I’ve decided to start a new series having to do with sourcing.
Because we work with a lot of people in sourcing products in China and we’re seeing a lot of common issues.
The ones that we’ve seen in the past for ourselves, but have learned to overcome.
And now we’re seeing a lot of new people who go to China, source direct use sites like Alibaba have these same problems.
In this post, what we want to look at is buying from a middleman versus buying direct from a real factory AND how you should determine what the difference is.
A lot of times we see that the problem is people can’t tell the difference between a middleman (sometimes referred to as a Trading Company or an Import/Export Company).
When I take our clients to China, I spend days with them going through the market and I point out the differences between a trading company and/or import/export company versus a real factory.
A lot of times you can tell the difference.
It’s pretty easy in the market, but you can also ask certain questions that help you to determine what is what.
Here’s part of the punchline though… When you deal in places like Alibaba or any of the online sites, you really can’t tell.
A lot of times those online sites are really just middlemen and they don’t even have any product.
You’ll buy a product from them, order it online, and say, for example, they’re selling a product for a reasonable price.
It’s $1.50 for a blue widget that you’re interested and you can make a little money selling it, right?
You think it’s great.
You contact them via email.
You can’t see their facility.
You don’t have any idea what they have.
You go ahead and place the order.
They buy it for 50 cents a piece, so when you put 30% down you’ve basically paid for the product.
They have no loss, nothing.
This is very, very common and something that is hard to tell online.
When you go direct though, there are still some issues or challenges.
For example, when you’re in China and you’re going through the different shops, a lot of times you have to be wary of the shop.
You have to take a look at it when you’re in the shop.
Is it a single product shop?
For example, if the shop sells glass bottles, is the whole shop nothing but glass bottles and do they look to be manufactured similarly?
Or do they have glass bottles in one part of the shop and kitchenware in another part of the shop, and something completely different in another part of the shop?
Generally, that [different products] tells you this is probably a trading company or import/export company.
At the same time, manufacturers can trip you up a bit and will have a store that will have their products in part of it, and they may rep some other products as well in the same shop.
These are just things you have to be aware of and you need to look for and ask questions about when you talk to them.
Online they’ll all say they’re the manufacturer even though a lot of them aren’t.
So, you need to really watch out for that. It might seem great at first and I’ve done this myself… I’ve bought from many trading companies or import/export companies to start a product, but as I start to do things like customization or making that product my own (i.e. putting your logos on the packaging, etc.) things become a little bit more difficult because this isn’t really the manufacturer.
If you’re looking to build a product that you’re going to brand and you’re going to make customizations, then you really want to be make sure you do your homework and ensure that you’re dealing with a manufacturer.
If it’s online, make them send you their information.
Do your due diligence.
Do the research and spend that time.
Make sure that the manufacturing company and all that information is the same.
If it says trading, import/export in their name AND/OR they want you to send the money to some kind of weird place AND/OR their email addresses don’t have their domain name of the corporation or the manufacturing company on it, those are all little signs that tell you that there’s potentially a problem.
The other thing is when you actually go to China and you go to one of the fairs and you just see a booth, it’s really hard to tell necessarily if they’re the manufacturer.
Now some of them are pretty evident because they manufacture one thing out of one material, but other ones aren’t.
If they’re a trading company, the easy way to determine that is just ask them to go visit the manufacturing plant.
Real simple like, you’re in there, you’re talking… They have a good product and you’re interested in making a purchase.
Just ask them a simple question… “Hey, where is the facility located? Where’s the manufacturer located? And can I go visit?” This doesn’t always help you 100% of the time, but it definitely helps to start to weed them out.
I’ve had experiences where I’ve gone to a manufacturer and the manufacturing company was one company, but the guy who was in the market who said it was his manufacturer actually had a deal with him and when he sent people there, they said, “yeah”, that he was the manufacturer, when in reality he wasn’t.
What he really was, was a middleman who could take the orders for you.
There may be a benefit to that in some cases, especially if there’s a tight relationship with the manufacturer, but an import/export or a trading company that just warehouses the same product and buys it from these manufacturers in the large MOQs that maybe you don’t want to buy, they will not be able to change the order.
They’ll have X product in their warehouse, you’ll go to buy it, and they’re going to send you what they have.
A lot of times that’s a challenge.
For example, the packaging won’t be what you expected.
It won’t be packaged in the way you want it to be.
The other types of things like that are going to become evident real quick, and so we need to make sure we do our due diligence like I’ve said higher up in this post.
Anyway, that’s the first in a series of about 11 or 12 different topics that I’ve outlined that talk about how to improve your experience and get the most out of your trips to China or your buying, and be able to make sure that you’re not putting yourselves in a position to have a challenge.
If you have any other great comments on ways that you might have done the same kind of due diligence, things that you’ve looked for in your manufacturers to help out… Man, the community supports the community, so we’d love to hear about it.
Would love to discuss your experiences in doing the same thing and how you’ve gotten around it.
Just place a comment below. Or post a comment in our Facebook group here.
Thanks for reading.