Is Your Chinese Factory a Factory?
posted in Asian Vendor Management by Shane Bredoff
So, you are bringing in your product direct from China. You went online and found a good product to sell and the price is good, at least half of what you could buy it for in the US. Factory direct is the way to go, or is it?
Many of the companies that market products online are actually trading companies. These are companies that purchase and inventory products from factories and then sell them to distributors around the world. These companies provide some definite benefits and may be the best way to go. They do, though, lose some advantages that dealing directly with a factory can provide.
If you are looking to purchase a small quantity of a variety of products, a trading company is probably the way to go. Because they purchase from a variety of factories, they can offer a wider variety of products. Additionally, since they sell to many customers, the minimum order quantities can be smaller than purchasing direct from a factory. Finally, these companies are well versed in dealing with exporting products and can, usually, handle the paperwork and shipping arrangements to get you your product.
Factories can provide some different benefits. Based on the quantity of product you are ordering, product can be customized for your business. In fact, custom tooling can be made specifically for your products so that they are unique in the market. Additionally, pricing should be better when dealing direct with a factory. This may not always be true though based on set up costs and negotiating skills (in China, you will be overcharged if you do not understand your supplier’s cost structure).
Which direction is correct for your company is often based on how long you have been in the market and the maturity of your products. So, how do you know if you are dealing directly with a factory? It is great to be able to visit the factory, although some trading companies will take you to a partner factory as if it was theirs. When it is time to work directly with a factory, it is often smart to consult with an expert. Having someone on your side that has already worked with a factory is the best assurance.
