If you are getting into the import game (perhaps as a private labeler looking to sell on Amazon or other marketplaces) you will undoubtedly be faced with the prospect of using Alibaba or a similar B2B website to connect with suppliers.
One of the challenges of working strictly online is that you don’t exactly know who you are dealing with. For this reason, most neophyte importers wish to traverse the path of least seeming resistance and only work directly with a factory. This desire is compounded as seasoned importers regale listeners in horror stories about being taken advantage of by unscrupulous scamsters overseas.
It just seems easier to go directly to the source. Middlemen only serve to take a percentage and increase the likelihood of something going wrong. Right?
For some reason the industry, flooded with new interest and inexperience, has portrayed the trade agent as the nefarious bad guy in most instances. Speaking from personal experience, I have a friend who is a trade agent and he tells me of all the calls he gets where the prospective importer asks “are you a trade agent or the factory?” If my friend responds truthfully, the importer will hang up or discontinue correspondence 90% of the time.
However, this may NOT be in the best interest of the importer.
What Is a Trade Agent Anyway?
Quite simply, a trade agent is a person who connects distributors and end users with manufacturers. Inherently this does make them the middlemen. And yes, they take a fee as they don’t work for free.
On the surface, this would make it seem that a trade agent merely stands between an importer and a factory, decreasing margins with their collected fees. Much like the drug liaisons who connect big time suppliers to street dealers in Hollywood narcotics movies.
And just like in those movies, everyone is always trying to figure out a way around the middleman.
Except the world of importing doesn’t exactly work the way Hollywood does. Trade agents serve a valuable and important purpose in the industry of worldwide commerce.
But what does a trade agent really DO?
Trade agents provide a bridge between manufacturers and distributors. They are not there to obscure the process, but to enhance it. See, many overseas factories are not multi-lingual. That means, remote factories in the mountains of China likely have no means of reaching their ideal clients from, for example, the United States.
A trade agent opens the line of communication that, in their absence, did not exist. The trade agent does the hard work of understanding the language, and meeting the factory on their terms. Then, they work to bring in customers that would otherwise not know the factory ever existed.
For this reason, many factories will ONLY work with trade agents to broker their deals with clients. They are almost sales representatives in that regard. The difference is, a trade agent is an entrepreneur, so they have more control over how they operate.
The publisher is a middleman, he calls the tune to which the whole rest of the trade dances; and he does so because he pays the piper. – Geoffrey Faber
What Are the Perceived Disadvantages of Working With a Trade Agent?
Due to the middleman perception, as well as a general misunderstanding of the purpose of a trade agent, there are many perceived disadvantages to working with one. They are typically:
- A trade agent offers no real value; they only take a percentage. The biggest perceived disadvantage is that there is no value in the use. A trade agent’s involvement is simply viewed as a loss or unnecessary added expense.
- A little more due diligence and a trade agent could be avoided altogether. Many believe that if they simply keep trying they can find the factory they need without having to work with an agent, as if the agent is merely using Alibaba to source suppliers too.
- A trade agent could just steal your money. Some believe that, since the agent is not an established, vetted factory, it makes it easier for them to rip people off.
- If I’m not working directly with the factory, I can’t make customizations or changes. Many believe that a trade agent lacks the power to influence a factory to make customizations.
- If I’m working with an agent, I won’t get the best price. Many also believe that, due to the need for a percentage markup for the trade agent, as well as their desire to maximize that margin, it would be unlikely to get the best possible price if working with an agent.
While any of these concerns will always pose as a possible risk, they certainly aren’t indicative of working with a trade agent.
What Are the Advantages of Working With a Trade Agent?
- It may be the only way to work with your ideal factory. Some factories simply don’t speak your language, and don’t desire to. They let their agent do the legwork while they stick to what they do best.
- An agent may have relationships with several factories. So, this means you could be paired with one that is actually right for your specific needs.
- A trade agent could have already negotiated prices. Those prices could also be much lower than you could have negotiated on your own, even with the agent markup.
- An agent might be able to better communicate your specifications. Having someone on your team that speaks the language of the factory could mean your specific customizations are communicated more clearly.
Now, this certainly doesn’t mean that you have to work with a trade agent, or even that you should. It does mean, however, that you shouldn’t limit your options at the outset. It makes better business sense to be open in how you get connected to your goods.
It will serve you well if, instead, your primary concern is the quality and value of the products you are sourcing and the contract you are offered.