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5 Steps to Differentiate Between Traders and Manufacturers
06/07/2022
When considering sourcing from China, you have two types of suppliers to choose from: traders and manufacturers.
Which type of supplier is most suitable for you? What is the difference between traders and manufacturers?
In this article, I will guide you through the pros and cons to help you make the right choice after reading.
Brief
1) The pros and cons of manufacturers
1. What is a manufacturer and what does it do?
A manufacturer is actually involved in creating tangible products from raw or partially finished materials. Manufacturers use a combination of computers, machines, and skilled workers to create products, sometimes from scratch.
2. There are generally three characteristics:
Remote location
Generally, manufacturers are located in remote suburbs to avoid high rent and pollution for residents.
Complex management
Nowadays, manufacturers are no longer a simple superposition of production and processing departments but integrate administration, R & D, production, warehousing, logistics, reception, office, and logistics. So the operating costs are very high.
Single category
For example, the headphone manufacturer in China specializes in the production of headphones, with a single category but a wide variety of designs.
3. The operating modes of the manufacturer include:
Based on forecasted demand: This is the most common production model, and it involves the manufacture of products based on the forecasts of demand.
Based on current demand: This model is less risky for manufacturers as it means they only produce products based on existing demand. But it could also put pressure on factories if demand exceeds production capacity.
Assembly: This model is a hybrid of the previous two models. The factory provides ready-made raw materials or components for production, but only assembles the final product after an order is received.
4. What are the pros and cons of a manufacturer?
Pros:
Manufacturers focus on production rather than marketing, which makes them experts in a specific niche.
Manufacturers can act quickly when products need updates or improvements.
By dealing directly with manufacturers, you can cut out the middlemen and save a chunk of money.
Cons:
Most manufacturers are not able to meet the requirements of products of different categories.
Because of their lack of marketing skills, you have to count on yourself.
2) The pros and cons of traders
1. What do traders do?
Trading companies are often involved as “middlemen” in the production and distribution of products and services. They typically buy, sell, and deliver products to other retailers and even consumers. Most of them have physical storefronts.
2. Traders have three main characteristics.
Improve efficiency
Traders generally sell products from multiple manufacturers, and customers can compare products from multiple manufacturers through an intermediary.
Product inspection
When purchasing products, traders will inspect the factories and products. Products will generally be divided into shipping, product quality supervision, inspection, and a series of works to play a role in product inspection.
3. How do traders work?
Traders generally choose several large categories, find some qualified manufacturers, select some products with sales potential, request their quotations, and integrate these information into a list.
After that, they ask the factory for samples, take pictures and videos, and upload them to the e-commerce websites. Once there is an order, they will immediately purchase products from manufacturers.
4. The pros and cons of traders
Pros:
A wide variety of products
Traders act as intermediaries, which requires them to inspect and cooperate with as many manufacturers as possible. On a typical trader’s website, there are more than a dozen or even a hundred kinds of products for importers to choose from.
Great customer services
One of the biggest advantages for traders is that they can offer better service. They don’t have to put a lot of effort into production, which means tons of money and time can be saved to improve their service level.
Less MOQ requirement
In general, manufacturers require a large MOQ to cover their production costs. Traders, on the contrary, can offer a small MOQ by combining orders from different importers into a large one.
Minimum risk
There was a time when importers were always concerned about being scammed. The good news is that nowadays most traders can provide insurance. Whenever there is a delay or a missing product, importers can always get compensation for their losses.
No language barrier
When you mention the manufacturers in China, most of them are poor English speakers. Contacting them directly can be a frustrating experience for most importers. Compared to that, mastering English is necessary for traders to provide decent service.
Cons:
higher price
3) Distinguishing between traders and manufacturers
1. Product variety
Most manufacturers only focus on one specific category. This is due to the high cost of production. On the contrary, manufacturers almost sell everything.
2. Location
Where is the company located? Enter their address into Google Maps and see if they have offices in Hong Kong, Shanghai, Shenzhen, or another densely populated metropolis. If the answer is yes, they are very likely to be traders.
3. Website
Is the company website attractive and easy to use? Are they all in English? If so, you are most likely browsing a trading company’s website. For most manufacturers, having a fancy website is simply not a high priority.
4. Business license
Check the seller’s business license, if there is one, and make sure the specific business scope is “manufacturer”.
4) Should you choose a manufacturer or a trader?
Which supplier should you choose to deal with?
Well, it depends.
If you are or hire a sourcing expert.
If you need a single product in larger quantities, at a cheaper price.
If your newly developed products requiring faster and more professional technical support.
If you need highly customized products.
Then choose a manufacturer.
If you are a rookie unfamiliar with the whole process of samples, orders, payment, logistics, etc.
If you require a variety of product combinations.
If you need a small number of common products.
Summary
It’s easier to communicate with the factory when something goes wrong or you’re trying to customize a product.
Dealing with a manufacturer can give you a price advantage, especially if you order a large quantity.
As for traders, they are very helpful in simplifying your import procurement process.
Besides that, a fine trader can greatly assist you in understanding your market positioning.
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