How to Spot and Avoid Middlemen
Episode #3 of the course Fundamentals of importing physical products from China by Damir Serbečić
Hello and welcome to today’s VERY important lecture.
In this email, you’ll learn how to cut out the middleman and avoid paying extra for inventory when you don’t have to.
You see, just like any other marketplace, Alibaba is full of traders. Although the purpose of an online marketplace is to deal with a manufacturer or brand directly, traders (middlemen between manufacturers and you) still exist in huge numbers. If you deal with a middleman, then expect to pay higher prices than you would when dealing with manufacturers directly.
Here are a few more NEGATIVES of dealing with a middleman:
• little to no ability to customize a product—if you want a custom product, then you’ll have to work with manufacturers directly
• usually, longer lead times (waiting period)
However, there are some POSITIVE aspects about working with middlemen, e.g. low minimum order quantity (MOQ) per product variation. Since factories usually have high MOQs, trading companies buy higher quantities from factories and then resell them with an extra margin but a lower MOQ.
For example, dealing with a middleman may be a good decision if you want to launch a test product in a niche you’ve never sold anything before, but factories require 3,000 units as a MOQ. In this case, middlemen can help you test a niche with lower MOQ and lower initial investment.
How to Spot a Middleman
Alibaba storefront page and assessment report. Go to the supplier’s Alibaba storefront page (example here), and click on Company Profile/Company Overview. Take a look at the Business Type field. This shows whether a supplier is a manufacturer or trader.
If a supplier has been assessed by a third-party inspection company, then download the assessment report and check what business type they are.
Sample availability. Factories usually have samples available immediately. In case of a generic product, samples can be shipped out the same day, and more complex product samples should be available in a few days.
If you have to wait for “sample production” for more than 10 days, then you’re probably dealing with a middleman.
Factory address on maps. Ask your supplier for a factory address, and check it out on Google Maps. If it’s in the middle of a city, then it’s probably not a factory.
To double-check the address they gave you, look at the address they have on file with Alibaba (on the supplier’s Alibaba storefront page) and assessment report.
Unplanned video call. Chinese agents don’t shy away from talking over the phone. They are often quite insistent on WhatsApp and Viber calls. This is your opportunity to check if they are a factory.
The next time you have a talk with your agent, request a video call and ask them go to their factory facilities. Sales offices are usually in the same building as the factory facilities, so if they are a true manufacturer, it won’t be a problem to show you the factory over a video call.
You’ve learned how to find and evaluate suppliers, and now you’re all set up to start inquiring and TALKING to suppliers.
In the next lecture, you’ll learn what to ask suppliers in order to get the deal done as fast as possible.
Talk to you tomorrow.
Have a great day!
42 Rules for Sourcing and Manufacturing in China (2nd Edition): A Practical Handbook for Doing Business in China, Special Economic Zones, Factory Tours and Manufacturing Quality by Rosemary Coates
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