Are You Leaving Money On the Table? Part 3 – China Sourcing Agents
August 17, 2016
What are China sourcing Agents?
In the last blog we talked about Communications and Trading Companies, lets focus this time on China sourcing Agents.
A China sourcing agent is a freelancer, like an employee, and, like an employee;
- If he or she is good, then the agent is a valuable asset and a blessing. On the other hand, a bad agent is a nightmare, a lingering liability.
- Training is important: an agent performs better if he/she is trained and if he/she is part of a structured management system.
An agent works for you, the importer. As such, the Agent assists the importer with the process of buying merchandise. This means that:
- You buy the goods from the factory, not from the Agent; the Agent helps you with the process.
- Product specialist: Often, they too are specialists in certain product families, but not always.
- Relationship with the factories: They handle the relationship with the factories on your behalf and usually are very familiar with them. You know who the factories are because your buying contract is with them.
- Warehouses: They do not have a warehouse. They often do not even have an office.
- Accountability: Variable.
- How they make money: They collect a commission on the goods you buy and sometimes may also receive a monthly stipend.
The benefits of dealing with Agents include:
- They usually understand your product well and will support you, especially in the local area.
- They behave like employees (i.e. Independent contractors) and you could be their only client, which means you might get a very personalized service.
- They can be quite effective for those who buy a significant volume in 2 or 3 factories.
- They help negotiate MOQ (Minimum Order Quantities)
- Design and new ideas: Depending on the individual they can make good contributions to design and ideas.
- Sample development: They usually rely on factories to develop samples, so the performance will be uneven.
- Logistics: They follow up with factories and transport companies to ensure prompt delivery.
- Quality assurance: They often do not see this as their main responsibility, but will execute your plans and requirements and act as your eyes and ears on site. Keep in mind that Quality Control means more work and agents are not motivated to provide this service systematically and consistently.
- Price and Payment terms: They can help negotiate good price payment terms. But their commission payment structure is a conflict of interest: The higher the price of the product, the higher their income; there is little motivation to secure the lowest price.
- No fixed overhead.
The downsides of using China sourcing agents includes:
- You need to find – and then keep – a good Agent.
- Agents, like employees, require an investment of management and training.
- An agent can become sick or otherwise absent from time to time.
- Prototyping: They are usually not motivated to develop new products from scratch because this means much time, little commissions.
- Serving startups: They usually prefer to handle companies with well-established sourcing programs, not startups.
- Processes and procedures: Many agents use relationships to get results, they are not trained in specific procedures.
The types of companies that like to do business with Agents are:
- Buying groups
The types of companies that generally don’t like to do business with Agents are retailers, distributors and wholesalers. The reason is that Agents are not structured to efficiently handle a broad range of SKUs for a varying range of product lines, which is integral with a growing China sourcing operation.
Do you have sourcing agents? What are they like? Do they fit the above profile? I would be very interested to hear more about your experience!
In the next blog we will shift our focus on managing your own China Sourcing Office.
At China Performance Group, our mission is to create wealth for our clients. To learn more about optimizing your China Sourcing operations, contact us here.
By Guerschom Francois