Trading Companies vs. Sourcing Companies: All That You Need to Know When Importing From China

Importing goods from China in order to sell it on the local online platform is one of the hottest trends among budding entrepreneurs in the west. The easy access and low-cost protocol to set up online stores, logistical facilities such as Amazon FBA and online B2B directories such as Alibaba make it fairly simple for most people with the internet access to hunt down a supplier in China and place an order to get it shipped to America.

A lot of people are joining the club because it seems to be the quick and easy way of making money. However, many people get trapped because they end up underestimating the complexities involved in dealing with Chinese suppliers. The most basic step to get into this market is to find a supplier in China. The most popular route for the majority is to log in to an online B2B directory such as Alibaba or Google search and hunt for suppliers. However, there is a loophole. These online directories are large open platforms and anyone can register there. When you are looking for a supplier in China you are most likely to be looking for a manufacturer, or preferably an Amazon sourcing agent, also known as sourcing companies if you are a newbie. However, you will also find a plethora of trading companies that are registered as suppliers.

Most amateur entrepreneurs fail to read between the lines and end up dealing with a trading company. This is because the fine line between trading companies and sourcing companies are difficult to detect. This, however, does not mean that the two entities are similar and can be used interchangeably. It is not wise to deal with a trading company and as an importer, you need to understand the difference between a trading and a sourcing company.


Difference in Specialization

A trading company specializes in product or industry. For example, a certain trading company that specializes in apparel industry can help you find products from apparel manufacturers. They are, however, not specialized in any core business process. On the other hand, sourcing companies are specialized in business processes, such as inventory management, storage and handling, warehousing, prepping and packaging and quality control. Sourcing companies will offer you these specialist services as a value addition.


The difference in Scope of Knowledge

Trading companies have knowledge about products and suppliers. They would be able to tell you the difference between a silk and a polyester garment, but that is all that they do know. They have little knowledge about the technicalities and processes that are involved in the backend to bring out the final product. On the contrary sourcing, companies have a much broader scope of knowledge about business processes. They know how all business processes from raw materials to procurement, to inventory and quality controls are to be managed to achieve an effective supply chain. This is where they assist you with forwarding inventory to Amazon FBA.


Protection of Interests

In case of a dispute, a trading company will always support the producer because manufacturers are their source of supply. They have to cater to a number of clients and they would not want to upset a producer for one particular customer. However, sourcing companies protect the interest of the customer since they are meant to work as a remote representative of the customer.


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April 2, 2018 Trading Companies vs. Sourcing Companies: All That You Need to Know When Importing From China