Sourcing Agent Q&A: Who are They? How They Work? How They Charge?
Nowadays, acquiring agents/companies play an increasingly essential function in worldwide supply chain monitoring. Nonetheless, lots of local business are still confused concerning buying agents, particularly when there is obscure and also obsolete details online that may misdirect them. As a result, I have assembled the 8 getting firm questions that customers most appreciate as well as confused, as well as provide you with the most objective solutions.
1. What is a sourcing agent or sourcing business? What do they do?
A sourcing representative is an individual or firm that stands for a customer to resource products, get products that run out the buyer’s reach. Sourcing agents/companies are typically needed in international trade.
In the conventional feeling of the term, a sourcing agent is just to resource suppliers for his client. Undoubtedly, the services supplied by sourcing agents can consist of selecting the appropriate distributor, price negotiation, following up production, quality assurance, item conformity & testing, delivering & logistics.etc.
It’s not stated that sourcing agents/companies are due to give the full range of services. The work range depends on the agreement/consensus reached by both sides.
2. Sourcing representative VS sourcing firm comparison
In the global market, individuals typically take these 2 words as one significance. As an example, if you want to find a person sourcing for you, you can say– I require a “sourcing representative” or a “sourcing firm “, it matters not. But actually, these are two various concepts.
1) Sourcing representative
A sourcing agent can be an individual sourcing representative, that can be employed as a permanent representative for you. This specific sourcing agent typically has only one or 2 individuals, they usually operate at a tiny workplace or home office.
Some of them may have numerous years of experience working in a trading company or sourcing firm These private sourcing representatives can be discovered on some freelancing systems (like fiverr, Upwork, and so on ), as well as a few of them might have likewise set up their very own sites on Google.
But just in the last conversation we discussed, we’ve compared the pros and cons of sourcing teams and sourcing agent people. Searching in UPWORK or FIVERR is more easily understood as a more discretionary choice because you have no control or knowledge of exactly how much effort your agent is spending on your proposal. Of course if you’re on a very limited budget, it’s true that $5 an hour isn’t much, but…. Do you really want to put thousands or hundreds of thousands or millions of dollars of business in the hands of a $5 an hour agent?
2) Sourcing business.
Sourcing firm, also referred to as sourcing agency. It is understandable, a sourcing business is supported by a group of professional sourcing agents and also arranged apartments, like sourcing, high quality checking, warehousing, and also delivery systems. They can integrate vendor sources more effectively and also can offer several customers at the same time.
Sourcing companies typically situate in commercial collections. As an example, most China sourcing agents/companies lie in Yiwu, Guangzhou, as well as Shenzhen in China.
Final thought: Both sourcing representatives and sourcing firms are basically a web link between customers as well as providers, and it’s everything about which one you choose to pick to offer you.
3. That needs a sourcing representative/ firm?
1) Individuals who have no experience in importing
Importing from overseas involves a lot of difficult elements, like sourcing right providers ， following up manufacturing ， item testing and quality control ， and handling delivery, and so on
. If you have no experience in overseas investing in, you can discover a sourcing agent/company to assist you start your first importing trip.
2) People that have multiple item classifications to handle
Selecting 2 reputable providers for 1 item may require you to speak to 10+ vendors. Expect you are seeking 10 products, after that you require to call at least 100 vendors and also confirm them. In this case, a sourcing agent/company can not only do the laborious job extra successfully but likewise consolidate all the goods you called for.
3) Large merchants, supermarkets
Is it stating that a large importer with bountiful funds and also experiences does not need a sourcing agent? Absolutely not! Big business also need them in order to handle their supply chains much better.
Take the chain grocery stores as an instance, they will certainly require to get hundreds of products categories It is virtually impossible for them to visit each factory as well as purchase every product by themselves.
Retail giants such as Walmart as well as Target are all obtained their items by sourcing agents or trading firms.
4) Individuals who deal in special product classifications.
Besides day-to-day necessities, there are some unique product groups such as constructing materials, chemistry, medication and so forth. Take the Chinese chemistry & medicine market as an instance ， it is rather difficult to locate distributors neither at the exhibition or online. So you have to delegate a sourcing agency or trading firm who is specialized in the market to assist with your business.
3 benefits of sourcing agents/companies
A reliable sourcing agent/company plays a vital duty in international trade buying.
a. They can locate distributors who supply a competitive rate and high quality. A good sourcing agent can aid you find capable and also trusted makers. Due to the fact that an excellent agent/company has accumulated a lot of qualified factories’ resources already that you might not discover online.
b. They can boost sourcing efficiency. A neighborhood sourcing agent/company can help you get over barriers of society and also languages. He recognizes precisely what you want, and bargain with vendors about the information of the products, and in turn provide the message to you in well-versed English, which greatly decreases the interaction cost.
c. Lower your threat of importing from overseas. A great sourcing agent/company must be experienced in handling product manufacturing, quality control, compliance qualifications, import as well as export procedure policies, and also worldwide shipping.
4. What services do sourcing representatives provide mainly?
Sourcing service fees vary according to the work scope you get from the agent. So make certain you have actually made it clear about the service range and also charges before you start cooperation, in case some possible conflicts take place. That’s why I cover one chapter to introduce the solution of sourcing agent/company services.
Adhering to are the primary solutions most sourcing agent offer:
1) Sourcing item providers
It is the standard solution of every sourcing agent to validate and also select the distributor that satisfies the needs of their customers. And they will discuss with the vendor in behalf of the purchaser to get the best price as well as validate the details of production.
However, some buyers may be knotted in whether the sourcing agent/company should give the distributor details to them. Some also assume the representative is cheating them or making questionable cash by not providing the supplier details to them.
Let me clarify to you right here, whether the provider details is supplied to the customer depends upon the solution design of the sourcing agent
Individual sourcing representative.
Some private sourcing representatives can be located on Fiverr or Upwork, that are generally paid a fixed wage (by hour/day) or can be paid a dealt with payment for one task. This setting of participation is similar to finding yourself a sourcing assistant in an international country.
Essentially, the buyer pays the salary to get the vendor info, so it is the responsibility for the agent to give the supplier’s calls to his manager– the buyer and the purchasers themselves will certainly connect with the distributors to work out the cost.
If it is a sourcing company/ agency, they will not give the provider details directly to the purchaser. The following are the two core reasons.
To start with, these quality vendors are their gathered sources (consisting of those can’t be located on B2B internet sites), which is why you can get a competitive price from the sourcing company.
Secondly, they bill their service fees by a particular percentage of the complete worth of products, that is to say, this is their profit version. (I will certainly discuss the sourcing agent/company fee techniques further concerned 5 later on).
Although they are not telling the purchaser the manufacturing facility get in touch with details, they are willing to take the purchaser to check out the manufacturing facility and also let the buyer have a particular understanding of the production ability of the manufacturing facility. Yet this typically happens with larger orders. If the buyers order small worth like $1,000 shoes or $1,000 hats, they are less likely to take purchasers to check out the factory overseas.
2) Follow-up production, evaluate the top quality and organize delivery
After locating an appropriate supplier, it’s time to prepare the production of items. Sourcing agents/companies will help collaborate with the factory, keeping track of the whole production process and also make sure the factory finishes the manufacturing on schedule as well as the goods remain in fine top quality.
They will certainly also provide a quality inspection service. They will cooperate with the quality inspection company to inspect the finished products and minimize the defective rate before shipment.
Then comes the last step– shipping arrangement, which requires a high level of expertise. Because apart from a bargain for the most competitive shipping prices, they will also need to inform you what documents and product certificates you should prepare for the custom.
These services are also available by most sourcing agents/companies. You can choose any part of their services based on your own situation.
3) Other services
In addition to the mainstream services mentioned above, some large professional sourcing companies also offer private label solutions, including but not limited to the following aspects:
Customize the product
Free product photography for ecommerce
In a word, there are good as well as bad sourcing agents in this industry. This leads to the result that many buyers afraid to try the sourcing service. Therefore, it is important to find a reliable sourcing agent for long-term cooperation and a stable supply chain.
5. How does sourcing agent or sourcing company charge?
Do you know this is an interesting question-how does a sourcing agent charge? There is no specific charge standard as there are thousands of sourcing companies and individual sourcing agents around the world. The sourcing agent fees vary greatly according to the service scope, the cooperation methods, the product category, and the amount of the order.
Many purchasing agents/companies attract customers with low service fees even free service for trial order, but the buyer will finally find that the overall procurement cost (product cost + shipping cost + time cost) is not low at all. And the buyer may receive unsatisfying goods even the agent declaim they did the quality inspection.
To give a general idea about the sourcing service fees, I introduced 4 common charging methods of sourcing agents in the following.
1) Fixed salary for each project or a certain period
Many individual sourcing agents charge a fixed salary for each product or a certain period (week/month). They usually charge less than $50 for each product. Pretty cheap, right? And you can talk to your suppliers about your products and build a business relationship directly. The disadvantage is that these agents are usually not professional, and the suppliers they find are usually not the most cost-effective ones.
Some experienced buyers prefer to hire an individual full-time sourcing agent for weeks or months, to do some simple sourcing work like finding suppliers, translating and communicating with the suppliers. If you want to import from China, you can hire a full-time China buying agent around $800 a month to work only for you.
2) No extra charge but gain from the price difference
Many individual sourcing agents or sourcing companies use this charge method. Usually in this situation, the sourcing agent can provide good suppliers with more competitive prices or better product quality, which is impossible for the buyer to find these suppliers through normal channels, like some B2B websites.
In turn, if the buyers could find their competitive prices on their own, they would never consider such sourcing agents.
3) Percentage service fee based on product value
Charging for a certain percentage of the whole order value is the most common method among sourcing agents or companies. Why ？ Because usually they provide other services like follow-up the production, quality control, shipping arrangement ， consolidation and so on. So, they will charge a certain percentage of the value of the goods as the service fee.
In China, the common service charge is around 5-10% of the total order value. Another point, the product categories and the size of the order also greatly affect this percentage. For example, if the order is for some products with high price competition and high demand like rolled steel, or the value of the order is over $50 0,000, the service charge maybe about 3% of the order value or maybe less.
Usually few sourcing companies willing to accept service fees less than 5 % for the daily consumer products. It does exist some sourcing companies may try to attract you with 3% or less service fees, but you’ll end up finding that products prices are much higher than most online suppliers( like Alibaba suppliers). Or you can be delivered with poor quality goods even you get the perfect sample at the beginning.
Takeaway: No matter what the charging method is, you should evaluate whether the agent can reduce the overall procurement cost, improve the sourcing efficiency and ensure the quality of goods and so on.
6. What tricks does bad sourcing agent play? Kickback, bribe, etc
Now finally to the part that everyone CARES about. You may have heard a lot about the dark side of sourcing agent/company, such as accept kickback or bribe from the supplier, which make the buyers are afraid to use the sourcing agent. I will now reveal the common sourcing agent tricks in the following.
Kickback and bribe from suppliers
First of all, kickback or bribe happens to either individual sourcing agent or sourcing company. If the buyer and sourcing agent/company have agreed on product price and supplier information transparency at the beginning of cooperation, the agent still asks the supplier for a kickback, it becomes illegal/unethical acts.
For example, suppose now you get two equal prices from supplier A and supplier B, if the B supplier offer kickback to the sourcing agent, then the agent is likely to choose the B no matter if the product quality from B is good or not. If your sourcing agent accepts kickback, you may end up with the following situations:
The goods you received are not to meet your quality requirements, or product that is in non-compliance with the certification requirements in your market and thus illegal to import and sell.
If there is a dispute over product quality, your sourcing agent will not stand on your side or try to defend your interests for you, but more likely to excuse the supplier for various reasons.
Objectively speaking, kickback usually happens in large orders with tens of thousands of dollars. For small orders with thousands of dollars, most sourcing agents will not bother to get involved in kickback or the bribe.
The kickback phenomenon is much less now compared with 4-5 years ago, especially in the daily products industry. Because the buyers can find suppliers directly through many channels, such as B2B websites like Alibaba, Made in China, etc. They can make a comprehensive comparison on their own, and then weigh if the product price and service commission provided by the sourcing agent is reasonable.
So, a good sourcing agent/company plays an important role in your supply chain management. In addition to helping you to obtain competitive product prices, they also devote to take care of the follow-up processes, because the good service is the core competitiveness of their business model. As to some individual sourcing agents who might do a one-time business, I can’t guarantee the service quality.
7. Where to find sourcing agent for different types of business
You may ask me, where can I find a reliable purchasing agent? Don’t worry, I’ll show you three places to find a sourcing agent/company.
Searching on Google is always the first thought for most people when encountering problems. In fact, Google does help in most cases, it gives useful information. If you want to find a sourcing agent in one country, such as China, you can just type in” China sourcing agent”, and there will be a list of Chinese sourcing companies in the search results.
When you are checking out one of the sourcing websites, pay attention to the content, the years of establishment, company photos, contact information, the team size, infrastructure, customer reviews and testimonials, blogs, etc. Only a professional team will invest enough money and energy to optimize its websites on Google.
2) Upwork/ Fiverr
Upwork and Fiverr are freelancing websites where you can find some individual sourcing agents. Some of them are doing it as a part-time job, they will help you find a supplier and provide you with a supplier’s report. You will then need to contact the supplier and dealing with follow-up processes by yourself.
As this individual sourcing agent can pop up quickly, they can also disappear quickly. So you should be more careful with your individual agents when it comes to paying services fees issues.
In addition to looking for sourcing agents online, you can also pay a visit to trade fairs. For example, if you want to import from China and get a China import agent, you can visit Canton fair, Hong Kong fair, and the Yiwu international fair, etc
. But looking for a sourcing company at a fair is more suitable for large importers, who are more likely to spend millions of dollars in purchasing every year and need to import hundreds or thousands of different types of products.
If you are just a small or medium-sized importer budget only tens of thousands of dollars in purchases per year, the suppliers on fairs may not accept your order, or they may arrange an unprofessional sourcing agent for you.
8. Practical tips to find reliable sourcing agent or sourcing company
Tip 1: Choose Chinese sourcing agent VS sourcing agent based in other countries （ USA, UK, India, etc. ）.
As China is the largest consumer goods exporting country, Chinese sourcing agents account for a majority of the world’s agents. So I will divide sourcing agents into two types, China sourcing agents, and non-Chinese sourcing agents. What’re the differences between them? Which one to choose? Let’s see the pros and cons of them separately.
The pros and cons of Non-Chinese sourcing agents.
How do the sourcing agents based in other countries operate? Generally, they are natives of a certain country and help buyers in their own country purchase from other Asian or Southeast Asian countries, such as China, Vietnam, India, Malaysia, etc. They usually have their own offices in both the purchasing country and their own country. The team usually has several people, they mainly service for some large buyers.
If you are in the USA, choose a local sourcing agent and you don’t have to worry about language and culture barriers between you and the sourcing agent, the communication efficiency is improved.
If you purchase a large order, you can consider finding a sourcing agent in your own country. However, they are not very friendly to some small businesses, because their service commissions or their own profit is high.
The pros and cons of China sourcing agents.
Compared with Non-Chinese sourcing agents, obviously service commission or profit of China sourcing agents is much lower. Besides, they have more professional sourcing teams and richer Chinese supplier resources than non-Chinese sourcing agents.
However, with the development of cross-border e-commerce business, more and more Chinese procurement teams have very efficient business capabilities and very good language communication skills. As more and more international students return to work in China, it is now easy to find employees with strong English communication skills in China.
Tip 2: Choose the sourcing agents specialized in a certain item.
If you want to import a lot of different types of daily consumer products, choose a sourcing company that has already sourced a lot of daily consumer goods for previous buyers.
If you specialize in importing certain industrial products, then find the sourcing agent specialized in this industry like building materials, medical products. Because these sourcing agents must have accumulated a lot of good suppliers in this industry and can give you sound purchasing and production advice.
Tip 3: Choose the sourcing agent located close to the industry cluster.
Each country has its own industrial clusters, which are groups of similar and related firms in a defined geographic area.
For example, if you want to purchase daily commodities from China, the sourcing agent of Yiwu is a good choice. And for clothes, the sourcing agent in Guangzhou will have more advantages.
Locating close to the industry cluster is convenient to contact with factories and reduce intermediate costs, like freight cost, quality supervision fees and so on. For example, If you want to purchase electronic products, the sourcing agents in Yiwu will not have better price advantage than the sourcing agent in Shenzhen.
If you want to source products from China, here is a table of industrial clusters for some industry categories in China for your reference.
Tip 4: Ask the sourcing agent/company if he can provide happy clients’ referrals.
A good sourcing agent that provides value would have a lot of happy customers, and they will be happy and proud to provide you the happy customer contacts. So you can check out what the sourcing agent most good at-are they good at finding the best price or inspecting the product? Can they provide a good service?
Tip 5: Choose the sourcing agent with longer sourcing experience.
Sourcing experience is a vital factor you should take into consideration. An individual agent who works as an agent for 10 years can be much more resourceful and more reliable than a sourcing company that only established only several months.
The number of years he has been in business is proof of his track record. This means he has continuously provided his clients with a good quality business. Other than being knowledgeable in choosing suppliers he should also be extremely capable in the areas of quality control, logistics and audit.
For instance, our company is a reliable sourcing agent company that has been in business for more than 10 years and has 50+ employees on board, along with numerous long-term partners.