China is undoubtedly one of the leading manufacturing markets in the world and has gained the attention of importers worldwide. There are three reasons for China being the "world factory".
Low labor costs
A technically superior workforce
All these advantages make China a great manufacturing country, although many western companies are wary of collaborations. So the question often asked is how do you find Chinese manufacturers?
There are many cultural, business, and language barriers that can deter purchasers, but many small and medium-sized purchasers can easily overcome these barriers by working with Chinese sourcing agents. Reduce your risk because a reputable and experienced sourcing agent can leverage years of experience to manage the supply chain on your behalf for optimal results.
It seems like an additional expense that you are adding to your production costs. But the deal can be very cost-effective if you manage the China sourcing agent fees successfully.
First, find a good sourcing agent in different ways. Choose the right one, and ask what their rates are, but before you negotiate the rates, find out for yourself how much China sourcing agents charge.
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Before you know the fee standards, you need to know what services most sourcing agents will provide. The following are:
Such as warehouse storage, inventory management, interpretation, etc.
The degree of difficulty and professionalism of each service is different, so the cost will be different.
Commissions can be from 3% to 10% of the total value of the order depending on the product type, the order size, and many other factors. Different sourcing agents have different charging standards. But usually, the sourcing agents wouldn’t charge a commission fee higher than 10%.
This cost is basically negotiated before the customer places an order, and does not include the cost of previous preparatory work.
The fee does not depend on service, usage, or time. A flat-rate fee is variable from agent to agent. Sometimes flat-rate fees are calculated on a per-product basis.
This is a kind of commission you pay for being facilitated with the opportunity to be linked with potential and high-quality suppliers. We know that the service of a China sourcing agent doesn't limit to sourcing suppliers but also includes verifying the credentials of the suppliers (factory/area/Number of Workers/Year Running etc), and negotiating your requirements such as color, material, size, MOQ, and prices with them.
Once the suppliers pass the examination, the sourcing agents will hand over any further responsibility and risk in the sourcing entire procurement process to the clients and charge a one-time fee for their thoughtful service.
Tips：Although this fee is the standard disclosed by China sourcing agents, some China sourcing agents will provide free services for finding supplier in order to get new clients. As a result, many clients will find many sourcing agents for comparison. This behavior is very bad for the overall market.
When we hire a China sourcing agent, except for sourcing products from China, our purposes also include their management work during the production process. That means you need a sourcing agent to help you take care of all the aspects of sourcing products from China, from sampling to shipping. And the sourcing agent will charge for these services.
They charge more or less according to the difficulty of the service.
There are charges that the manufacturing company spends on preparing the product. Containing:
Tips：Generally, the factory will promise to return the mold development fee to the customer after your shipment reaches a certain level.
For example, you can communicate with the sourcing companies and ask them to recruit a senior merchandiser to serve you full-time. Her responsibility is：
Sourcing products and manufacturers
Follow up on production progress and problem-solving
Always online to help you with any product or order problems
The sourcing companies will charge the following fees:
15%~30% of the employee's salary as a management fee.
3%~5% of service fee when the shipment
Tips：This way of cooperation is generally after long cooperation with the sourcing company, they will agree with you. This is suitable for your product SKUs that are too much, products which need customization, or your time is limited.
Warning: Running a sourcing company with a less than 3% profit margin in China is hard. If a sourcing company claims they can help you manage your supply chain for a 3% commission level, they are likely making money from you in other ways like the example above.
As we all know, experience means professionalism. The experience of the sourcing agents is the main factor we should consider when we looking for a reliable China sourcing agent. Depending on their experience, you can judge whether it’s a good sourcing agent or a bad one.
Different sourcing agents are specialized in different fields. For example, Ruizhi sourcing has rich experience and suppliers at product customize (Die casting/Surface treatment/metal stamping/injection molding, etc), so their sourcing fee for customized products will be lower than other sourcing agents.
Because their experience and suppliers can be reused, other suppliers need to start from scratch, which will require relatively high personnel and development costs.
A competitive environment will increase or decrease the sourcing fee. The sourcing agents in China continues to appear, there are hundreds of sourcing agent in China now, so the competition is relatively large. Refer to “The Best 30 China Sourcing Agents”.
This situation makes it difficult to set a standard for China sourcing agent fees.
It’s fortunate that there are no monopolies in this industry, so sourcing agents will lower their fees to attract clients.
Sometimes the products which you want to source are too rare to be found, so the sourcing agents will charge relatively higher fees, Because suppliers are scarce, sourcing agents need to invest more staffs and effort to find the right source or supplier.
I believe that happened 10 years ago, there would have been a lot of sourcing agents or trading companies taking bribes from factories to make more profits, but now the competitive environment is becoming more and more fierce, the quality of staff is improving and the overall awareness is rising.
It is no longer necessary to make profits by bribing short-sighted. It is more to rely on service, expertise, and efficient management to strive for profit, at least in my sourcing agents' circle.
There will certainly be some, but not most of them. If he misstates the manufacturer's costs, there are several possibilities:
The service fees you promised are not enough to cover his management costs;
He checks your background and thinks that you are not willing to place orders continuously, and they just want to earn the first fee;
The sourcing agents control the product supply (obtaining the mold copyright or reaching an agreement with the factory on the quantity of sailing).
The general high-quality sourcing agent who wants to do long term business relationship with you for a long time will not misstate the manufacturer's quotation, because he knows that no competitive price will push you to competitors.
We encounter many clients who send the same demand emails to multiple sourcing agents, but what is even more exaggerated is that the emails are not sent separately. We do not like such clients to only compare prices with multiple sourcing agents.
First of all, these clients do not respect the fruits of our labor and think that Chinese products or services are cheap or free.
Secondly, pursuing the cheapest price is not our target client, because the value of sourcing agents lies in their expertise and service.
If you are purchasing finished products, the more detailed you describe your sourcing requirements (product name/parameters/color/quantity/logistics, etc) the better.
If your requirement is a customized product, prepare your drawings (parameters / material requirements/appearance/process requirements) in as much detail as possible.
In short, reducing the cost of communication between the two parties will reduce China sourcing agent fees.
The more detailed you describe, the purchasing agents won't have to spend a lot of time communicating your needs or wasting time on wrong sample proofing.
The more detailed your requirements are, the more the sourcing agent will instinctively believe that your demand is real. Because as experienced sourcing agents, many customers will initially describe an undetailed requirement and end up with 80%
Choosing the right sourcing agent is the most critical because sourcing agents' service fees will not be an important part of your project, the most important thing is product quality control, price, and timeliness. I hope you can read these articles carefully, which can help you find your reliable sourcing agent.
<What Is a Sourcing Company – Ultimate Guide>
<How To Find A Sourcing Agent You Can Trust?>
<Top 30 Best China Sourcing Agent in 2023 - The Complete List>
Sincere communication is the key factor for sourcing agents to rate customers, and different levels of customer fees will be high and low. Sincere communication and timely responses to sourcing agent questions also reduce the management cost of sourcing agents, because the biggest cost of sourcing companies is professional staff and management.
How much is the cheapest sourcing agent fee?
There is no one-size-fits-all solution. No one model of Chinese sourcing agency fee is better than the other model. The answer depends on your specific situation. Think about your needs, product types, risk points, and so on. You need to choose options that suit you and your business needs. That's why we wrote this article.
No matter which method you choose, it is important to understand the services covered by the cost. In this way, you will know how to negotiate with sourcing agents, and which kind of purchasing fee is most suitable for you and your needs. I enclose a copy of the "Ruizhi sourcing fee standard" here for your reference.
Do you know another charging model for purchasing agents? Let us know. Please leave us a message.