In the last article, we discussed the definitions of product sourcing and sourcing agent, along with some of the key advantages of using a sourcing agent and sourcing internally to manage your product sourcing needs.
In this piece, we will continue to delve into the potential drawbacks between the two options and discover which may be the most beneficial for your situation. Let’s get started!
Disadvantages of Using a Sourcing Agent
Despite the various advantages of utilizing a sourcing agent in China to save you time, it is also important to be aware of the potential risks that may be associated with such an arrangement, such as:
1. Higher Costs Due to Agent Fees
One of the main disadvantages of using a sourcing agent is the potential for higher costs due to agent fees. Sourcing agents typically charge fees for their services, which can add to the overall cost of the sourcing process. This can be a disadvantage for businesses that are operating on a tight budget or that are looking to minimize costs.
The fees charged by sourcing agents can vary depending on a number of factors, including the complexity of the sourcing process, the size of the order, and the level of involvement required from the agent. Some agents charge a percentage of the total order value, while others charge a flat fee or an hourly rate. This can add to the overall cost of the sourcing process and may not be feasible for all businesses.
2. Less Direct Control Over the Sourcing Process
When working with an agent, you may need to rely on the sourcing agent to handle many of the details of the sourcing process, including receiving the product samples, adjusting the product size or color, negotiating with suppliers, arranging for quality control inspections, and coordinating shipping and logistics.
While this can be an advantage in terms of reducing the workload and complexity of the sourcing process, it can also be a disadvantage for businesses that prefer to have more direct involvement in the process. This can be especially true for businesses that have specific requirements or expectations for their products, as they may need to communicate these requirements clearly to the sourcing agent to ensure that they are met.
3. Potential Sourcing Agent Scams
A potential disadvantage of using a sourcing agent is the risk of encountering scams or other unethical practices. Unfortunately, there are some agents in China who may engage in fraudulent activities, such as misrepresenting suppliers or products, charging excessive fees, or even stealing deposits or payments.
As with any business transaction, there is always the risk of being taken advantage of by a dishonest or unscrupulous individual or company. Therefore, it is important for you to carefully verify the agent’s credentials and references, and thoroughly review and understand all contracts and agreements before signing.
Disadvantages of Sourcing by Yourself or Using Your In-house Team
Here are some potential disadvantages of sourcing internally.
1. Need to Invest Time in Supplier
When sourcing from China on your own or with your in-house team, the most challenging part of the process is to thoroughly research and analyze the capabilities of each potential product supplier. This process involves background research and history tracking and verification to confirm their credibility and reliability.
This can be a time-consuming task that requires resources, such as manpower and expertise, that may not be easily attainable within the confines of your company, making it difficult to complete in a timely manner.
2. Hard to Find the Best Supplier
When sourcing independently, rather than engaging the services of a third-party sourcing agent in China, it can be challenging to find the best supplier in your specific niche or industry. This is because although Alibaba may be the preferred choice of many foreign buyers who are looking for manufacturers, the reality is that more Chinese shoppers or sourcing agents take advantage of the more economical prices offered by 1688, the completely Chinese version of Alibaba.
What’s even more important to note is that many companies in Alibaba are trading companies, while many suppliers in 1688 are real factories, making it a reliable source for sourcing goods.
3. Payment Problems
When it comes to payment, it can be yet another hassle for businesses in the Western world. Partnering with a well-established factory that has a proven track record with international buyers is often a safe bet; however, when it comes to dealing with smaller factories, payment issues may become a major obstacle to deal with. Some of them may ask for a more down payment, which can be a strain on buyers, or they may only accept a limited range of payment methods, which can make it difficult for some companies to make their payments.
In addition to that, any potential issues related to the money transfer process can lead to unnecessary delays and potential losses of both time and money. And it will be an even greater disaster if you are not in China to handle the situation swiftly and effectively.
In-house VS. Third-party: Which is the Better Option?
By understanding the advantages and disadvantages of each of these strategies, you should now have a more comprehensive understanding of both sourcing strategies. Given these options available, you may want to ask yourself which is the best choice for your company to make.
If you are a small company with a tight budget, then then it can be a wise choice to explore the possibility of sourcing on your own to save costs and increase efficiency. If your company is expanding and it needs more time and focuses on the current stage, you should look into hiring a reliable sourcing agent that can provide the support you need and free up some of your own time and energy.
Of course, you can make the final decision based on your specific situation and requirements because there is no one-fit-all solution in the world. If you have the time, expertise, and resources to conduct thorough research and manage the sourcing process yourself, sourcing internally can be the right option. However, if you are looking to streamline the process and access a wider network of suppliers and industry knowledge, using a sourcing agent is a nice choice.
No matter which option you choose, it’s always important to create a comprehensive and well-structured plan that gives you the best chance of success.
About Us
If you are interested in working with a sourcing agent and seeing how they can help with your business, China 2 West’s sourcing team would love to help. Since 2005, we have been the best partner for businesses in the Western world. We have developed to be a leading one-stop-shop supply chain consultancy solutions from product sourcing and manufacturing to QC inspection and distribution in the Greater Bay Area in Southern China. If you want to know more about how we can help your project, don’t hesitate to contact us today.
