(If you are looking to know what the differences are between sourcing agent and trading companies specifically, you can refer to a lastest blog I wrote in 2021, Comparison between a China sourcing agent and a Trading company)
Many foreign buyers seem to favor manufacturers only over all other types of business in the supply chain. And some buying offices in some sense discriminate against trading companies because they drain profits in between, and some of them tend to lead foreign buyers to think of all middlemen including sourcing agents as negative players. However, I think the decision should be left to the buyers themselves in choosing among buying offices, sourcing agents, manufacturers or trading companies.
First of all, we need to ask ourselves, what do buyers really care about? The answer actually can be very simple: quality, price and service. Although I myself am a sourcing agent, I hold the view that the products can be procured from any type of business that best juggle the three factors or anyone that can facilitate the manufacturer to adjust these three factors to a perfect balance.
For example, if a good trading company can strike a good balance among these three factors, I do not see why buyers should not choose to deal with a trader. Believe it or not, some trading companies can even offer lower price than manufacturers with the advantage of getting tax refund from the government. Moreover, it has to be admitted that they could have more expertise in terms of product knowledge than all product sourcing companies or individuals, because unlike buying offices who deal in say 30 industries, these traders have been focused on one particular industry for years.
Same with individual sourcing agents, although they are stereotyped as being always taking kickbacks in between, still there are some really professional and loyal players that worth a check, it requires sharp observation, gut feeling and sometimes just good luck from the buyers in getting a real good one. The most precious advantage in engaging a really professional sourcing agent is that, the sourcing agent search suppliers without bias against any type of business, so they can show different choices available to the buyer, and they will always fight for the client’s interests and terms. But suppliers especially trading companies sometimes can pose difficulties to their client especially when dramas happen in a business process due to natural conflict of interests. In addition, some sourcing agents can offer good references of suppliers to their clients and deal directly with the suppliers to save time for everyone. They also charge very reasonably and flexibly, in addition, they can devote more personal time and attention to their clients.
Another group of service providers are buying offices. But one of the differences is that some buying offices may be more suitable for big buyers only, because in processing large orders, for big buyers the consultancy cost may take up just a small part of their budget. However, for the majority of buyers which are small to medium businesses, entrepreneurs or start-ups, a big buying office may just cost them as much (or even more) cost as a trading company, because buying offices require higher investment in renting large office area, hiring multiple employees, etc.
Finally, it should be noted that dealing directly with manufacturers that do domestic business only is definitely frustrating, they usually export to overseas via trading companies. Fortunately foreign buyers can build an export conduit by engaging sourcing agents, business interpreters, buying offices or trading companies to bridge the gap.
Therefore, I suggest foreign buyers carefully examine the price, quality and service in engaging different types of business in the supply chain. Not any one of the three above-mentioned players is guaranteed to be the best choice.
