Trading Companies vs Factories: 7 Reasons They May Be Better

7 Reasons Trading Companies Can Be Better Than Factories

A large number of our shipping customers speak negatively about trading companies. I wanted to create this article to introduce people to the hidden aspects of a trading company that most guides won’t tell you.

A lot of the guides I read focus entirely on getting your products for the lowest price possible. But we say otherwise.

Any DIY importer looking to turn pro needs to streamline their sourcing process. And a great way to do this is to look at trading companies as much as manufacturers.

So, I am going to be super biased here and list a bunch of reasons why trading companies are going to be better for you and your streamlined importing process.

Our Seven Reasons

1. Customer Service Focus: Trading companies understand customer service more so than factories. Their focus is entirely on the customer so it is often easier to communicate with them.
2. Pre-Built Factory Relationships: They build the relationship so you don’t have to. A trading company will often work very closely with multiple factories and have very good relationships. They pass these relationships down to you in an effort to increase their worth to their customers.
3. Willing to Go the Extra Mile: They are willing to go the extra mile when the factory won’t. If you want multiple items sourced for one product, they can help. If you need a special package or special labeling, a trading company can help.
4. Access to Smaller Factories: Trading companies often use factories that are not big enough to have their own international sales team or export license. This means they are working with factories that have lower prices than some easy-to-find competitors online.
5. Low Overhead = Lower Prices: Trading companies have little overhead, so they can offer lower prices. Their markup is sometimes as little as 0.5%. Rent is cheap in China and trading companies don’t need to be huge. A team of four to ten workers at a trading company can have a much lower overhead than a factory of 100 employees or more.
6. Great for Small-Quantity Buyers: Trading companies are great for small-quantity buyers. They often have great relationships with their factories or have product stock on hand, able to offer lower order quantities for the small-sized importer.
7. More Products & Free Samples: They offer more products and are often happy to send you additional product samples for free. I always tell my clients to request their trading company send them three of their best-selling product samples in every shipment. This is a great way to source more products and do so quickly and efficiently.

Thinking Twice about Trading Companies

So before you run away from the idea that a trading company is just another middleman stealing pennies from your profits, understand the massive benefits they can bring. It isn’t uncommon for serious importers to only use trading companies because of how much more enjoyable they are to work with.

Recommended: Reach out to Jing Sourcing and request trading companies be added to your list of potential suppliers.

TL;DR

• A trading company and a factory are different legal and commercial counterparties.
• A trading company can be the better choice when you need assortment, small quantities or export administration.
• The decision should follow your order profile, not a general rule.

Trading company versus factory: what changes for the buyer

Aspect	Factory	Trading company
Product range	Usually narrow and process-specific	Often broader, with several suppliers behind it
Small or mixed orders	May decline below a production minimum	Often more flexible on quantity and assortment
Export administration	May be less experienced at documentation	Usually set up for export paperwork and consolidated shipping
Price basis	Generally closer to production cost	Includes a margin for sourcing and coordination
Visibility of production	Direct	Indirect — ask which factory actually produces the goods

Check the entity, not the label: confirm the legal name, the operating address and the name on the payment instructions. A supplier describing itself as a factory may contract through a separate trading entity.

Frequently asked questions

Is it better to buy from a factory or a trading company?

It depends on your order. Factories suit focused, higher-volume production; trading companies often suit assortments, smaller quantities or buyers who need export administration handled.

How do I tell whether a supplier is a factory or a trading company?

Check the registered business scope, the operating address and the name on the payment instructions. Ask directly which entity produces the goods and which one contracts with you.

Do trading companies charge more?

They usually include a margin for sourcing and coordination. Whether that is worth it depends on the range, flexibility and export administration you need.