Do you prefer to import through a trading company or work directly with a manufacturer?

What is a trading company?

A trading company does not actually produce any goods. Instead, they source a variety of products from one or more factories (often they work with several factories). They are similar, although not identical, to what we would imagine in the west as a distributor or a wholesaler. Their big benefit is that they are able to offer a wide variety of products.

What is a factory?

A factory in China is exactly what you think it is: it’s a factory that produces various widgets. They normally have some type of machinery to produce these items although the sophistication of that machinery can drastically vary. 

So How to Identify a Trading Company or a Factory? and Should You Use a Factory or a Trading Company?

Neither factories nor trading companies are inherently bad or good although I often hear importers insisting they will “only work with factories”. I have worked with many trading companies during my importing life, even when I know the exact factories my trading companies work with. A trading company will normally be more expensive than a factory but a good trading company should add additional value through sourcing, quality inspection, customer service, and so on. The problem is that some trading companies offer little additional value and essentially buy and resell products with no value-add.

Well, there are 4 ways to tell a trading company from a factory:

1. Product Variety

Does the company offer several lines of products that require different manufacturing processes? For instance, say there is a company called “LCD Display Manufacturing Company.” If this company offers LCD displays, touch screens, display module cases, and driver board then they are probably not a real display module manufacturer.

3. Company location

Where is the company located? Put their address into Google Maps and see if they are located in the middle of Hong Kong, Shanghai, Shenzhen, or another densely-populated metropolitan location. If they’re located in a downtown area, chances are that is not the manufacturing location.

That doesn’t necessarily mean they are not the actual manufacturing company - some large factories do have sales offices based in the city. But quite often a little investigation into the actual manufacturing location reveals that the office is not related to the company that is producing the goods.

4. Company website

Is the company website appealing and easy-to-use? Is it all in English? If so, it is very likely you are looking at a trading company. Unless it is a huge and well-known manufacturer, the company website is usually the biggest indicator.

This is especially true of Chinese trading companies. Even some of the largest factories in China have very basic websites, with very little English and a poor layout. Having an appealing website simply isn’t a high priority for most factories. The lack of decent advertising efforts coming from Chinese factories themselves is part of the reason why trading companies have taken hold in China.

Well, What are the advantages of traders and manufacturers?

Here are three great reasons why many importers continue to buy through a trading company:

1. Trading companies often help to ensure they’re working with a quality factory that will make a quality product.

2. Trading companies often offer lower prices, especially for smaller orders.

3. Trading companies help to ease communication between the buyer and the factory.

And for manufacturers, there are at least seven reasons to consider buying goods directly from a manufacturer:

1. Factory-direct products normally cost less.

5. Merchandise typically has a smaller environmental impact when customers directly order it from manufacturers. The products only need to be transported from the factory to the buyer. They might be sent to one warehouse during this process. On the other hand, many retailers and distributors repeatedly transport, store and repackage goods. Wholesale items are often sold in smaller bulk quantities before they reach retailers.

6. A manufacturer may supply extra features or accessories to customers who purchase products directly. On the other hand, retailers wouldn’t want to carry a style that only a few people would want to buy.

7. You may be able to obtain specialized products that retailers and distributors don’t sell in your country.

To sum it up, Some of these advantages improve the quality of products or help you find merchandise that meets your specific needs. Most people choose to order goods in this manner when they want to cut costs or can’t find desirable products elsewhere. Although retailers may provide more convenient service and support, they rarely match the prices of factory-direct items.

So, traders or manufacturers? It actually depends on who can procure the product/service with better skill and efficiency. It’s not always about price.