Types of Suppliers

The first step you had to take was deciding which product you wanted to import and sell. Now that you’ve done it, the next step is to find the correct suppliers for your product. Most importers go to Alibaba.com to find suppliers, but there are many other sites to choose from. The following chapter shows the different types of suppliers.

There are three types of suppliers that would be discussed in this chapter. They are:

• Wholesalers

• Trading companies

• Manufacturers

There is a common misconception among importers that the suppliers they are talking to are manufacturers that own the factory. But if you found the supplier through Alibaba.com, chances are they are a trading company or wholesaler, not the manufacturers. This chapter will explain the advantages and disadvantages of all three types of suppliers.

Wholesalers are individuals or companies who sell goods in a large quantity at lower prices, usually to retailers.

Advantages:

Wholesalers generally have western representatives who would help ease the communication between you and the Chinese factories.

Your lead-time gets significantly diminished if they have a warehouse in America.

The transaction is cheaper.

Disadvantages:

In comparison to a manufacturer or a trading company, you would need to pay 20-50% higher prices while dealing with wholesalers.

They do not give you many options concerning customization.

Traders or Trading companies are almost the same as wholesalers, except that they do not usually own the products they are selling. Trading companies act as intermediaries between the manufacturer and the importer.

Advantages:

Traders will have less of a communication barrier when communicating with you, the importer, compared to a Chinese manufacturing factory.

Trading companies often have already established connections with several factories and prefer to deal directly with them on behalf of you.

You can choose different varieties of goods to import by communicating with only one trading company as the same company would have good relationships with various types of factories. This saves you the pain of contacting new people every time you want to import a product.

Trading companies are open to receiving lower minimum order quantities than manufacturers.

Disadvantages:

As the trading company deals with the factories producing goods on your behalf, you don’t know which factory is making them.

You are liable for any defective products, not the intermediaries.

They are much more likely to stop all communications or “disappear” at any time than any other type of supplier.They are a cheaper source of supply than wholesalers. You have to pay for their markup, which is typically 5% or lower. They enjoy discounts for buying in bulk.

Manufacturers are the owners of the factories that are producing your product.

Advantages:

You can weigh in on decisions about your product from start to finish.

There are better opportunities for customization.

You know where your product is being manufactured.

You can bargain for the best price.

Disadvantages:

They do not have the best English Language speaking representatives.

They are not as reliable as trading companies.

The best way to determine which type of supplier to choose from manufacturers, trading companies, and wholesalers is to compare the advantages and disadvantages provided and pick the one best suited for your situation.

Although experts suggest the importer directly communicates with the factory, this approach has its shortcomings. You may find wholesalers or trading companies to be a better match for your product.