Filed Under:China Sourcing   

We have discussed the advantage and disadvantage of China factory in part 1, in part 2, we will talk about the pros and cons of dealing with Chinese trading company, including trading companies in Hongkong and Taiwan.

The Advantage

The service attitude

Trading company knows better of their advantages and shortcomings as trading company in China. Their selling point is their service, not price. So they respond to your inquiries very fast, they provide solutions even if the products you are looking for are different to theirs, they are professional.

So if you are looking for a solution, rather than just lowering down price, trading companies are the option to you.

A very good example of successful trading company is Lee & Fung. This Hong Kong based trading company has more than 120 billion RMB revenue in 2010. Lee & Fung develop and design products based on the market intelligence and customer requirement, they manage and optimize supply chain on a global basis. They provide a solution to meet the buyers’ special needs. Lee & Fung’s salesmen and QC engineers have more than 10 years experience in certain industry.

Marketing

Trading companies have a lot of pressure, they understand the fierce competition, they know the extra efforts they need to make to stand out. So they will try to make fabulous brochure and pictures, they actively attend the trade fairs around the world, they try to develop a complete list of product line, they pay attention to the manner of emailing, telephoning and negotiation. They are better at branding and packaging themselves.

Disadvantage

Yes, it is the price, the passiveness to price increase and cost control. We have to admit most companies in China are fighting price war against each other, you sell 1USD, I will lower to 0.95USD, you then go to 0.90USD, a few rounds of fighting, the trading company retreat as there is profit margin.

So for mediocre and average trading companies, these disadvantage is more obvious, if they can’t make up the disadvantage by product development and supply chain management.

The trend

If you go to the Canton fair, you can seldom see trading companies, but the fact is many companies there are trading companies. They don’t use trading or international trade as company name, some of the factories even buy equipment to show their clients that they are manufacturers, but when the client leave the factory, they will then sell the equipment. One way to tell the trading company from factory is to look at their brochure, if a company make from lighting to floor matthen electronics, they are trading companies.