What a China sourcing agent costs, and why we don't charge that way
Ask what a sourcing agent costs and you will be told a percentage. Usually somewhere between five and ten percent of order value, which is the range most agencies publish.
The number is the least interesting part. What matters is what the number does to the person taking it.
The three models
Commission on order value. The agent takes a percentage of what you spend. Simple, transparent on the surface, and quietly the worst aligned of the three. The agent earns more when you spend more. If a cheaper factory would serve you better, the agent is paid less for recommending it.
Flat fee or retainer. You pay a fixed amount per project or per month. Incentives are cleaner. The problem is that the agent is now paid the same whether your order goes well or badly, and a difficult order costs them more to service than an easy one.
Trading margin. The company buys the goods and sells them to you at its own price. Its margin is inside that price. This is what a trading company does, and it is what we do.
The thing nobody tells you about commission
There is a second payment in the commission model that does not appear on your invoice.
Some agents take a commission from you and a further payment from the factory for bringing the business. You are not shown the second one. It is not illegal and it is not rare, and it means the person you believe is representing you is also being paid by the party on the other side of the table.
You can test for this. Ask an agent directly, in writing, whether they receive any payment, rebate or commission from the supplier. An agent who works only for you will answer immediately. Watch what happens to the ones who don't.
Where our model is weaker, honestly
The trading model has a real disadvantage and you should know it before you pick anyone.
Because we buy and resell, you do not see the factory's price. A commission agent, at least in principle, shows you the invoice. We don't, because the factory price is the basis of our margin.
What you get instead is a single number, fixed in writing before you commit, with no percentage that grows as the order grows and nobody behind us paying us to steer you. You can take that number to another supplier and compare it. The comparison is the protection.
If total visibility of the factory invoice matters more to you than a fixed price and a single contracting party, a flat fee agent is a better fit, and we would rather say so than win badly.
What to ask before you appoint anyone
- How are you paid, and by whom
- Do you receive any payment or rebate from the supplier
- Who holds the contract with the factory, you or me
- What happens to your fee if the goods are rejected at inspection
- Will you put the quote in writing with a validity period
The last one catches more people than it should. A verbal price from a trip to a trade fair is not a quotation.