Buying from China's Factory or Trading company?

When buying from China, you'll meet two kinds of company: Trading company & Real Factory .

Most buyers prefer to deal with factories directly, because factories always give better price. In fact, both have their advantages and disadvantages. Sourcing is not all about price, you got to consider issues like service, professionalism, communication etc, which in many cases, are the advantages of trading company, but the shortcoming of factory. The biggest advantage of factory is Cheaper price. Normally, factories can offer better price than trading companies. Factories control raw material, production, and technology, while trading companies buy from factories and will add their commission onto the factory price. So if the trading company don't have competitive supply chain(in some cases, their associate factories can give extremely competitive price to the trading companies, so even after the trading companies add commission, the price is still competitive compared with other factories, this is rare, but it can happen).

But you might also meet the communicating problem, you know China is not a english-speaking country, the truth is most of the factories donot have enough English-speaking staff at present. In comparision of small factory, trading company hire more educated staff. Another advantage of trading company is they allow small order quantity which factory don't accept.

Another problem is quite a large quantity of Chinese suppliers, especially small and medium sized ones, don’t have import and export certificates, they are exporting through big import and export companies(factories pay 2 to 3% commission to the export company.

So many trading company pretend to be a factory, and sometime you can't easily tell from their company name,They don’t use trading or international trade as company name. One simple way to tell the trading company from factory is to look at their brochure, if a company make from lighting to floor mat then electronics, they are trading companies; another way is checking their business license, which clearly indicates the type of company, though it is in Chinese vision.