Many importers believe they tend to get the best price from Chinese factories. Actually, that’s not true. Sometimes, choosing Chinese trading companies is better for some businesses.
As running a trading company–Jingsourcing, I deeply understand what you think about it. Hence, I concluded some beneficial tips about Chinese trading companies. You’ll learn about which is the best for you.
1. What is a Chinese Trading Company?
In short, a trading company does not manufacture any product on its own. As a rule, it purchases products from various Chinese factories and then resells them to the clients. And a trading company often possesses various factory resources.
However, not every trading company sources goods from factories, which may have too high MOQ to reach. Some small-scale trading companies source products from other large-scale trading companies. Plus, these large-scale trading companies can offer relatively low MOQ and often cooperate with many other large-scale factories.
Furthermore, a trading company focuses on selling its services compared to a manufacturing company. In other words, they not only focus on the product quality but also care about what clients are most concerned about. You can always get help when dealing with the problems such as shipping issues, etc.
2. Six Types of Chinese Trading Companies
Chinese trading companies can be divided into different types according to various business modes. When you find different Chinese suppliers, you should choose a suitable type to fit your business.
In the following, I’ll introduce five different types of trading companies and discussed each one from the following angles:
- Trading company’s Business Model
- Advantages & Disadvantages
- Where to Find the Trading Companies
- Possible scams
Certain-field trading company
This type of trading company has existed for a long time. And they are deeply rooted in the history and culture of the country for countless years. Thus, they usually boast a stable business and possess a highly mature team with a vast supply chain.
Surprisingly, sometimes you may find a better price from them compared to dealing directly with manufacturing companies. What for?
Actually, it is a norm for different factories to offer a 10-15% difference in price due to the cost of management. However, many Chinese trading companies are aware of this concept. Thus, they know how to source quality products at a very competitive price. With that, you can get a fair deal.
For example, suppose you are into the sales of motorcycle accessories, you will need to patronize five different factories to buy accessories for five motorcycle brands. In a case like this, you will find a professional machinery company a wiser option which will save your time and effort.
How to find and identify them?
When you use the online method, first check if the products are in stock; while offline, look at the items on display. Usually, factories have products belonging to a specific industry on display. Hence, if the company has a wide range of products, it is most likely a trading company.
Moreover, in terms of price, a certain-field trading company is a better choice as they offer a relatively similar price to the manufacturing company.
As far as your goal is to get quality products at reasonable prices, and you’re willing to cooperate with a supplier irrespective of whether it is from a factory or trading company, then the trading company is your best option especially when you have a relatively low MOQ.
|A certain-filed trading company|
|Business model||Professional in a certain niche|
|Better for Whom||Importers who need high added-value products and professional support.|
|Advantages||Products are of good quality and competitive price.|
|Disadvantages||For some products with low added value, the price is not good.|
Production and Sales Integrated Trading Company
This type of trading company owns a factory to produce a certain type of product. In addition, they also deal in other related products, which are manufactured in other factories.
Factories specializing in the same product categories in China usually gather in the same industrial cluster. Thus, one factory in a certain field can easily reach nearby factories specializing in other related fields.
For instance, a trading company has a leather bag factory and they can also sell leather belts, wallets, hardware, and so on to their clients. Because there are many other belts factories, hardware factories, and wallet factories around its factory.
Importers who want to source different kinds of products can save time and energy to find and deal with plenty of factories. Moreover, you don’t need to make efforts to select a reliable supplier. And the Chinese trading companies can be more experienced to deal with other factories than you.
|Production Combined Sales Trading Company|
|Business model||Producing certain products and also deal in other products|
|Better for Whom||Importers who need various types of products|
|Advantages||Save time and energy to find new factories|
A sourcing company is virtually the same as a trading company. They serve as a link between Chinese factories and importers and help their clients find the right supplier. When you decide on a supplier, they will source, supervise, carry out QC and ship your products. They are known in China to offer full China sourcing services.
Who needs them?
If you are inexperienced in importing from China or you would rather focus on marketing than waste time sourcing for suppliers despite that you are experienced in it, it may be a perfect choice to have a sourcing company handle your entire China supplier chain.
They can help you find reliable factories that offer customization for products if you need one. They can offer services such as getting the product customization details, production follow-up, and shipping arrangement.
Sourcing company’s greatest advantage is possessing more options on suppliers, flexible price comparison, and time-saving. You can keep turning down the suppliers they offer until they find the one that suits your taste.
Where to find them
You can locate sourcing companies via Google search. If you have the means to China, you can come to the Canton Fair. You will see several large sourcing companies in the shipping area.
We, Jingsourcing, are one of the earliest-established sourcing companies in China. We are going well-known as our business develops stably. Since 2020, more and more sourcing companies are emerging. You have more choices but some have only 2 to 3 people in their team though they also operate a website on Google.
Hence, you must be cautious when searching for sourcing companies. However, to be honest, it’s really difficult to tell if they are good or bad until you start working together.
|Business model||They offer full services, such as sourcing, supervising, and shipping.|
|Better for Whom||Importers without experience or need an agent to manage the supply chain|
|Advantages||More suppliers, more prices for comparison, and time-saving.|
Grocery-type trading company
A grocery-type trading company deals in all kinds of different products. They depend on factory resources around them. Plus, a typical grocery-type trading company uploads any goods of these factories onto its website.
For instance, if they have a hat factory close by, they will upload a hat. Or if they have a friend in stationery, they will quickly upload that, too.
Since they have a very strong ability of product sourcing, they often list a wide variety of products, most of which are daily consumers’ products.
Since grocery-type trading companies jump at every product around them, this business model makes them lack professionalism regardless of whatever products they sourced or sold. I don’t recommend patronizing this type of trading company especially when you need a customized product.
An instance is if you need to develop a vacuum cup. Generally, the grocery-type trading companies do not engage in the development process such as material selection and testing, mold development cycle, mold cost estimation, value engineer development, and many more.
|Grocery-type trading company|
|Business model||Deals in a variety of products|
|Better for Whom||Importers who deal in daily consumption products.|
|Advantages||Strong sourcing ability|
|Disadvantages||Not professional in certain industry, particularly customized products.|
Hot-selling type trading company
This type of trading company specializes in the sales of many hot-selling products and thus earned the name “Hot-Selling trading company” in China.
An HS company has a powerful sense of identifying the market trend. They are good at getting insight into the hot-selling goods which they can sell out for 2 -3 months quickly from the factory resources. They opt out of the product as soon as the demand decline and jump on the next hot-selling product.
When a particular product is trending in the market, you will find many trading companies marketing such products, especially the HS company. Companies like grocery type may inform you that there will be a delay in delivering your product after you made payment. In fact, sometimes they are out of stock, and thus they won’t be able to get your products shipped.
However, an HS company will never do that. They have enough factory resources to source products, which enables them to deliver your products in due time.
The HS trading company lacks the proper stability and structure to offer aftersales services. Also, it has only a few employees; some of them even operate in the comfort of their bedrooms.
Another challenge is the absence of a long-term plan for a particular good, they move on to the next product at the moment the hot-selling is out of production.
Many HS companies claim to be factories, but in an actual sense, they are not. A typical trading company set up in Shenzhen or Yiwu is most likely to belong to the HS company category.
Where to find them
Chinese wholesale websites such as Alibaba, AliExpress, and DHgate are the destinations of many HS companies in China as they often work across multiple sales platforms. But they may lack personal identity.
If your business qualifies as hot-selling, you can get in touch with HS trading companies to exchange ideas and become partners to earn quick cash. I am confident they will be glad to have someone like you as a long-term consumer.
|Hot-selling type trading company|
|Business model||Specialized in many hot-selling products|
|Better for Whom||Importers who deal in popular products and earn quick money.|
|Advantages||Have sufficient factory resources on popular products|
|Disadvantages||Not stable, unable to offer good after-sale service.|
SOHO trading company
SOHO means Small Office, Home Office. It is a type of trading company with only one or two people. Most former employees of factories or other trading companies start their business and become the founders of SOHO after winning a few loyal old customers.
The working concept of a SOHO company is to obtain a company registration, and the setup account on Alibaba, projecting themselves as a factory or trading company to gain the trust of their prospects.
Although that practice may portray SOHO trading companies as unreliable suppliers, however, in all fairness many of them are quite good. From my personal experience, SOHO companies can be classified into three categories namely:
- Certain-field SOHO trading company
- Grocery-type SOHO trading company
- Hot-selling type SOHO trading company
SOHO companies have fewer costs of operation and offer long and stable cooperation. Whatever they earn on an order, all is left to themselves. Occasionally, they may provide you with a better price compared to a professional trading company.
Besides, they often offer you the best prices and services knowing well they may not gain a penny particularly when you are buying from them for the first time. Also, they are extremely hard working. You can trust them to solve your problems and make you feel assured.
As a result, don’t be negative when you find a SOHO supplier. If the products and the price look suspicious, don’t be too eager to point that out or show that you are surprised. Just watch on and decide whether you can buy from them or not.
Kindly pay attention to the grocery-type SOHO.
- They often do everything to source for customers, and once they are busy, they are less efficient.
- Also, they deal in a wide range of products and sometimes help their customers in sourcing products, but they may leave your problem unattended when they get busy.
Where to find them
How to identify them
A. You can check this contact page to see if they leave a phone number. In China, the differences between the telephone number and phone number are usually as shown below:
B. Another method is to request them to send you the pictures of their offices, the company logo, company culture wall, team photos, etc. If they always give different excuses to avoid doing that, then they’re likely to be SOHO.
In many instances, they always say that they’re out of office. You can inform them that you are merely interested in identifying whether it’s a SOHO rather than trying to criticize them.
SOHO suppliers tend to make your business grow fast if you are fortunate enough to deal with a reliable and trusted one. There is a real-life story of a SOHO trading company in Eastern China that has been in operation on a particular niche product for more than ten years.
Although she has no company account and relies on the agent to help her collect her order payment, she has made a sales conversion of more than $15 million worth all alone. She has clients from across the globe with one of her former customers being a green business hand at that time. Currently, he is the vice president of their country.
Another customer’s company started as a small-scale factory with a few machines and is presently an industrial leader in his country.
|SOHO trading company|
|Business model||Small office, home office, with 1-2 people.|
|Better for Whom||Importers who reply on SOHO to make business growing faster.|
|Advantages||A certain SOHO can offer better price and service.|
|Disadvantages||Not stable, sometimes not efficient|
3. Chinese Trading companies vs Chinese Manufacturers
Some may think that a Chinese factory always has more advantages than a trading company. Actually, that’s wrong and it depends. And for some businesses, trading companies can be better than manufacturers. It’s also possible to get lower prices and even better services and products from a trading company. I will compare Chinese trading companies with factories from different aspects.
In terms of communication, most factories are in a weak position. In general, there are no professional international traders in the factories. They are not familiar with the foreign purchasers’ culture or habits, either. They may focus on production and cooperating with other Chinese trading companies.
In contrast, trading companies have more experience in dealing with various purchasers. Moreover, they are good at English and it’s easier to communicate with the salesperson in a trading company. They have more close relationship with the purchasers.
In general, Chinese trading companies’ MOQ is lower than that of factories. That’s because the factory would cost a lot if they just produce a small number of products. Thus, most factories won’t accept small orders.
If you’re new to the business, you can ask the suppliers for lower MOQ. If they agree, they can be trading companies. If they don’t accept and need MOQ up to 1000 pcs, they can be factories.
Besides lower MOQ, sometimes Chinese trading companies can offer more product categories for you. Grocery-type, hot-selling trading companies are not specialized in a certain field, but you can get more options of product categories. Buying from trading companies would be better especially when you’re dealing in daily consumption products or different popular products.
Assuming a particular supplier has different types of fishing rods on display while the others have fishing rods and also other gears such as reels and lures used in a fishing tackle. Which one do you think is a factory? Definitely the former one.
Factories can control the product quality immediately. Buying from factories tends to have some troubles such as quality issues. While trading companies can implement a stricter quality control system and ensure product quality. They can help you with quality control at each stage of importing.
4. Ways to Tell Chinese Trading Company from Factory
You may find hundreds of thousands of Chinese suppliers when importing from China. And many suppliers may claim that they are real factories but they’re not in reality. If you want to verify your suppliers, there are several solutions for your reference.
Check the business license
First, you can ask the suppliers directly. But you may find it a lie if you want to find a factory so you need to verify that through other ways. Then, you can check their business license, where you can find their business scope. If you can find words like “生产，加工，制造” on it, which means manufacture, then it can be a factory.
Besides, if you find the suppliers on wholesale websites like Alibaba, you can check their business type on their homepage. It will give you a direct answer.
Check the ISO certification
In general, most suppliers who own the ISO 9001 certification can be the manufacturers. However, ISO 9001 is not compulsory for every factory so some small workshops will not apply for one. Besides, some trading companies can also have ISO 9001. These trading companies are just similar to the factories.
Visit its factory or website
If the suppliers have a website on Google or they have a store on Alibaba and so on, you can go to check their websites. You can look through their product catalog, office address, etc. As we have mentioned above, trading companies will show you more product catalogs.
For example, if the supplier only deals in outdoor bags, it can be a factory; if you find different types of bags like school backpacks, handbags, etc. from it, it can be a trading company.
Moreover, if you have the means to come to China, you can also go to visit their factory directly. But it will cost a lot to travel to China. So if you can’t visit the factory on your own, you can also hire an agent to check for you.
5. Tips to Deal with Chinese Trading Companies
No matter what types of trading companies you need, you should compare plenty of suppliers to get the best price, products, and services. I’ll share some tips for your reference when you cooperate with the trading company.
Don't insist on the lowest prices
Price is the prime when sourcing products from China. Sometimes when the trading companies have inventories, they’ll sell you at very low prices. But if the products need to start new manufacturing, the prices will be higher. When you find such products with quite lower prices, you should be careful about the materials and sizes of the products.
Ask for samples to evaluate the product quality
In addition to achieving the best prices, you should also pay attention to the product quality. When you’re satisfied with the quote from the trading companies, you can ask for samples from them. But be careful, some trading companies may offer you samples of good quality, which may be manufactured from one factory. But then the company will ask another factory for mass production.
Find suppliers with good communication
As a rule, Chinese trading companies have specialized English salespeople. Hence, you don’t need to worry about the language barrier as dealing with factories. But some salesmen from trading companies may hire some new graduates without good communication skills or abundant industry knowledge.
A good trading company to cooperate with should understand your requirements well and have abundant experience to give you beneficial suggestions.
Now It’s Your Turn!
We have come to the end of this guide. I have poured my honest reviews on the different types of trading companies in China. I believe you must have learned by now which trading company is the best for you.
Kindly CONTACT US if you have any questions and feel free to drop your comment. We will be glad to reply to you as soon as possible. Do well to share this guide with your contacts.