Do you prefer to import through a trading company or work directly with a factory to manufacture your products?
What is a trading company? A trading company – sometimes called a vendor – works as an agent connecting buyers and sellers without having any involvement in the ownership or manufacturing of the product sold. And when searching on websites like Alibaba and Global Sources, you might find most of the companies listed are not actually the factories manufacturing the products shown. Many of these are trading companies, some of which are affiliated with one particular manufacturer and others which deal with several factories.
As long as price and quality meet expectations, many buyers don’t really care whether they are dealing with a trading company or a manufacturer. In fact, many buyers benefit from dealing with a trading company instead of working with a factory directly (see 3 Reasons To Buy Through a Trading Company).
So is there a way of differentiating a trading company from a factory at first glance? The truth is, it can be difficult to be 100 percent sure. However, you can get a pretty good idea by using these four indicators of a trading company in order to distinguish from one or the other.
1. Product variety
Does the company offer several lines of products that require different manufacturing processes? For instance, say there is a company called “Golf Product Manufacturing Company.” If this company offers golf clubs, golf shoes and golf bags then they are probably not a manufacturing company.
Manufacturers in China, in most cases, will focus very specifically on one product type or manufacturing process. This is due to the high cost of machinery required to produce different kinds of components. Therefore, a company that manufactures golf clubs will typically not make golf bags and shoes, since those products entail completely different manufacturing processes.
2. Name of the company
Trading companies tend to have much more savvy and marketable company names than actual manufacturers. The reason for that is their business is trying to obtain customers from overseas, whereas manufacturers are usually focused on making products. Trading companies need to be more consumer-friendly in order to attract a larger client base.
Manufacturers also normally have the name of the city or town they are located in within their business name. For example, a company that makes rulers or cups in Dongguan could be called “Dongguan Plastic Products Company”. But a name like this doesn't sound very appealing to foreign buyers, does it? A trading company, on the other hand, will often have a catchier name like “Home Products Manufacturing Company”, in order to pass off as a manufacturer. A factory would rarely have a name like that in China.
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.
Whether you prefer dealing directly with the manufacturer or want nothing to do with it, these four signs will steer you in the right direction. Trading companies provide consumers with a large array of options in order to purchase affordable goods abroad. Nevertheless, they are often not an option for buyers looking into more specific aspects within the manufacturing of their product. Next time you find yourself having trouble differentiating between a manufacturer and a trading company, ask yourself:
- Do they sell more than one type of product?
- Does the name sound catchy or generic?
- Where are they located?
- Is their website unusually user-friendly?
Next time you’re manufacturing in China, look for these four signs to help determine if that company you’ve just started working with is actually manufacturing your product.