Sourcing your products from China becomes a key challenge, as China can be difficult to navigate, especially for new importers. Mistakes in the early stages of importing can drastically impact the future potential of your business.
The best way to mitigate the risks of improper procurement is working with aagent.
What are the options for procurement, and why is a sourcing agent your strongest opportunity for growth?
There are four major options for procurement: direct purchasing, commissioned agent, trader, and sourcing agent.
1. Direct Purchasing
Purchasing direct from a manufacturer means that you handle all interactions with the supplier yourself. You find the supplier, choose the products, negotiate price, draw up contracts, handle claims and disagreements, perform quality inspections, build relationships, request samples, and more.
A number of new sellers mistakenly think this is the best avenue because they can maintain full control of their supply and aren’t charged a fee that cuts into their margins.
However, this is also the riskiest method. Unless you’re an experienced pro in the manufacturing industry, you make yourself vulnerable to scams, costly processes, and other inefficiencies by purchasing direct. Plus, you have to learn the entire industry yourself, which takes a significant time investment. Without the appropriate resources, you’re often trying to blindly navigate a complicated world.
2. Commissioned Agent
You can hire an individual agent to help you find suppliers for your product.
These agents are usually overseas and have a large network of partners and resources. They’re also low cost and fast.
However, they are very rarely professional and offer very few services. The agent will find you a supplier, but then you are on your own. They usually don’t help you build long-term relationships with these manufacturers or provide other consulting services. Agents tend to keep their resources locked up, giving you very little visibility or access to your own supply chain.
Plus, the majority of agents get a commission from the supplier. This means they’ll usually defend the
supplier in the case of negotiations, error, or disagreements. They usually aren’t looking out for your
A trader is like a middleman for locating applicable suppliers. They will help you find a manufacturer and they’ll handle payment.
This is not popular for procurement because it’s the most expensive option for the lowest return. Traders take a percentage of your margin on every order, which can heavily cut into your revenue. They also maintain total control over your supply chain with little transparency.
4. Sourcing Agent
A sourcing agent is the strongest option for almost all importers. This is a third party that
works with you, not for you. This builds a partnership to help you find suppliers, assess products,
negotiate price, build contracts, handle claims, and build supplier relationships and communication.
The only con to a sourcing agent is that it can be an upfront investment. However, in long-term, working with a sourcing company is the most efficient and profitable solution.