hourly rate is $30, you may end up paying $360 instead of $210. So you might receive the information on local suppliers later than necessary and pay more than the work is worth.
Flat Fee
In this pricing model, you pay a fixed amount to the sourcing company that you both agree on at the beginning of your project. So the company starts working right away, and clients will receive the suppliers’ lists in no time.
9. What kind of tricks does a sourcing agent/company plays?
With a lot of advantages of hiring a sourcing agent or sourcing company, there is also a dark side of procurement professionals. Kickbacks or bribe from the supplier is the tricks that they play. Kickback usually happens when the client places a large order that worth tens of thousands of dollars.
Most sourcing agents don’t want to get involved in kickback or even bribe from the supplier when a client places an order of a few thousand dollars. If the sourcing agent accepts the bribe from the supplier or involves in kickback, you may receive the products that don’t meet your quality requirements. Or, the products you received don’t comply with the requirements in your local market, and thus these products are illegitimate to sell.
10. How to find a reliable and trusted sourcing company/agent?
Follow our helpful checklist to find a reliable and trusted sourcing agent in China or sourcing company China who is willing to tell you the supplier and EXW price.
Choose a type of sourcing company
There are different types of sourcing agents/companies, as mentioned above. Each type has its own pros and cons. First off, you need to decide whether you want to work with a single-sourcing agent or a larger sourcing company. Read reviews and check testimonials while researching your next sourcing agent or company.
Verify their working process
The ideal working model is that sourcing agent/company is playing an business partner of yours, so very important point is that they are honest to you and tell you everything about price and suppliers. If you don’t know the price that sourcing agent/company get from supplier, you can’t tell if your agents mark up on prices. It’s horrible that sourcing agent/company charges you at a fixed commission but earn money on price again.
Ask for a written quotation and negotiate the price
Once you decide the type of sourcing company/agent, find the reliable sourcing agent or company and request a quotation from them. This offer should include the different pricing models, price for each service, and the way price is calculated. If you choose an independent sourcing agent, you can negotiate payment with him/her to get a better price. They are flexible with their payments as compared to sourcing companies. In comparison, larger sourcing companies work on fixed prices. However, they have some margin for discounts which make the deal pocket-friendly. Remember to ask for a copy of their official business license. Choose the one that best suits your requirements and budget.
Document everything that you agree upon
In the last step, document everything that you agree upon to avoid any disagreements in the future. For instance, it must be clear that what will be the payment type, total amount, and who is responsible if delivery is delayed or product quality is not high-quality. Both parties should agree to all terms and conditions via email. Documentation always helps you if anything goes wrong.
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