As the spring edition of the 2015 Canton Fair is on at the moment, we have a lot of existing & new clients visiting our office, when they find some time-off from the Canton Fair or for free consultations that we offer at this time. Every year during these meetings, one of the questions that many importers, especially new importers tend to ask, goes something like this:
“I have heard there are lots of trading companies at the Canton Fair, how do I ensure I am dealing with genuine manufacturers only.”
This question stems from the belief that it is better to deal with manufacturers than traders. This is true in many cases, however under many circumstances it is better to deal with traders than manufacturers but that’s a whole post in itself so I will leave that for another day.
With the help of this post however, I would like to share some pointers an importer can use to differentiate between manufacturers & traders at most Chinese sourcing fairs & not just the Canton Fair. But before you book your China ticket, you may want to make sure if Canton Fair is right for you.
Why do Traders Masquerade as Manufacturers
Importers who have been importing from China for a while, or people who have been on B2B websites or sourcing fairs in China would know that it is common for trading companies in China to claim that they are manufacturers. Importers often look at this as an unethical practice, which it certainly is. However, traders have their own justifications for this.
Many importers, especially new importers are under the impression that buying from a trading company would be more expensive than buying from a manufacturer. Due to this perception, they would take traders off their shortlist at the very beginning of the process.
This can be quite demoralizing for the “salespeople” in these trading companies, whose salaries are largely commission based. To counter this, many trading companies have to claim to be manufacturers.
The degree to which they take this position varies significantly, with some trading companies even putting fake pictures of factories on their catalogues. So how do we pick traders from manufacturers at trade fairs in China? 5 tips below should come in handy:
1. Just Ask Them
As simple as this sounds, this should be the first question to ask any supplier, if you are in doubt. There are lots of ethical & honest trading companies in China & they will simply tell you that they are a trading company. In case they claim to be a factory, tell them you would like you would like to visit their factory as you are already in China & observe their reaction.
If they are a trading company, they may offer a vague answer. If it’s a factory & they see you as a qualified customer, they will in most cases go out their way to encourage you to visit the factory, as having a factory is a USP in itself in the eyes of the factory & once you have invested the time & effort to visit a factory, the chances of you placing an order with them increase significantly.
2. Look at their Product Range
Most factories in China are highly specialized & focus on making a very limited range of products. Therefore, if you see a booth carrying a fairly wide range of products, even within a specific industry that could be indicative of a trading company.
Another common scenario in China is that a factory may be manufacturing 1 product but trading in other products. This is a difficult one to spot, because the factory would pass most background checks & come out as a qualified factory. The only sure-shot way to confirm whether they are the manufacturer of a specific product is to check out the production line for that product or use tips 4 & 5 together.
3. Look at the Address
Every time I go to the Canton Fair & receive a product catalogue at a booth, the first thing I tend to do is look at the “address”. The address on a Chinese supplier’s catalogue can tell you a lot about the supplier.
Factory addresses would normally be in far off outskirt areas & you can look for keywords like “Industrial Area/Zone/Park”, “XYZ Village”, “economic zone”, etc. Most trading company addresses in China would start with something like “Room No X”, or would be property addresses in cities.
If you see the latter while the supplier claims to be a factory, you can always dig-deeper and ask some more questions.
4. Ask lots of technical questions
Relative to trading companies, factories are normally in a better position to be able to answer technical questions about a product’s manufacturing processes, common quality problems with the product (they will tell you in a lot of detail why their product doesn’t have that specific quality problem while most other products in the market do 😉 ) .
This works well if you yourself understand your product well & have some idea of the materials & production processes. If you are visiting the sourcing fair with a specific product in mind, then Youtube is your friend when it comes to finding useful information about manufacturing processes for your product.
5. Ask if they are open to a 3rd Party Factory Audit.
You can ask suppliers if they are open to a factory audit by a third party inspection company before an order is placed. A factory audit is designed to help importers substantiate the various claims made by suppliers & analyse the production capabilities, resources & certifications of potential suppliers.
Traders would normally not be comfortable with this as it means exposing their “source”. This can not just be used at a china sourcing fair but can also be used when finding suppliers on B2B portals or through other sources.
Don’t Eliminate Traders too Quickly
I hope some of these pointers are handy when picking out traders from manufacturers at sourcing fairs in China. However, I do believe that it is not always a good idea to eliminate traders simply due to negative perception bias.
Trading companies can offer value in a lot of ways that manufacturers cant, for e.g. through access to lower MOQ’s, better service quality (English speaking staff, etc.), product accessories that a manufacturer may not carry & even offer better pricing under certain circumstances.
Have you had any experiences dealing with not so ethical trading companies at sourcing fairs in China or elsewhere? Have you got any tips to add to this list? I’d love to hear.