When sourcing from china, buyers often ask themselves: “Will working with a trader make my product more expensive?”
The short answer is: yes, but not always.
The usual way a trading company makes its margin is by connecting buyers with the appropriate factories and handling the buying process. But the price you pay in the end is a lot more than the trader's margin. Total purchasing cost can be influenced by product specifications, order quantity, factory pricing, quality control, logistics, payment terms and supplier management.
For the foreign purchaser the critical question is not whether the trader adds a markup but whether the trader adds enough value to justify the added cost.
How Can a Trader’s Price Be Up?
A trader purchases goods from a producer and resells them to the buyer at a higher price. This margin includes services such as supplier sourcing, communication, quality control, order management, packaging and logistics coordination.
For instance, if a factory quotes the price as $10 per unit, a trading company may quote $10.50 or $11 as it has to cover its operating costs and make a profit.
However, looking only at the two prices can be deceptive.
The factory may be cheaper per unit but have a higher MOQ, may charge you for packaging or molds, or have limited support with quality inspections and export documentation. The price of a trading company may include some or all of these services.
So the cheapest factory price is not always the cheapest purchase price overall.
Knowing When It is Financially Viable to Trade with a Trader
A trustworthy trader can be especially useful, when you are buying custom products or working with multiple factories.
If you need custom glass products, the trader might help to coordinate:
- factory choice
- Research & Development
- Mold growth
- Sample approval.
- Production monitoring
- Quality checks
- Packaging
- Documentation for export
- International Delivery
You have one company managing the project instead of you spending your time communicating with several factories yourself.
This can help reduce hidden costs such as travel, inspection costs, communication time, delays in production and quality problems.
For small and medium-sized buyers these savings can sometimes trump the trader’s margin.
Do a Trader’s prices always exceed a Factory’s?
Not necessarily;
Experienced trading companies may work regularly with factories and have better purchasing terms than an individual buyer. They can consolidate orders, get better prices on materials or leverage existing production partners.
Also, some factories prefer to work through trading companies as the trader will take care of customer communication and order management.
This implies the difference between the factory's immediate price and the trader's ultimate price may be smaller than buyers may believe.
How to Compare Prices the Right Way
When comparing a trader to a factory make sure you are comparing the same product and same level of service.
Check Check
- Product specifications
- Material and finishing
- MOQ
- Package
- Tooling or mold costs
- Quality criteria
- Inspection arrangements
- Lead time of production
- Terms of Payment
- Shipping terms
- Post sales support
If there are further costs, then the $9.50 factory price may not be cheaper than the $10 trader price.
How to Lower Your Purchase Cost
If you choose to trade with a trader, ask for a clear quote.
A professional trading company should be able to tell you what is included in the price and what other costs there are such as tooling, special packaging, inspection and transportation.
You can also ask if the trader can quote on different quantities. Increasing the order volume can greatly reduce the unit cost.
The most important thing is to look at total landed cost, not just the unit price at the factory or trader.
Last Words
In case you work with a trader, your product cost will be higher as the trader needs to make some margin. But this does not necessarily mean working directly with a factory is cheaper.
For custom or quality-sensitive products, a good trading company can provide supplier management, quality control, production coordination and logistics support that may save you money and time down the road.
The best way to do it is to weigh the total cost, service, risk and convenience and decide.
For overseas buyers, the right supplier is not always the one with the lowest unit price. This is the one that gives you the best overall value for your project.