Top 10 Sourcing Companies In China List // + Guide on How To Hire A Sourcing Company

Manufacturing in China requires great trust between suppliers and buyers – especially on large orders. Small mistakes could cost you thousands of $ and delays. Sourcing companies do a lot more than just discovering products. They suggest suppliers from a large pool of suppliers/factories visit the Chinese factories, negotiate on your behalf, carry out quality control, verify licenses & certificates, and help with logistics/shipping.

TABLE OF CONTENTS:

• What Could Go Wrong Sourcing In China?
• What Do Sourcing Companies In China Do?
• Sourcing Companies In China: Top 3 Types
• Top Benefits Of Sourcing Companies In China
• 5 Steps To Hiring A Sourcing Company
• How Sourcing Companies In China Get Paid: Top 3 Ways
• Sourcing Companies To Avoid: Top Red Flags
• Questions To Ask Sourcing Companies In Chin
•  Top 10 Sourcing Companies In China (Full List)

List Of Best Sourcing Companies In China

1. Cosmo Sourcing
2. Imex Sourcing
3. Guided Imports
4. Import Dojo
5. Easy Imex
6. China2West
7. Dragon Sourcing
8. Linc Sourcing
9. 80/20 Sourcing
10. Sourcing By Kian

Top 10 Sourcing Companies In China: FULL LIST

1) Cosmo Sourcing

Cosmo Sourcing is an American-owned sourcing company based in China with regional offices in Shanghai, Hong Kong, Ho Chi Minh City, and the US. Cosmo Sourcing can provide sourcing services in China and Vietnam simultaneously. Cosmo charges a flat upfront fee for their sourcing services and services to clients ranging from Fortune 500 companies to FBA sellers. An American expat in China founded Cosmo Sourcing called Jim Kennemer. Since its inception in 2012, the company has sourced over USD 40M of products from China and Vietnam. Their biggest customers are in the US, Europe, UAE, Canada, and Australia.

Cosmo Sourcing provides advantages that make it stand out among sourcing companies. They accept payments to US Bank Accounts, which means all contracts you sign will be enforceable in the United States. Cosmo Sourcing is incorporated in Hong Kong and charges a flat fee for all customers, regardless of the order size. Customers only pay once and get an “all-inclusive” sourcing service.

Cosmo Sourcing hires a large, experienced team of American and native Chinese experts specializing in sourcing, manufacturing, logistics, and quality control. Aside from the secure payment terms, the biggest advantage is that all employees working for Cosmo Sourcing have to sign legal agreements banning them from selling on the Amazon FBA marketplace (or any other online marketplace). This is a major security advantage for foreign investors looking to keep their sourcing confidential.

Cosmo also integrates NDA contracts between buyers and suppliers to provide maximum security for clients. They hire American staff for logistics and management, including native Chinese and experts for quality controls. Cosmo’s sourcing service is all-inclusive – meaning they supply everything clients need, from product development to shipping logistics. Cosmo helps clients start product development by developing spec sheets and product validation – this helps manufacturers get the products right. They also evaluate suppliers manually by visiting the factories and consulting them with native quality control experts. 

Cosmo compiles a large supplier list for customers and allows them to pick suppliers based on the price and the quality they can expect. They also provide transparent information about the factories they’re working with – many companies hide their suppliers. Cosmo can also arrange special services for FBA sellers, such as shipping directly to Amazon fulfillment centers in the US from the Chinese factories.

2) IMEX Sourcing

IMEX Sourcing is a sourcing and quality-control service company based in China specializing in sourcing services and software development for e-commerce sellers. IMEX Sourcing is focused on the Chinese market and aims to provide cost-effective production solutions for international clients. The highlighted service of IMEX Sourcing is their all-inclusive “360° sourcing service,” They also provide ad-hoc services for all stages of the sourcing process.

IMEX Sourcing’s team has over 50 years of combined experience in the sourcing industry, and they have a bilingual team composed of Westerners and Chinese quality control experts. IMEX Sourcing also develops custom software for e-commerce retailers.

IMEX Sourcing’s 360 Sourcing Service aims to help Western buyers with the entire sourcing process, from finding a supplier to shipping it and managing customs clearance/logistics. IMEX Sourcing’s main clients are in the US, UK, Australia, and Canada. They provide additional shipping services, such as shipping products directly to the buyer’s address instead of an international shipping port. The company manages the entire sourcing process, including Chinese customs clearance, once the products are ready for shipping.

3) Guided Imports

Guided Imports is one of China’s largest sourcing companies focusing on mid-sized and large enterprises looking to manufacture in China. We only recommend Guided Imports if you want to invest over $100,000, as they mainly work with Fortune 500 companies and other high-growth brands. Guided Imports’ sourcing process takes a custom-tailed approach suited to the buyer’s product specifications.

Guided Imports specializes in a few key industries: Healthcare, electronics, promotional products, baggage, and solar industries. Guided Imports works with healthcare institutions worldwide who want to import or manufacture healthcare equipment in China. 

Guided Imports electronics/smartphone sourcing department is very strong, with massive capabilities in device manufacturing. They work with large technology brands and ensure customers get quality electronics. The company also has a strong gift/promotional product portfolio. Recently, they’ve expanded to fashion and bags as well.

4) Import Dojo

Import Dojo was started by an Austrian entrepreneur in China who specializes in e-commerce and provides sourcing services for international customers. Import Dojo’s CEO spent the last 20 years working in the manufacturing industry in China and has written dozens of books on the subject. 

Import Dojo has experience sourcing for some of the biggest retail brands globally, including Metro, Rewe, OBI, Carrefour, Tesco, Walmart, Amazon, Auchan, Lowes, Sears, Home Depot, and many others. The CEO is one of the most influential sellers in the world and hosts his podcast and sourcing tutorials on his website, ImportDojo.com.

ImportDojo takes a unique approach to sourcing in China by offering monthly and yearly sourcing packages that clients can purchase directly from the website. The yearly subscription gives them access to ImportDojo’s sourcing services, and the company guarantees they’ll find suitable suppliers within 7-10 days, or they’ll issue a refund. They can help clients get started by showing them original buying prices in their niche and discovering alternative suppliers for their current suppliers.

5) Easy Imex

Easy Imex is a Shanghai-based sourcing company that is one of the largest in China by total exports. Easy Imex was founded in 2004 and has since exported over $180,000,000 of products while establishing relationships with 7,000 suppliers. As one of China’s premier sourcing companies, Easy Imex hires 20 full-time managers in their Shanghai offices and 30 private quality control inspectors available in all Chinese provinces.

Easy Imex’s service stands out by helping buyers find unique suppliers not listed on Alibaba or other public marketplaces. The company claims as many as 70% of its suppliers are not listed on Alibaba and can help source products that are hard to source. Easy Imex on-the-ground experts can verify the legitimacy of suppliers and help clients make decisions by presenting a range of manufacturing solutions. Their team has a combined 132 years of experience in the sourcing industry.

6) China2West

China2West is a sourcing company that also has offices in Thailand and Vietnam. China2West is British-owned and has a Western management team based permanently in Asia. The company has been registered in Hong Kong since 2005 and has expanded to Ho Chi Minh City and Bangkok, offering various sourcing services such as factory audits and assistance. China2West can help buyers build a reliable supply chain by providing access to thousands of suppliers they’ve worked with across many product categories. 

China2West offers clients a few sourcing packages directly available for sale through their website. China2West’s sourcing service is also available for off-the-shelf products. Their sourcing process typically takes 5-10 days (sometimes lower), and they have differently priced packages depending on the sourcing complexity and difficulty. They use their private supplier channels and B2B sourcing sites to discover suppliers. China2West guarantees they’ll be able to produce three potential suppliers for your product within the first week.

7) Dragon Sourcing

Dragon Sourcing is a global sourcing corporation and one of the largest service agents in the world. Dragon Sourcing was started in Hong Kong, and they have their second HQ in Shanghai. Dragon Sourcing was established in 2004 and expanded all over Asia in its first ten years of operation. Dragon Sourcing has regional offices in the US, Turkey, Austria, Vietnam, the UK, Brazil, Italy, and Kenya. They have a presence on three continents and service clients from nearly 100 countries.

Dragon Sourcing can source products or services from commodity products to custom products. They have experts for all product categories that can source dozens of potential suppliers for every project. Dragon Sourcing’s services are catered to businesses of all sizes, ranging from small start-ups to multinational corporations. The main advantage of Dragon Sourcing is that they’re large enough to be wholly supplier-independent and always take a unique approach to their sourcing process without taking commissions from suppliers.

8) Linc Sourcing

Linc Sourcing is a Swedish-owned sourcing company that operates in China and Sweden and is one of China’s oldest-running companies. Linc Sourcing was started in 1995 by Lennart Rosell. Linc Sourcing’s main office is located in Shanghai, and they provide procurement services for buyers while working with suppliers in all Chinese provinces. 

Linc Sourcing vows to lower client production costs by making the purchasing process efficient. Their organization has two employees in Sweden, 11 in Shanghai, and franchise partners in Europe (UK, Spain, and Italy). Linc Sourcing has developed partnerships with 80 active suppliers in China and handles an annual purchase volume of $13M.

9) 80/20

80/20 is an American-owned sourcing agency based in Shanghai, China. The owner of 80/20 is one of the most renowned names in sourcing and has been sourcing in China since 2008. 80/20 has worked with hundreds of different clients and equally as many suppliers. Gary Huang, the CEO 80/20, publishes sourcing tutorials on his website, where he documents his experience.

80/20 was named after the “80/20 rule” invented by an Italian economist. The rule states that 20% of actions we make generate 80% of the returns we get. He found that nearly 80% of sales were generated by 20% of his key customers. This rule is why he emphasizes focusing on the 20% of things that produce the results we seek. Gary has helped hundreds of companies source their products in China, and he occasionally offers exclusive sourcing services.

Note: This exclusive service is not always available and occasionally opens up for new customers. Check their website to find out if sourcing is available at the moment.

10) Sourcing By Kian

Sourcing By Kian is a company started by Kian Golzari – one of the most influential names in the sourcing industry. Kian Golzari provides an exclusive sourcing service for select customers. Kian provides sourcing training and has personally sourced over 2,500 products for Fortune 500 companies such as Tesco, Aldi, Argos, Bath & Beyond, Visa, Panasonic, and Google. Kian Golzari has also worked with the United Nations and was awarded the 2012 Olympic Games contract for its official merchandise. Kian is an advisor at Sedex, an organization specializing in global manufacturing.

Kian is occupied with designing and manufacturing products for the NBA and launching a new travel brand. He’s a personal mentor to over 100 top Amazon sellers and occasionally provides sourcing services to new customers. We don’t advise start-ups/small companies to use his consultancy as it’s mainly aimed at established brands looking to lock down big deals in China.

What Do Sourcing Companies In China Do?

Simply put, the sourcing company acts as a 3rd party brand ambassador that helps find the right supplier for you. Let’s say you want to make sports shoes. There are thousands of factories and tens of thousands of suppliers that can manufacture sports shoes in China. You’ll never know if the suppliers on Alibaba are 3rd parties paid by the factories or middlemen looking to make a margin on your order. You also don’t know if their leather shoes are ISO-certified and eligible for international export.

• A sourcing agent can help you locate factories, consult the factory owners, visit the factories, negotiate the payment, start production, and get your product shipped on time.

Sourcing companies have a physical presence in the country they operate in: i.e., a Chinese sourcing company will have an office in China; a Vietnamese sourcing company must have an office in Vietnam. They effectively serve as boots on the ground for your company, and the agents speak Chinese + they are familiar with all local customs, manners, holidays, etc. They can help you find the products you need, lowering the production cost and making your product.

China has more sourcing companies per capita than the rest of the world combined. There are hundreds of sourcing agencies in China, but we’ll only list the top 10 in this article below (agencies that export tens of millions of $ worth of products). China is the world’s largest producer and export of factory goods, which means sourcing specialists are operating all over China. It’s possible to arrange sourcing agents who only work out of individual provinces to increase experience in that area.

If you are interested, check out our guide on the best sourcing companies in Vietnam.

What Could Go Wrong Sourcing In China?

Let’s say John Smith invests $50,000 in manufacturing backpacks in China. He goes to Alibaba because he doesn’t have experience working with Chinese suppliers. He chooses the first supplier who gives him a reasonable price on Alibaba without conducting thorough checks at their factory. The result?

He ends up losing over USD 10,000 on his first order. The manufacturer delayed his order by 30 days, and the backpacks he received were not the particular color he requested. Take this as a lesson: If you don’t have a sourcing company to vet your suppliers personally and provide a guarantee the order will be fulfilled on time (at your desired specifics), you could lose thousands of dollars a lot of time.

Pro Tip: Hire a sourcing company only after you’re prepared to place an order. If you have a budget and are ready to order, this is the best time to consult a sourcing company. Don’t waste your time with sourcing companies until you’re ready to place an order with a manufacturer.

Sourcing Companies In China: Top 3 Types

Sourcing companies in China can vary significantly. For instance, they can vary based on the payment model. Some prefer to get paid a % of the order size, while others charge a flat fee regardless of how much you order. There are also structural differences in the way companies operate. The most significant differences are in sole-sourcing agents, sourcing companies, and large corporations that offer sourcing as a side-product among their services catalog. Here are the top 3 types of sourcing companies operating in China:

Sole Operator Agents

Sole operators work as independent procurement agents. These agents are a “one-man company” that usually specializes in a particular category of products. For instance, there are sourcing agents for footwear and sports appeal. There can be significant differences between sourcing agents. Some may be inexperienced and charge little, while others may be sourcing tens of millions of dollars worth of products yearly and charging higher fees.

The main upside of working with sole-owner sourcing agents is that they are entirely dedicated to your project. The one-on-one experience means they’ll pay more attention to detail and be more dedicated to your sourcing needs. The downside is that you have to verify they’re licensed and experienced and not just paid by the factory. When working with less prominent sourcing agents, you’re at an increased risk of payment fraud.

• Example: Kian Golzari.

Sourcing Companies

Sourcing companies or agencies are the most prominent in this industry (we developed our list below). Most companies hire multiple agents like the ones we listed above. The agencies can vary significantly. Some of them specialize in furniture, while others specialize in electronics. Some charge by the hour, while others charge a flat fee.

Sourcing companies are more reliable than hiring sole agents because they have a larger presence and a wider network, with dozens of agents working under their wing and establishing connections with factory owners. Expect to pay more for sourcing companies than you would sole agents. There are small sourcing companies that have sourced a few million dollars worth of products, mid-sized ones that have sourced tens of millions of $ worth of products, and large sourcing companies that have sourced hundreds of millions or billions of dollars $ worth of products.

• Example: Cosmo Sourcing. 

Large Corporations

Large corporations (usually in the shipping/logistics field) offer sourcing services. These tend to be the most expensive, but their services are usually on the level of sourcing companies that exclusively specialize in sourcing.

The advantage of working with companies of this kind is that they can combine their sourcing services with convenient shipping/logistics services to expedite the shipping time and give you other perks. These companies tend to have quality control departments and ensure zero defects in your products. You can expect to pay a higher fee than a sourcing company. Many of them charge by the hour.

• Example: Dragon Sourcing. 

Top Benefits Of Sourcing Companies In China

There are the most common questions first-time buyers ask: What can sourcing companies in China do for you that I can’t do for myself? Isn’t sourcing all about going on Alibaba.com and looking up suppliers? Is there an area where they can give you an edge in manufacturing? Those questions will be answered below. In short, The sourcing company serves as your brand ambassador. Hiring a sourcing company is the equivalent of opening up your own branch office in China.

Sourcing companies not only look up suppliers, but they have a physical presence in the country. The sourcing agents can visit the production line and give you an assessment. They can inform you if the factory is worthy while compiling a list of top suppliers. They can speak Chinese and negotiate the order on your behalf. The local knowledge helps bring down MOQs, lower prices, place orders, etc.

The sourcing company can communicate the order to the last detail, minimizing miscommunication and lost revenues. They are familiar with all cultural norms in China, such as how national holidays can impact production and factory closures. They can also arrange convenient pickups from the factory to the international port of departure. That being said, here are the main benefits explained:

✔ Sourcing Your Products

The sourcing company carries out one essential activity: Supplier discovery. Finding a good supplier in China is like looking for a needle in a haystack. The Chinese market is so big that it should be considered in multiple markets. It takes a very experienced and clever sourcing agent to narrow down reliable suppliers that can fulfill your order without errors. It’s not as simple as looking up B2B platforms like Alibaba or Global Sources. Even those websites are littered with factory intermediaries, frauds, scammers, and others looking to exploit you. Even though it’s smart to do a preliminary search to find out more about what you can expect, you should always hire a sourcing agent to secure the deal.

• Example: If you want to purchase e-bike conversion kits for electric bicycles, most suppliers will list the kits between $300-400 on Alibaba. They’re not telling you you’ll have to pay $100-200 extra for the battery to power those kits. The deception is one of many “hidden” secrets that suppliers are not letting out on B2B trade websites – where a sourcing agent could help by filling in the missing pieces. The agent knows the exact market value of every piece of equipment and what could affect it.

The sourcing company will visit the factory in China to consult with the factory owners and check whether they can meet your project requirements. The fee for hiring a sourcing company could be as little as it would cost you to book a flight ticket to China and back. The best sourcing companies will already have a list of suppliers you can immediately approach in every industry. In many cases, you don’t even have to do any research; you can go to a sourcing company directly for a consultation.

✔ Saving You Time

Our most valuable asset is time, and the sourcing company saves you time in numerous ways. You don’t have to research thousands of potential suppliers on the internet and try to vet them personally – you let the sourcing company go to work for you. The sourcing company researches for you and presents many factory options, prices, etc. – leaving it up to you to make the final decision.

They are physically located in China to visit potential factories in hours and cut a deal with the factory owners on your behalf. They also speak Chinese, which cuts down when hiring a translator and dragging them out to the factories. The many services minimize the responsibilities you have to face when you’re placing an order. You save hundreds of hours while the sourcing agency ensures your order is properly managed and executed to your desires.

The sourcing agency is your local representative in China. Their job is to get the best possible deals for your budget and establish your relationship with the factory, enabling you to re-order if the shipment ends successfully. Top sourcing agents have worked with the same customers for many years.

✔ Chinese Cultural Differences

There are major cultural differences between China and the West. Do you think this can’t affect your business? Think again. For instance, when there’s a Chinese New Year (the most important festival in China), all the factory workers leave and go home to celebrate with their families. This festival is supposed to last a week, but many factories remain closed for over a month. 

What happens if your shipment is delayed by 30 days because you didn’t know the factory would close? Situations like this would never happen with a sourcing company because they’d let you know in advance – helping you ramp up the production in the days leading up to Chinese New Year so you can have products while they’re closed. The sourcing company presents other holiday solutions, effectively helping you fill product shortages from factory closures. The sourcing company takes the pressure off you by anticipating all things that could go wrong in advance.

Communication differences could cost you tens of thousands of $ if the supplier doesn’t understand the specifics of your order. The factory owners are often not well-versed in English, and foreign buyers order thousands of dollars worth of products, thinking nothing could go wrong. When you hire a sourcing company, you’re hiring native Western and Chinese agents trained to speak Chinese at a native level—their knowledge of Chinese cuts down on all potential miscommunication errors.

✔ Verifying Certificates

What happens if you export to the US and EU seaports but the shipment is refused at the port of entry? Many Western buyers are unaware that their shipment could be refused at the destination seaport because it doesn’t comply with international import standards. This is why those ISO certificates you’ve heard about could be useful. It’s possible to import non-certified products, but you’ll have to pay extra to certify them – this increases your total costs. Be wary of working with low-quality suppliers.

The best solution is to hire a sourcing agent to narrow down a list of certified suppliers and then check their official certificates and licenses to ensure they comply with international standards. The good news is that most big factories in China manufacture at international standards. While few things could go wrong, it’s wise to consult with the sourcing agent to ensure their documents are legitimate.

Certain business sectors, such as metal processing, will require separate licenses for the manufacturer, and you want to ensure these are legitimate. The sourcing agent can deploy experts to verify the legitimacy of their licenses and certificates (usually written in Chinese).

✔ Weeding Out Scammers/Bad Factories

Things could go downhill if you order a large amount (such as over $10,000) online without visiting the factory firsthand or hiring a sourcing agent. You could become the target of payment fraud and get scammed by bogus suppliers. Alibaba tried to fix this issue by providing “Gold” supplier status to suppliers, but even scammers can bypass this now by purchasing a “Gold” status.

• The only way to verify the legitimacy of the factories is to put boots on the ground. You also want to make sure the “supplier” you’re talking to online is the actual manufacturer of the products and not a third party. The legitimacy of a factory can all be verified by hiring a sourcing company and letting them work for you.

The sourcing company will already know which suppliers are legitimate and deliver consistently. Their knowledge and ability to vet factories is arguably the greatest argument for hiring a sourcing company – you’re buying their experience and connections to factories. They deal with thousands of factories yearly and have a network of agents who know which suppliers/manufacturers are suitable for the products you want to manufacture.

✔ Negotiating On Your Behalf

The sourcing company acts as your brand ambassador in China and negotiates on your behalf. They will meet the factory owners, shake their hands, and discuss and pressure them into offering you the lowest prices possible. They can even go as far as minimizing the MOQs (minimum order quantities) with certain suppliers.

Sourcing companies have experienced negotiations that know the exact market prices of each product and the pain thresholds of factory owners, thereby negotiating the lowest possible price. They do this without compromising product quality. The knowledge of the market and pricing is also a side advantage of sourcing agents: They know the absolute lowest a manufacturer will go without lowering quality. Some suppliers might take advantage of you by lowering the price and the quality of the materials to go into the product.

The sourcing company will take over the negotiation process for you and help close the deal. Their negotiating skills to save you on the logistics and travel time would allow you to book flights back and forth to China, helping you save money and time while still manufacturing your product.

✔ Minimizing Risk Of Failure

Think about everything that could go wrong during an order: Miscommunication, scams/frauds, fake certificates, logistics errors, overpaying for products, etc. These are all things that are automatically avoided by hiring a sourcing company. 

The sourcing company allows you to minimize the risk of failure and effectively serves as an insurance agent that safeguards you during the entire sourcing process. They minimize the risk when placing your order, and they follow up with you by double-checking and ensuring the supplier keeps their word throughout every stage of the production process.

• They can carry out quality control and send inspection services for your order. They can also negotiate the shipping of goods between the factory and the international shipping port of departure – helping you bypass customs on time and ensuring timely deliveries.

The company will double-check all the export licenses, documentation, and paperwork to ensure you have zero issues (including arranging insurance). Even though there are things you can do to contribute, such as submitting product designs or providing more details to the sourcing agent, the risk is minimized every step of the way.

✔ Keeping You Updated

The sourcing company will provide regular updates throughout the order process and delivery. For instance, they’ll provide briefings/data reports when they engage the suppliers. They will follow this up by consulting with the factory owners to ensure they’re working on your order. 

The sourcing agent will inform you when the products are being shipped and when you can collect the delivery in advance. Many of them can ship directly to your home address or Amazon warehouse. They’ll also be available when it’s time to ramp up production or re-order from the same manufacturer.

5 Steps To Hiring A Sourcing Company

Hiring a sourcing company in China is easy. You only have to research which companies offer you convenient terms, choose a company, and place an order. The sourcing companies might differ in their approach to suppliers (i.e., some may hide the factories they work with while others give you a choice) and may request payments based on different terms (covered below). In general, the hiring process can be summed up in 5 steps:

Step 1) Product Details. 

You contact the sourcing company and tell them what products you want to source. When you first talk to a sourcing company, you present product details such as design, size, material, brand, extra details, etc. You want to be as detailed here as possible to help your agent find suitable suppliers based on those details. This is the most crucial step in the hiring process.

Step 2) Picking Suppliers. 

The sourcing company will take the product information you’ve given them and narrow down a list of potential suppliers. If they feel warm about a certain supplier, they suggest one supplier over another. They will personally reach out to 10-20 possible suppliers and find one based on your product design, order quantity, delivery time, shipping logistics, and other variables (i.e., worker conditions, green/eco materials, safety standards, etc.). You’ll help you make your decision based on that information.

Step 3) Order Placement. 

Once you decide to work with a certain supplier, the sourcing agent will meet the factory owner in person. This meeting is usually conducted at the factory’s premises, where they can check how production unfolds, verify certificates, negotiate prices, and sign the contract for your order.

Step 4) Order Fulfillment. 

The factory starts producing the product and fulfilling your order at this stage. They communicate back and forth with your sourcing agent to convey essential information and keep you updated. The goods are then shipped (usually via a forwarding agent). The sourcing agents can put you in touch with shipping companies that facilitate shipping between the factory and the international seaport (by truck) and then unload the shipment for you and ship it to a warehouse in the US, such as an Amazon warehouse.

Step 5) Follow-Up. 

The sourcing company will keep in touch during shipping to prevent damage (if you have to file an insurance claim) and make new orders. If the product succeeds and you’re ready to re-order from the same supplier, you can still work with the same sourcing company. Many entrepreneurs establish relationships with sourcing agents that last for years.

In essence, the sourcing company carries out the following activities:

• Research and communication.
• Certificate/license verification.
• Supplier negotiation.
• Production oversight.
• Shipping & storage logistics.
• Quality inspections.

How Sourcing Companies In China Get Paid: Top 3 Ways

There are only a few ways sourcing companies charge clients. Most of them work on a commission-based payment. Example: They may ask for 2% per order; if you place a $200,000 order, they get $4,000. Others charge a flat fee regardless of the order’s size or size.

Some companies charge by the hour, even with no guarantee of a deal being made. Sometimes, the company may ask for mixed payments (prepayments and commission-based payments). Most sourcing companies are open about how they charge customers, so you’ll rarely be taken by surprise. Here are the top 3 ways sourcing companies get paid:

001 // Commission-Based Payment

The most common way sourcing companies get paid is based on a commission. The commission-based payment model varies with the company. The commission is why it’s hard to calculate how much you can expect to pay because every company will set its percentages. You can generally expect to pay higher fees if you place lower orders and the opposite.

Example: If you place a large order, the fee can be small: 1-2%. If you place a small order, the fee could be 10%. Let’s say you order $100,000 – they likely won’t charge $10,000 (10%) for the procurement. However, if you place a $500 order, they’ll likely charge $50 (10%). Certain companies charge higher fees on the first order and then lower fees on consecutive orders, hoping to attract long-term customers.

You’ll usually have to consult the company and tell them about your budget to find out how much you’ll have to pay. They’ll either announce these percentages on their website or give you a quote via email. The payments are usually required in advance before the sourcing company goes to work for you.

The main issue with commission-based companies is that they have no vested interest in finding low-cost suppliers because they make more money on the commissions if you spend more. Therefore, the company is not incentivized to get the deal done at $40,000 when they can get a higher commission on a $50,000 deal.

002 // Hourly Rate

The hourly model bills you for all the hours a sourcing company has put in. This model tends to be more expensive and used by large corporations who don’t mind spending a few extra dollars. There are a few advantages and disadvantages to this model. The main advantage is that no matter how much the deal is worth, you’ll only pay for the hours spent.

For example, if you order $1,000,000 worth of products, you’ll only be billed for the hours the agent spends conducting the deal (instead of paying 1-2% – which would amount to $10,000-20,000 in this case). The disadvantage is that if you’re a small or medium company, you may spend way more money than expected for procurement, especially if it’s a harder niche product to source and negotiate.

Flat Fee (Most Recommended!)

The flat-rate model is the most transparent model we recommend for companies of all sizes: Start-ups and established companies. The flat-rate model means you only pay a fixed fee from the project’s start until the end. The flat-rate model carries tremendous advantages for buyers because it removes the payment volatility, and you know exactly how much you’ll get billed in advance.

Example: The company may charge a $2000 fee, and that’s all you’ll end up paying for the duration of the project – irrespective of how many hours they spend negotiating or what the deal size is. The sourcing agent will find you the best deal because they don’t make money on larger orders, and you won’t be surprised when you get billed by the hour. The flat rate business model is the best payment model for all purposes. However, it’s harder to find companies that charge a flat fee.

Pro Tip: Consider separating the agencies you hire based on the payment method. If they get paid by the commission (as opposed to a flat-rate/hourly payment), they get paid when you place an order. If you hire commission-based agencies, you can’t trust them for quality control because they’ll be eager to place an order even at the cost of reduced quality.

Sourcing Companies To Avoid: Top Red Flags

There are a few red flags you should be wary of when you’re getting started and hiring a sourcing company.

✖Paid By Factories

Avoid hiring sourcing companies that are affiliated with factories. This is usually the case with sourcing companies specializing in certain industrial sectors – the factory owners may buy them up to bring customers to them. For instance, let’s take the example of electric scooters (a highly popular export item).

If you have a factory that manufactures excellent electric scooters for a decade, they may be your best supplier. But then you could have a different factory that makes mediocre scooters and takes longer to produce your products. The sourcing agent will likely recommend the latter because they have an incentive to make you go with that supplier. Always go for a general-purpose sourcing company.

✖Poor Language Skills

The main red flag of sourcing companies is that their agents can’t speak fluent English. While the sourcing agent should be able to speak Chinese, they should also have excellent English communication skills. Even though their website looks professional and makes a good impression on customers, you never know if they hired professional writers. The only way to find out is to communicate with them firsthand. Start by emailing or calling them to get a feel for their communication skills.

How is this relevant to the procurement process? For one, manufacturing is all about the details. Finding the right supplier is especially crucial on large orders where you’re paying thousands of dollars – you want to ensure all the product’s specific characteristics are integrated into the final product. This is why you should only hire excellent communicators. In an ideal case scenario, you should hire a Western-owned sourcing company whose owners can speak Chinese and have a mixed team with local Chinese agents.

✖Sourcing Delays

Many sourcing companies present themselves as the most experienced – claiming they have a huge network of partners, factories, and years of experience. What happens when you hire them? They fail to present a list of viable suppliers in a matter of days. 

As a general rule of thumb, if your sourcing company fails to deliver a list of suppliers within a week after payment – fire them. The best sourcing companies will start recommending manufacturers instantly when you talk to them over the phone.

Questions To Ask Sourcing Companies In China

What are the best questions to ask sourcing companies when you’re starting? Here are some key questions that can help you make your decision:

• Offices/Physical Presence. Are you physically present on the ground in China and have an office there?
• Experience. How long have you been operating? What is the total value of the products you’ve sourced? What are your previous clients? Do you work with Western clients? Do you have any references?
• Specialization. Do you specialize in certain industries, such as appeal or electronics?
• Legal. Is your business licensed to operate in China? Can you make transactions for our company and ensure the suppliers will get paid on time?
• Payment Terms. How do you prefer to get paid? What is your commission on the order?