How can you tell if a supplier is a China factory or trader?

By justchinait
 / 
May 11, 2021
 / 

In China, 70% of the China suppliers in domestic trade are traders, and 90% of the suppliers in international trade are traders.
As long as you have worked as an international sales, whether it is in factories or foreign trade companies, no one is not asked are you a factory?
However, you casually find a China supplier to ask, whether it is a China factory.
Almost 100% of the suppliers will say they are a China factory,90% of the China suppliers are lying.
Most of the traders are pretending to be factories all the time.

Why does everyone say they are a China factory?

Because most of the customers, still believe that the China factory is cheaper.
From the business point of view, the customer originally did not care whether his supplier was a China factory or a trader. What the customer cared about was who could maximize his interests.
But Today Chinese foreign trade industry, most of the traders just work as foreign trade porters, in the use of information asymmetry to earn money, the value that can provide, simply can not resist the temptation to get a lower price, the company brand, and reputation completely unable to provide trust.
In this case, as a customer, the best decision is to try to find a lower-cost China supplier.

So should we choose a China factory or a trader?

About the China factory, each of us knows that the factory price will be cheaper. And if we can give the order directly to a factory, then you save at least 30% of the purchasing cost.
About traders, so many traders have been existing in the market for years, there must be a reason for their existence, so let’s study this subject in this article.

What is a China factory?

The China factory is also known as a manufacturing plant or production enterprise.
It’s a production line consisting of machines, equipment, and workers to produce goods.
There are generally three characteristics.
1.Remote location
Because the site area is generally larger, may produce pollution, coupled with today’s transportation is very convenient, so, generally, factories are located in the more remote suburbs, those places are cheaper rent.
2.Complex management
The China factory is no longer a simple superposition of production and processing departments but contains a combination of administration, research, and development, production, warehousing, logistics, reception, office, restaurant, logistics, parking, etc.
To occupy a place in the market, it is necessary to achieve the best price, quality, delivery, service, and other comprehensive, so the production process of the China factory is very high demand for management technology, and the difficulty is relatively large, and the operating costs are very high.
3.The category is relatively single
Such as a headphones China factory specializing in the production of headphones, a single category, but a wide range of designs, everything you can imagine.

How does the China factory operate?

Today about 80% is order-based production, 20% is e-commerce production.
Order-based production is to receive orders from customers before starting to purchase raw materials, prepare equipment, worker training, equipment, manufacturing, testing, performance debugging, product testing, packaging, storage, and a series of production and control activities.
E-commerce production is started by sales planning, production and then put into some B2C platforms, such as domestic Tmall, JD, Taobao, PDD, international such as Amazon, eBay, Shopee, etc…

The advantages and disadvantages of the China factory

Advantages:
Strong technical and professional capabilities,
Strong after-sales service, the factory in China as the producer, they have the ability to fix problems.
Price advantage, save the middleman to earn the price difference, at least 30% savings

Disadvantages:
Single category, if customers have diverse needs, can not get.
The understanding of customer’s needs is not good as traders.
The whole Sourcing Procedure Service is also a shortcoming.

What is a China trader?

It is an intermediary link between the factory in China and the customer by participating in the commodity trading business and promoting the occurrence and realization of the act of buying and selling.
There are three major functions.
1. Improve the efficiency of sales activities
Intermediaries generally sell goods from many manufacturers at the same time, and customers can compare goods from many manufacturers at one intermediary, which would take a lot of time to communicate with each China manufacturer individually if there is no intermediary.
2. Supervision and inspection of products
Intermediaries in the purchase of goods will examine the China manufacturers in the product design, process, production, service, and other quality assurance system, or according to the manufacturer’s reputation, the product’s brand-name effect to select products, sales of products, products will generally be divided into grades, shipping, product quality supervision, and inspection, this series of work plays a role in the supervision and inspection of products.
3. Transmission of information
Intermediaries in the purchase of products from manufacturers and sales of products to customers will introduce to manufacturers the needs of customers, information about the market, similar products each manufacturer, and the product trends and developments. Invariably, the information is passed on, promoting competition and contributing to the improvement of product quality.

How does the China trader operate?

China traders generally select a large category, such as 3C consumer electronics, and then collect China suppliers in this field, collect their quotation sheets, select some products they think have potential, integrate them, and form their quotation sheets.
Then find China manufacturers to ask for samples, shoot pictures and videos, upload them to the China B2B platform, once a customer inquiry, immediately contact the corresponding factory, get the quotation from factory and add bout 50% for profit, and then quoted to foreign customers.
Once customers confirm the order, after receiving the customer’s deposit, then use that money pay 30% of the deposit to the China factory, arrange production, basically, all the work is outsourced to the factory, the trader only focuses on marketing and customer service.

The advantages and disadvantages of China traders

Advantages

1. Richer product range
A trading company, will not sell only one factory’s products but will choose many factories to form a class or multiple products for sale, or even a product it will choose multiple factories with multiple specifications, so that the combination of sales, then it has a lot of choices for buyers customers, will not be limited to a factory a product above.
For example, a foreigner procurement needs a variety of fabrics, cotton, linen, silk, velvet, chiffon, woven, knitted, etc., but your factory can only provide cotton, he will have to go all the way to find other factories to buy goods, the time spent in the middle, labor costs are not low enough to offset the point of interest that you let then the China trade company price is low.
If you do not deal with intermediaries trading companies, foreign buyers will have to send their people to China and are to send enough people to deal with different places and different factories to meet their own procurement needs, even to participate in the exhibition to look for may not be able to find the right products, such a way of operation is far from finding a full range of products to cooperate with the trading company to come true.

2. Fast delivery time and small order quantity for trading companies
The trading company is not an agent of the factory, but an independent company, after the trading company gets the goods from the factory, generally has its warehouse storage, and then slowly digest the inventory. Generally looking for factory customers is not to buy the goods you have produced, but to produce the products he requires, and the factory is generally waiting for customers to place orders before producing goods, rather than producing goods waiting for customers to buy ready-made.
Some small customers of certain product order will not be too high, but the category will be very mixed, often failing to meet the factory’s minimum requirements, from production to transportation costs are not cost-effective, so there is often a small number of customers can not negotiate, so customers will choose to cooperate with trading companies, after all, trading companies are certainly more than one product sold to customers, often two or three or even a dozen together, the number of less, but more types, they are as good as the customer can buy ready-made. But the variety of more, they can make money as well.
Another is the problem of time costs, many trading companies are looking for cooperation to buy spot, they need to quickly buy the product, rather than waiting for your factory slow production, time for them is money, is the revenue.

3. Buyers buy products and services
Now we know that the price is not the deciding factor for buyers to place orders, so what else is important to buyers? Service! Yes, buyers prefer their partners are a good service company, communication will be much smoother.
Trading companies between customers and factories, their survival code is an important one is a service, excellent trading companies can handle the relationship between factories and customers, factories are a place to survive only the product, the service is not very important, there are many factories should also lose customers because of the service attitude and conflicts.
Trading companies, however, are not the kind of suppliers who only consider the benefits and are not willing to pay more, for example, the factory is to see the order before starting production, but if the customer wants to hurry, production can not come to the blind, but the trading company is different, they are often cooperation with customers who need to produce, will let the factory produce part of the goods in advance, and so the customer urgently needs to place an order for goods only need to prepare another part of the goods On the line, only part of the risk transferred to their own body, but to maintain good long-term customers.
Sometimes even if the profit is small, the trading company will take the customer to find the factory in china one by one until the customer is satisfied, but the factory is rarely willing to be very patient to receive the customer below the minimum order amount.

4. The trading company will reduce the risk for customers
We all know that the factory production products, not always very and the customer’s heart, sometimes the quality is not able to meet the customer’s requirements, you need to spend time and labor costs to adjust, even if the adjustment may not be able to achieve the degree of customer satisfaction. At this time, the buyer will face the problem of finding a replacement, which will seriously slow down his trade process.
However, the trading company’s processing is much more flexible, the general trading company will not only cooperate with a factory in china, but cooperation with more factories also have a high degree of selectivity, if problems or unsuitable, can completely change a factory, generally what factory problems will not fatally affect the business of the trading company.
Another point is that the trading company is not the agent of the factory in china,  but it can be the agent of the buyer. The buyer can go through the trading company to find what kind of products and what kind of factories in the Chinese region, which is equivalent to having an office in China, and the long-term cooperation is both convenient and labor-saving.

5.Business communication skills more professional
Not that know the product must be a professional business, now the China factory also likes to participate in various exhibitions, but also on various websites sales, as if they do not need to do business through the trading company, but in fact, know the product factory is not necessarily good sales.
Communication is a big problem, the factory is not a professional sales staff, there is a big flaw in language communication, many foreigners are not all English, they may also operate a half-baked English and you the half-baked communication, it is more difficult.
And trade companies equipped with talent, not only from the service attitude, or foreign language professionalism, will be far better than the factory staff, foreign trade companies equipped with sales staff, small languages still account for a relatively large proportion of the buyers, to hear their native language, or easier to produce a sense of closeness.

6. Manufacturers facing the terminal is not mature
Do not look at the current society B2B website sales more and more normalized, but manufacturers directly facing the terminal for sales of this form is not mature, from the beginning of the trade, the middleman has been a constant presence, and is not so easy to be replaced, the concept, the existence of the middleman is also still deep-rooted.
Moreover, the reason for the existence of trading companies, they certainly have many of their unique development channels, to effectively develop customers and maintain the survival of the trading company form.

Disadvantages:

Higher price
Weaker after-sales service capability

How to distinguish between factories and traders?

Field visiting
90% of suppliers are traders, but most of them claim to have a China factory, as we know it’s not true.
But how is possible?
They always require their cooperation China company, to help solve the problem of visiting and inspection, when you go to check the “factory”, actually, the “factory” is the trader’s source factory, the source factory is willing to help the whole process, you can hardly distinguish the real from the fake.
If you want to distinguish, there are several ways.
The supplier’s office address is consistent with the address of the visited factory inspection? If no, it’s a trader. Some traders will move directly into the factory office, this needs to be further distinguished.
If the factory inspection requires an appointment in advance, basically traders, because the supplier working in other places need to rush over to receive you in advance.
Whether the salesman is familiar with the China company workers, they can directly command? If the salesman needs a third person accompanied during the visit to the China company, then it is a trader2. Business Register Inquiry
Normally the client only knows the English name of the supplier, you can translate them into the corresponding Chinese name, then check the business license, you will know whether it is factory immediately.
Of course, there is some trick here, some traders will open a small factory, maybe a simple packing plant, almost make nothing, with 99% of the goods purchased, but it’s a real factory, this still China trader.

Category single
Factory normally has a single category, such as headphones, earplugs, but a variety of styles of headphones and earplugs.
A wide variety of headphones, every idea you can imagine with headphones and earplugs.
But will not cross categories, there will not be a data cable, and a rechargeable battery, and a car bracket.
If a supplier with many categories, it’s definitely a trader.

When should we choose a China factory?

If you are a sourcing master, familiar with the whole procedure.
If you need a cheaper price, and the demand is relatively single a single product + packaging.
Newly developed products need more rapid and professional technology-related support.
High customization, products that require more OEM.
Products with a higher quantity
Products with higher purchasing frequency
Products that require after-sales service
Payment can be made before shipping or the goods arrive at the destination port.

When should we choose a China trader?

First-time buyers, unfamiliar with the whole process, such as Sample, Order, Payment, logistics, and so on. A trader can help you a lot with the whole process.
30%-50% higher price is acceptable, and need a variety of product combinations.
Need more choice and compare the products
Many categories of products needed
Small quantity
Small customization needs and common goods
With a tight capital chain and need for monthly credit payment

Advice

No matter choose a China factory or a trader, you should pay attention to four points, price, quality, delivery, and service.
Based on the same quality and delivery, and then compare the price, compared with at least 3 different suppliers.
About Quality, you do not need to be proficient, just get a tool to take apart the product and compare it with other samples, everything would be very clear.
Against your situation and needs, and then compare the price, finally to decide what kind of suppliers you need.
You will have a smooth sourcing trip, the best price, and the best procurement experience.

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