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Things You Should Know about Shenzhen Sourcing Agents

2024-02-02
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Are you interested in importing consumer electronics for your retail, wholesale, or online businesses? Are you aware of which city is referred to as China's Silicon Valley? Welcome to Shenzhen, a city in southeast China that is well known for its technological goods, it is home to the world's largest electronics market and numerous manufacturers.

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 straightforward: look up online supplier directories in China 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 verified sourcing agent with an office in Shenzhen. A sourcing agent is the third-party connecting you to a factory in China and managing various aspects of your business relationship with the factory. The experienced 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, perform quality checks and take care of deliveries. 

Qualities of Shenzhen sourcing agents you should focus on

1. Trustworthiness   

A buyer should choose a sourcing agent based primarily on the firm’s level of trustworthiness. It’s important here because they will be your support system to find the right manufacturers and to ensure that the production is completed on time, without compromising on quality at any stage.

Don’t fall into the trap of those few agents offering unreasonably low-cost or even "free" sourcing services. They will not reveal critical information that the clients must know before venturing out into the manufacturing in China. Go for the agents that are transparent and provide information like:

-      Number of factory employees

-      Market performance

-      Reputation in the industry

-      Actual type of business

-      Original product price.

Your sourcing agent will be your eyes and earns in China, which is why the trustworthiness is an important factor while choosing one for your business needs.

2. Experience 

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 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 supplier and you to stay on the same page and avoid a situation where a cultural gap severely affects your relationship or the quality or timeliness of order deliveries. 

An experienced agent in Shenzhen 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.

3. Quality

Instead of giving up too soon before determining the best options, a great sourcing agent should put forth all their energy into searching for and speaking with the optional providers. It is important to conduct a thorough study on the factory, including manufacturing capability, production capacity, assembly line setup, quality control system, engineering ability, technical knowledges, etc. These are to make sure the goods can be produced to the best possible standard and quality.

The sourcing agent must provide the buyer with the most recent information and analysis along with photos, meeting minutes, and written reports for assessment and decision-making of the client.

4. Accountability

The job of a sourcing agent in Shenzhen does not end with the transfer. They should oversee monitoring the manufacturing and delivery of the products, working with the suppliers to provide technical support for problem-solving, and helping to set up returns and refunds in accordance with the terms and agreements between the parties.

When a buyer transacts with any technically unsound factory where no one can speak English, this concern can be very important to consider. Particularly when it comes to product development in China, timely and effective communication between your sourcing agent and the factory engineers are crucial to ensure the products function perfectly to meet your consumers' expectations.

5. 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 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 agent you’re considering.

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 has sourced from Shenzhen factories in the recent past, get their advice and recommendations. Their experiences can be vital in helping you make informed opinions on the choice of sourcing agents. 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. 

6. Problem solving

One of the most important things to consider when dealing with third-party agencies is their approach to problem resolution. Quality issues may arise in a shipment, which may be the manufacturer's fault, but the Shenzhen 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 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 lapse 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 an experienced souring agent in Shenzhen as they make sure that the supplier knows exactly what you’re expecting.

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 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, production technology, and the product itself. They don’t have to be rocket scientists but should be able to identify defects that impact quality, integrity, and safety. 

Shenzhen Sourcing agents 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 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 product. It is highly possible that you might end up with receiving inferior quality products. 

The importance of protecting the information provided by the buyer cannot be overstated. The sourcing agent is exposed to a significant amount of confidential information during the cooperative engagement with the buyer. For the buyer to maintain its competitiveness in the market, the sourcing agency must treat whatever the buyer will not want others to know as absolute business secrets.

How much will a sourcing agent in Shenzhen cost?

Small importers, many of whom are Amazon sellers, prefer to concentrate on brand building and marketing. They need someone in China to handle production and shipping, which involves selecting the best suppliers and overseeing their daily operations.

1. Cost

Many buyers seek a sourcing representative with at least five years of sourcing experience, excellent English skills, and excellent background in quality control. However, those who fit this profile often anticipate making between 20,000 and 30,000 RMB each month.

What causes such high salaries? A talented worker in Shenzhen can expect to make multiples of the minimum wage of roughly 2,500 RMB.

Undoubtedly, some junior Shenzhen sourcing agents make between 6,000 and 10,000 RMB each month. However, very few of them can flawlessly oversee the entire sourcing business of a corporation. Expecting suppliers to respect them is unrealistic. Additionally, they lack expertise in contract drafting or logistics.

2. Opacity

Some of the "source agents" do not keep everything in transparency. Sometimes, it is not good for quality control as if the problems are not disclosed in time, corrective and preventive actions cannot be taken at early stage, before the defective products are flood in the market.

The agent should help you close the manufacturing deal for competitive cost. You will need to analyze the feasibility of the entire deal before proceeding further. Also, they should ensure complete transparency during the design, production, packaging, and shipping phase.

3. Legal matters

It is against the law to pay an "employee" or "contractor" in China without first establishing up a legitimate business there. If your business expands and you end up establishing a Chinese firm, it might turn into a significant issue.

Say 3 "independent contractors" are hired by you in China. Three years later, the Chinese government contacts your business and requests that you have employed 3 employees but have not paid employer taxes for the previous three years.

Because you have these 3 employees, Chinese authorities may claim that you are conducting business there and must pay company income taxes. Additionally, overall taxes are about 40% of the salaries you have paid during the past 3 years.

You will also be subjected to a fine from the Chinese government. They may even close your whole business here and prevent you from leaving the country if you do not pay.

Conclusion

China is the world's largest manufacturing economy and Shenzhen is its manufacturing hub for electronic products. Working with a seasoned sourcing agent in Shenzhen who bills you for whatever time spent on your orders can be the answer in your China sourcing business.

We hope you have got ideas for dealing with Shenzhen sourcing agents. An excellent agent will provide total support and conduct quality checks at every stage, starting from product design, sampling, mass production, warehousing, and shipping of consignment. Like how it takes time to identify a quality product, it takes work and judgement to find a quality sourcing agent.

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