When you’re searching for a manufacturer, you could actually fall into a trap. You could be working with a trading company rather than a manufacturer. A trading company is an intermediary that “jobs” out your manufacturing work, and tacks their profit onto your costs.
You don’t want to deal with a trading company for a number of reasons, but it’s not always easy to know the difference. Let’s start out by laying out the distinctions between a manufacturer and a trading company.
Differences Between A Manufacturer And A Trading Company
1. Manufacturer
- Original Producing of Goods (they actually manufacture the goods for you)
- Cheaper (they are cheaper because they’re not adding in “middleman” costs)
- Better Quality-if you find the right one (their reputation is at stake and they’re more likely to want to build a lasting relationship with you)
- Quicker Lead Time (because they’re doing the work, there’s no “delay factor” of an intermediary)
- Customizable Products (you can work with them more immediately to get the customizations you want)
- The One You Want (go for a manufacturer and avoid a trading company)
2. Trading Company
- They are a middleman between you and the factory! (this means that they will know less and be less involved in producing your product)
- More Expensive (they’re adding their profit margin onto your costs)
- Can Source You Low-Quality Goods (they don’t necessarily have any “skin in the game”)
- Slower (in all your interactions, you will have this entity between you and the manufacturer)
- Harder to Customize With (the trading company isn’t likely to be as knowledgeable about the customizations you want)
- The One To Avoid (Avoid trading companies for many obvious reasons)
Tips On Avoiding The Trading Company Trap
It’s not always easy to tell if the supplier is a manufacturer or a trading company. Here are a few tips to help you avoid falling into the “trading company trap”:
- The easiest way is usually when they have the words “trading company” in their business name, but that’s not always the case!
- The best way you can tell is by actually talking to them. You’ll notice that their responses to your questions are a bit vague because they don’t know much about the product. That’s because they’re only doing the sourcing and not the manufacturing.
- Their pricing is usually higher! After all, they have to add in their own profit margin on top of the manufacturer’s profit margin.
Don’t Forget To Ask Them If They’re A Trading Company. 😉
Here’s a bit you won’t learn anywhere else. There is actually a “sweet spot” when they are both a trading company and a manufacturer in one. This gives you all the pros of talking to someone who is dealing with customers, and also the pros of being a manufacturer (with higher product quality).
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