Sourcing Agent in Shenzhen: Top 9 Things You Should Know

2021-05-19

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Many third-party companies have come up to help sellers in the west navigate Chinese business culture and partner with reliable factories that produce in bulk at low costs. If Shenzhen is in your sights, then a Shenzhen sourcing agent is your best bet to begin a successful sourcing relationship in China.

Shenzhen was once a fishing village, today it is a megacity. An estimated 90% of the world's electronics are manufactured here, from mobile phones, laptops, robots and 3D printers to smart wearables, medical equipment and mainboards, to name a few. 

If you're planning to buy wholesale from Shenzhen, you obviously want to find a reliable factory that specializes in the products you want to sell. Finding a supplier may seem pretty straightforward: look up China supplier directories online or visit a B2B marketplace like Alibaba, Made in China or Global Sources. But it can turn stressful from this point on as you will need to longlist suppliers, contact them, run background checks, shortlist suppliers and make factory visits to Shenzhen. 

There's a more efficient way to find a Shenzhen supplier - going through a sourcing agent with offices in Shenzhen and your city or a major city in your country. A sourcing agent is the third-party connecting you to a supplier in China, and managing various aspects of your business relationship with the factory. A Shenzhen sourcing agent will help you find a factory that has expertise in the products you need, send you a sample product, handle negotiations and agreement signing (contracts in Mandarin Chinese and English), perform quality checks and take care of deliveries. 

Top Tips for Choosing A Good Shenzhen Sourcing Agent

To the big question then: how do you go about choosing a Shenzhen buying agent? Here are nine tips to keep in mind when you begin your search. 

1. Location

As mentioned above, most reputed Chinese sourcing agents have a presence in the country they operate in, and also have offices in sellers' countries, typically in a major city. For instance, the agent may maintain an office in New York City and one in Sweden so that American and European clients have another way to contact them. 

  • Check whether the Shenzhen sourcing agent's website has these details:

  • The address and phone number of their office in Shenzhen

  • The address and phone number of their office(s) in your country

  • The name of the contact person at each office (and their LinkedIn profiles, if they have one)

  • Maps with the office location 

The address and phones numbers should reflect consistently across all communications. That is, they should be the same in the emails the agent exchanges with you and on their social media profiles. 

It is not necessary for Shenzhen buying agents to have a multi-country presence. You may find experienced third-parties that operate solely out of Shenzhen. If they have a solid track-record of working with Western suppliers, you should not encounter any problems. However, given the rigid internet usage policies in China, you may not be able to access all the important information you need on the Shenzhen sourcing agent. Additional checks, such as asking for client testimonials or visiting the agent in Shenzhen, are advised. 

2. Experience 

Does experience matter? Yes, it does when you consider how much more an agent that has been in business for many years can bring to the table than a younger company. This is not to say that a new buying agent cannot be trusted to provide good service. But as they need some more years to get established, they may not know and have relationships with as many local factories as their experienced counterparts. Access to more factories gives you a wider selection to choose from. That way, if you aren’t happy with a sample, quotes or MOQs, you have the flexibility to ask your agent for alternatives. In the event that you have to cut ties with your existing supplier, you can switch to another one quickly. 

Doing the same thing over and over again makes errors in judgment highly unlikely. Checking a factory’s production quality, making your instructions on the initial sample crystal clear to the factory, and inspecting products from each batch randomly for quality, become second nature to experienced agents. 

Sellers in the west have a hard time navigating Chinese business culture. Novice importers face the possibility of falling prey to middlemen posing as factories. Given the fact that Chinese cultures, traditions, and beliefs differ from those in the western world, doing business with Shenzhen manufacturers or suppliers can be challenging. An experienced Shenzhen agent will know what western buyers value, how they generally react in specific situations, and their communication preferences. This helps your agent and you to stay on the same page and avoid a situation where a cultural gap severely affects your relationship or the quality and/or timeliness of order deliveries. 

An experienced Shenzhen buyer’s agent can also be expected to be knowledgeable about contract formalities and legal processes, such as dispute resolution in case your relationship with the supplier breaks down.

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3. References

The best way to find out if a sourcing agent in Shenzhen is reliable or not is to get information straight from the horse’s mouth, which in this case would be a client they’ve worked with before. Getting references is extremely important when deciding on a sourcing agent for your business. If you have shortlisted a few agencies based on the two previous criteria, go ahead and ask them to provide a few references from good companies that they have sourced for. Make sure that these references are authentic and trustworthy. Take your time and do a little research about the Shenzhen sourcing agents you’re considering finding that out.

You should feel free to talk to these references, find out how long they have been availing the services of the said sourcing agent and how their experience has been. Ask them if they would honestly recommend the sourcing agent for your business based on their experience.

If an ex-colleague, a relative or an acquaintance sources from Shenzhen factories or has in the recent past, get their advice and recommendations. Their experiences can be vital in helping you make informed opinions on the choice of buying agent. Even if they haven’t gone through an agent, their insights on directly reaching out to factories can be enlightening. Also check Quora and relevant online forums for advice and perspectives. There may not be a ‘perfect’ answer but common themes will emerge, opening your mind and making you more confident in your search. 

4. Trade License

Needless to say, the Shenzhen sourcing agent must have a license to conduct business. Chinese law is pretty stringent when it comes to granting licenses to businesses. For example, an entity that has a wide scope of services may be denied a license to operate. 

Request the agent to provide a copy of their business license. If they’re a legitimate company, this step will be over before you know it! If they make a fuss, there is a huge risk that they may be scamming you. 

A China business license has the following information:

  • 18-Digit Chinese Business Registration Number

  • Name of the company

  • Address of the company 

  • Type of entity (LLC or any other)

  • Legal Representative (the individual representing the company or authorized to sign a contract on the company’s behalf) 

  • Registered Capital

  • Date of Incorporation

  • Expiration Date

  • Business Scope (Trading? Consulting?) 

5. Documentation

The sourcing and shipping processes must be formalized in relevant documents. Your Shenzhen sourcing agent will need to provide the following essential documentation: Certificate of Origin, Bill of Lading, Fumigation Certificate and a packing list. There are specific purposes attached to each of these documents. A bill of lading is a receipt for shipping and serves as a title of goods. A Certificate of Origin certifies that the products were produced, manufactured or wholly obtained in China. It informs consumers about the origin of the commodity being purchased. 

6. Issue resolution

One of the most important things to consider when dealing with third-party agencies is their approach to issue resolution. Quality issues may arise in a shipment, which may be the manufacturer's fault, but the sourcing agents are responsible for guaranteeing quality. So, before you sign a contract, it is best to make sure how the Shenzhen sourcing agent deals with quality issues, how long it takes for them to get defective products replaced, or how do they compensate for sub-standard products. Will you get a refund? Will the supplier replace the defective goods? A fair bit of scenario-planning doesn’t hurt. 

An understanding of the suppliers’ obligations in case they have failed to meet a delivery deadline or the stipulated quality standard, is necessary. Effective negotiations begin by establishing the exact nature of lapses and who is at fault. If you haven’t been clear about your product specifications or double-checked whether the factory has understood your instructions, then the factory may not cooperate with you. Such situations generally don’t tend to arise when you go through a Shenzhen buying agent as they make sure that the supplier knows exactly what you’re expecting.

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7. Language proficiency 

A harmonious China supplier relationship hinges on effective communication. As Chinese businesses go out of their way not to lose face (“mianzi”), don’t expect them to ask for clarifications on product specifications out of the concern that it reflects negatively on their expertise or may somehow be disrespectful to you. Chinese business culture also values deep, meaningful relationships or what is known as ‘guanxi’. Networking and close cooperation are vital to the sustenance of business relationships. Western buyers have neither the language proficiency nor the time to engage with their suppliers on friendly terms. They let their agent handle these aspects of conducting business in China. 

So, it is imperative that your Shenzhen sourcing agent has good knowledge of English and Mandarin Chinese in spoken and written form. Language proficiency can be discerned in their email and telephonic communications with you. Their representative should obviously be able to understand you and translate your requirements accurately to the supplier. 

8. Expertise in the Industry

One of the key attractions of engaging a sourcing agent is the assurance of factory audits and quality checks once production is under way. To be able to evaluate the factory premises and quality controls at the facility, the agent should have sound knowledge of local manufacturing, product-specific manufacturing and the product itself. They don’t have to be rocket scientists but should be able to identify defects that impact quality, integrity and/or safety. 

Sourcing agents in Shenzhen that have specialized knowledge of a particular type or category of products can be trusted to carry out audits without any compromises. Check their records to see what industries their existing and former clients belonged to, or ask for buyer records. It is not necessary that a sourcing agency will deal with only one type of product, but having some experience in your industry makes them a better choice for you. 

9. Business ethics

If the agent ticks all the boxes discussed so far, you are likely to have a positive experience with them. That leaves the small matter of commissions or kickbacks. Does the company have a 'special arrangement' with some factories or are their processes above board? You can gently make an inquiry about why the Shenzhen sourcing agent has suggested a particular supplier. A red flag is when the sourcing agent promises to connect you to factories that offer the cheapest prices, even below the floor price of the particular product. It is highly possible that the agent is receiving a kickback and that you might end up with inferior quality products. 

Conclusion

China is the world's largest manufacturing economy and Shenzhen is its  'Silicon Valley'. There is no stopping your Shenzhen sourcing strategy as long as you find a good sourcing agent. And if you're in the importing business for the long haul, building strong relationships with your agent will support and expand your business. Revisit the tips in this blog when you embark on finding a Shenzhen buyer's agent. All the best! 

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