Understanding the Types of Sourcing Companies and Choosing the Right One

If you have studied the import industry, you will find that many businesses whether the big or small turn to Chinese suppliers for product sourcing. China is one of the popular manufacturing hubs for businesses looking at product sourcing service, product development, technologies, branding, and packaging.

Choosing the Right Sourcing Company

Sourcing agents are the best options for your business as they have a huge network and can get you, credible suppliers, in a short time. Not all businesses require the help of sourcing agents. If you are unsure about whether you require sourcing agents then try answering the below questions?

  • Is your business looking at diversification?
  • Are you looking at expanding your product niche?
  • Are you looking at producing bulk quantities?
  • Are you new to the importing business?

If the answer to any of the above questions is ‘yes’, then you do require sourcing agents. Different businesses have different requirements. Therefore, you need to search for a product sourcing service agent that specializes in your products.

If your business is looking at diversifying its product lines to meet competition, then sourcing agents can help you find the suppliers who can cater to your vast product lines. Similarly, if you have a single product category with a small target audience, sourcing from China can be a good option for your business.

If you are into the wholesale business, wherein you need to manufacture goods in bulk, then hiring sourcing agents can make the job easier for you. This can help you boost your product sales and at the same time keep your customers happy.

If you are a new entrepreneur then you might find it difficult to find suppliers as you might not be fluent in Mandarin or have the right networking skills to gain the trust of the suppliers. Secondly, you might need to boost the brand of your business and will not have time to visit China and check out the suppliers.

Here is where a product sourcing service agent can come as a boon for your business. They will do all the research for you and ensure that the products are manufactured and delivered as per your requirements.

As a new business owner, it is natural to get confused about which type of sourcing company would be right for your business. Here is where you need to do your homework and understand the different types of product sourcing companies

There are three types of sourcing companies:

  • Trading companies
  • Third-party services
  • Commissioned based sourcing

Dealing with Chinese supplies can be tricky unless you hire a sourcing agent to do the job for you. Many of the supplies are not fluent in English and you might find it difficult to negotiate with them.

If you own a small business or need to produce small quantities of your product, you can turn to trading companies. They will find small factories that will manufacture the products for you. Your trading company will charge a small margin on top of the manufacturer’s price. The only drawback here is you will have no clue who is the manufacturer and will not be able to negotiate the prices.

When you opt for a third-party product sourcing service they will handle all the hassles for you. They will identify the top Chinese suppliers based on your requirements, screen them for their credibility and license, do quality inspections and factory audits, and follow up on the production process. These types of suppliers are a good option if you have a large and diversified business and the volume is high.

Under commissioned-based sourcing, your agent will find the suppliers for you and charge a commission anywhere between 5-10% on the purchase order. This is a good option, provided you trust the agent and know them well.

Hiring Sourcing Agents Can Minimize Risks

Hiring sourcing agents can help minimize the risks associated with product manufacturing. Yes, you might need to shell out some money for their fees, but it is worth the investment. Here is how the right sourcing agent can help minimize the risk for your business:

  • They thrive on connections and using their networking skills can get you the best suppliers
  • They can even get you a competitive advantage by connecting you with suppliers who offer the good quality products
  • They will cross verify the credentials and then only negotiate with the suppliers
  • They have solid knowledge about the e-commerce culture and can help you get the best deals
  • They can help bridge the language barrier between you and the suppliers
  • They can easily make out the genuine suppliers from the fake ones
  • Since they work with different suppliers, they can help you get product samples from different factories

You can even hire a product sourcing service that can carry out the quality inspection for you. They will regularly visit the factories, check for product defects and prepare the reports for you. The benefit of hiring quality inspectors is that you can be assured those high-quality products are getting delivered to your customers.

When you hire sourcing agents, ensure that you do your research. Not all agents that are listed out there are genuine. You need to ask the right questions such as:

  • How long they have been in this business?
  • Where are they located?
  • Have they worked on similar products before?
  • Can they provide referrals for their customers?
  • What are their payment terms?
  • Will they conduct factory visits before and after the production?
  • Will they conduct the inspections themselves or hire third parties?
  • How frequently will they report the production status?
  • What happens in the case the suppliers produce low-quality materials?
  • What if the products do not get delivered on time?

Credible sourcing agents will answer all the above questions to the best of their knowledge. Ensure that you state your requirements clearly so that they can find the right suppliers for you.


Chinese sourcing agents can help ease your pressure of searching for Chinese suppliers. When good quality products are manufactured, this can help boost the sales of your business and improve your brand image.

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