In this post I am going to talk about how you will know a) if you want to work with a sourcing agent in China and b) if the answer to a) is yes, what type of agent is the best one for you.
I write this post assuming you read the post China direct sourcing strategy. If you didn’t, I suggest you read it first. It will help you understand the context I am talking about in this post.
Before we start talking about any sourcing agent in China in particular, and agents in general, I must say one thing. When I was working in New-York and went to visit customers and potential customers, the one thing I heard over and over again was that everybody wanted to work directly with a factory. Nobody wanted to work with “Agents”. The way they said it sounded like an “agent” is something you should safeguard yourself from and if you are not careful the “agent” is going to harm you.
According to dictionary.com The definition of the word “agent” is:
1. A person or business authorized to act on another’s behalf.
2. A person or thing that acts or has the power to act.
3. A representative of a business firm, especially a traveling salesperson.
4. A substance that causes a reaction.
According to the above definition, an agent is a person or a company you as a buyer choose to authorize to act on your behalf to do actions you choose. You, as the buyer have the power to decide what the agent (should you decide to work with one) will do, and what they will not do. According to the definition above, an agent can be someone you hire on a full time or part time basis. They can be an employee or a contractor.
Everybody’s situation is different and we all make decisions based on our circumstances. Many companies are self-sufficient and have both the resources and the know-how in order to work without agents. This post is intended to those of you that could use some help or at least an advice regarding their business in China.
3 types of sourcing agents in China
Different sourcing agents have different business models and you should be clear which type of business model works best for you.
Type #1 – Introduction Agents
If you have the ability, resources, and knowledge to work with factories without the help of any third party, and the only thing you need is to add factories to your bank of manufacturers, this is the sourcing agent for you. Their service is providing you with names and contact details of manufacturers that could be in a position to supply you the products you are looking for. You will still have to go through the entire qualification process with each manufacturer before you will know which of them can really produce high and stable quality products over time. The biggest advantage working with this type of agent is that besides a one-time fee, you are no longer obligated to pay any third party any cost related to the production of your product. You will receive no further support either.
Type #2 – Commissioned agent
A commissioned agent is an agent that in many ways will give you the same service as a trading company. The main difference is that they are not a part of the buying and selling transactions with all the implications. Instead, they earn a commission.
For this type of agent, the initial part of the work is an investment with a risk, as if for some reason, the order will not be completed, then in most cases, they are not going to get paid. So they have a higher motivation to see that the order does come to a successful close.
If you have a project you are not sure will result in a successful shipment, working with a commissioned agent is a way to reduce cost in case you will decide not to go into manufacturing.
The reward of the commissioned agent for taking this risk is that in case you will produce the order and place repeat orders, they will get paid for every single piece you will ever buy.
Type #3 – Sourcing agent in China – Business services
This type of agent usually has a wide range of services. Some of them are included in the service range of a commissioned agent. Some of them are not, and if your goal is to become independent in China, these services could be very important.
The range of services this type of agent will give you complement your company’s strengths, and give you support until you build capabilities in the areas where your weaknesses are.
This business model gives you the power and the flexibility to choose from a wide range of services, as they are broken into independent modules. This way you are free to choose which one you need and which one you do not need, allowing you to save money in areas you don’t need support.
The same flexibility allows you to start, stop and start again the services according to your needs.
Still not sure which of type of sourcing agent is the right one for you? Contact us. We would love talking to you about your projects in China.
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