What is the difference between Trading Companies and Manufactures?

Published by Hangjian Industrial (Heshan) Co., LTD. December 13,2019

Why you should purchase from us?

1.      If you are highly specialized in a certain field of products

2.     If future product development is a high priority

3.     If custom made and/or branded products are a high priority

4.     If product certification is a high priority

5.     If your product very price sensitive

Supplier type #2: Trading Companies

Trading companies have a very long history in China and traditionally act as a broker between foreign buyers and Chinese manufacturers. The status of the Trading Company has been a decline in the last few years. The main reason is probably that more and more manufacturers in China are experienced enough to deal directly with buyers around the world. This has left a smaller piece of the cake for traders. However, there are situations when buying from a Chinese trading company actually makes sense.

1.) Offers a lower Minimum Order Quantity (MOQ) Requirements compared to manufacturers since one batch of products can be divided among several buyers

2.) May offer a wider product selection through an established network of manufacturers

1.) Often more expensive (5 – 10%) than the original manufacturer

2.) Disputes and complaints will go through the Trading Company and your refund or remake is at their mercy. In some cases they will prioritize the relationship with the manufacturer over the buyer

3.) Communication regarding quality requirements and product specifications will be filtered through an intermediary and thereby increasing the risk of misunderstandings and quality issues

You might not be able to verify the original manufacturers’ capabilities. This is something that might cause future product developments to take a very long time.

When you should consider to buy from a Trading Company
- If you need a wide product selection
- If you are purchasing smaller quantities per product
- If your product is not very price sensitive
- If product certification is not a high priority
- If custom made or branded products are not a high priority


Supplier type #3:  Manufactures and Trading Company

Many, if not most, export oriented manufacturers in China are not limited to the products they produce themselves but expands their product selection by outsourcing production to other manufacturers. The main problem here is to find out which company is manufacturing the products you intend to import from China. If the supplier is not manufacturing the products, but subcontracting them to another manufacturer, then you are exposed to the same Disadvantages and risks as if you would be dealing with a Trading Company.

1.) Even if the supplier is not manufacturing the products themselves, the fact that they are manufacturing products in the same or similar category indicates that the supplier have a decent product and product certification knowledge. If they also have a sophisticated Quality Management System in place, it's possible that they will apply this to their subcontractors to some extent.

The supplier can be an industry leading manufacturer for Product A and at the same time being below average for Product B (which they subcontract). It all boils down to product knowledge and quality management, which is best overseen “in house”.