Many US and international based Amazon sellers rely on Chinese manufacturing. But not all manufacturers are equal. And if you have a great supplier, it can be a leg up on your competition. Hence more sellers are becoming aware the benefit of using sourcing services to find top suppliers.
We spoke to Christian Potts, CEO of Tao Consultants — a sourcing consultancy based in Shenzhen — to get his views on the state of sourcing in China. Christian has a wealth of experience with 5 years of experience in China helping both start ups and large organisations with their sourcing needs. In this article, you’ll learn how to find the right sourcing agent for your Amazon business.
What is a sourcing agent?
Their role is to help overseas companies import from China. Services they offer include identifying products, negotiating prices, and handling samples, inspections and logistics.
“Sourcing agents are individuals who supply a product at the lowest possible cost. The premise is they will do all the searching for you and your manufacturing desires”, Potts says.
Benefits For Your Amazon Business
Saves You Time: Dealing with Chinese suppliers can be very time consuming. Particularly if you are dealing with different time zones. A good sourcing company will be able to explain each step of the process, help you monitor progress, avoid delays and keep you informed. Why waste your time dealing with orders to someone halfway around the world? Your time is better spent on sales and marketing.
Better Pricing: 90% of the suppliers you meet online or at local trade fairs tend to be trading companies. By dealing with local sourcing specialists, who are familiar with the local areas of your suppliers, you will often get competitive prices directly from the factories themselves. Keep this in mind with Trump and his team in discussions to increase tariffs on imports from places like China by up to 10%. Obtaining more competitive prices will be more important than ever if you can’t find manufacturing for you product in the US.
Quality Control: Agents can help verify your suppliers by visiting the factory in person. That should also include inspections before the goods are made, as well as when the goods are ready to ship. Relying on your supplier for quality control is a recipe for disaster. The last thing you want is unhappy customers complaining about defective items.
Dangers of a Bad Sourcing Agent
Agents may select suppliers which would suit them best. Potts warns “Once you start getting into commissions and percentages you run towards a conflict of interest.”
Mike Bellamy, another sourcing expert, concurs: “It is common in China for trading companies to milk both ends, in other words charge the buyer for a research fee or commission while getting a kick-back from the supplier.”
Normally this is done in the form of a kickback or a commission. Potts believes “By operating on a retainer the interests of the customer are the only interests that matter. Tao Consultants adopts this model as we believe this is the most straightforward and transparent way of doing business.”
Doesn’t Disclose Supplier Contact Information
A good sourcing agent will give you full access to the supplier’s contact information as well as inspectors and freight forwarders.
“Say you are happy with your goods and for the initial order you paid 10% commission to your sourcing agent. If it’s good you do another order, a larger order, he is going to continue to charge you 10% again. For exactly the same work that has already been done and still you never get to meet the supplier.” says Potts.
6 Simple Steps in Finding the Right Sourcing Agent
- Conduct Product Research: Making a simple search for you product using Global Sources or Alibaba. You’ll get an idea on the pricing, specifications and locations of the factories. We recommend that, before reaching out to sourcing agents, you complete this product profile (We have provided you a template here). By being more specific about what you want, you’ll be able to communicate this more effectively to your potential sourcing agent. Have them sign a non disclosure agreement before you give him or her details on your product.
- Choose an Agent Near Your Manufacturing Base: The sourcing agent you select should be a specialist from within your industry so they really understand your product. He’ll have a clearer understanding of how to plan for quality control and the estimated cost of the product. It ensures that he can negotiate a better price on your behalf. The closer they are to your manufacturing base, the easier it will be for them to help in the event that things go wrong. It will also reduce travel and transportation costs.
- Communication and Language: Having the ability to clearly communicate well in both Chinese and English is essential, as many things can be lost in translation. A sourcing agent should be able understand your product in terms of the specifications, parts and components (in English). Going back and forth through email can be slow. Hence they should be able to speak you over the phone or through instant messaging using either WeChat or Skype.
- Getting Industry Expertise: Ask them industry specific questions to make sure it’s a correct fit. That way you know that they understand your product and are knowledgeable about the safety standards in the market you are selling to.
Here are some sample questions
Qualifying an agent
- How will they get paid?
- Will you be able to visit the factories before and during product?
- Can you provide referrals or testimonials from satisfied customers?
- Do you do quality inspections yourself or do you use a specialized third party?
- Will you get a weekly update on the production status?
- Are they located in the area where your products will be sourced?
- If you keep re-ordering the same products from the same sources, will you pay less for his services after the first order?
- Get References: Have them to provide you with at least 3 references for successful sourcing projects. You’ll get a better idea on the type of work they have performed with previous clients before you work with them.
- Sign a Contract With Them: Once all five of the above points have been satisfied and you are happy to proceed, you should go about signing a contract. Going on a verbal commitment alone can run you into trouble later on. You’ll be able to protect yourself in the instance that there issues with the product. You have set an expectation on what both parties agree upon when the contract is signed.
So now that you are aware of the benefits and dangers of having a sourcing agent you can use our 6-step process to find the right sourcing agent for your needs.
Even if it’s your first product it can be highly beneficial for you to have a professional and transparent agent who is able to walk you through the process of finding your supplier to help with your first shipment to Amazon. The right consultancy will be happy to have you work with the supplier after the initial contacts have been made.
For advanced sellers, managing multiple products can be difficult overtime. Making more time for bigger picture and strategic decisions makes more sense when you have sourcing specialists on the ground in China. They’ll be invaluable for the expansion of your ever growing Amazon business.
Do you have more questions about sourcing agents? Comment below and let us know what you think