Key Differences Between Trading Companies and Manufacturers
If you’re thinking of trying your hand at importing to Australia, you’ve probably already been searching online or attending trade fairs looking for suppliers.
What you may not be aware of is that many of the websites you have been visiting and the exhibition booths you’ve stopped at do not actually belong to manufacturers at all, but to trading companies.
Trading companies do not make goods, store them or own them. They act as intermediaries between the manufacturers and the importers who want to buy their products.
The easiest way to tell a trading company from a manufacturer is to look at their product catalogue. If it includes everything from electrical goods to rugs and ladies fashions, then they are a trading company. If there are only a few items that could have all been made on a similar production line, then they are more than likely a manufacturer.
Many importers prefer to source their goods directly from the factory if they can and the main reason for this is the lower price. If they can negotiate a good price with the manufacturer and avoid having to pay a commission to a middleman (a trading company), then they will do so every time.
Factories have direct control and knowledge of their raw materials and technology and can therefore usually offer to a lower price in order to win your business.
However, the problem when dealing with a factory is one of communication. Many foreign factory owners and their employees do not speak English, or those that do may not have the ability to interpret complicated information for their colleagues.
The factory is also located in another country, while you, the importer, are half a world away in Australia. That means, unless you have the time and resources to travel there frequently, your communication will be limited to hundreds of emails and long telephone conversations in pidgin English.
This is particularly frustrating and time-consuming if you are planning to have your product manufactured from scratch and are trying to communicate exact specifications to the foreign factory. The potential for error is enormous.
This is where the trading company has the advantage. Their business is built on service and, in a highly competitive marketplace, they offer the importer a complete solution from manufacture to shipping. If this is more important to you than getting the best price, then a trading company may be a better option for you in the long run.
Trading companies respond quickly to enquiries, are professional in their dealings and usually speak your language; but this is what you are paying for through the commissions they charge.
If, however, you want the best factory price without the hassle of trying to deal directly with the factory, there is another option available to you. This is to use an import agent based in the country you wish to import from.
Such an agent would have people ‘on the ground’ who could verify factory credentials and assist with negotiations, contracts, ongoing quality control and troubleshooting when production problems arise. In this way, you would receive the level of service you desire, without having to go through a trading company.