1.The amount of work you want completed
The more you want the sourcing agent to do, the more it will cost. Long-term projects, such as a new product, are going to cost more than a readily available product. Amazon sourcing is a good example. Amazon sellers who source goods from China to sell on Amazon are some of the biggest sourcing agent clients. Do you want product inspection with labeling and photos? This is a good idea, but it will mean additional work. This will increase your costs.
2.Salaries of employees of purchasing agents
Many believe the salary of a full-time sourcing agent in China is $800.00 U.S. a month.
This is incorrect. Here is why.
China is a large country. Each region has its own economy. The same job will pay a different amount in each region.
Regions like Shenzhen, Yiwu and Wuhan are in the southern, eastern and central regions of China.
In 2022, the minimum wage standard in qingdao is 2,360 Yuan/month ($348.00 U.S.) ; the minimum wage standard in Yiwu, China is 2,070 Yuan/month ($305.00 U.S.); the minimum wage in Wuhan is 1,520 Yuan/month ($224.00 U.S.).
Source of information: Qingdao Human Resources and Social Security Bureau, Jinhua Municipal People’s Government, Wuhan Municipal People’s Government
Note: This is the minimum wage required by Chinese law. Even if an employee has no education or work experience, as long as he is working, they earn a guaranteed minimum income. Procurement specialists with procurement work experience and proficiency in English earn several times this salary.
If you consider the cost of purchasing agents from the salary level of employees, Shenzhen pays the best; Wuhan the least; Yiwu in the center.
3.The infrastructure of the company
Infrastructure, some may call it ‘overhead,’ refers to the elements that go into running the sourcing agency. This includes things like electricity, computers, Internet and the like.
Some smaller sourcing agents work from home and have little infrastructure. Most sourcing companies rent office space for their business.
Sourcing Nova has warehousing near Yantian Port and Shenzhen Baoan Airport.
If you consider the cost of purchasing agents from the perspective of infrastructure, investment warehouse is the highest cost; a home office the least; a leasing office in the center.
A better Chinese sourcing agent usually charges a reasonable commission rate, usually 5%~10% of the product purchase amount. The commission rate is slightly different according to the professional level of the purchasing agent, the product type, the total order amount and the project duration.
Essentially, you are paying for the sourcing agent’s expertise and connections.
The formula for calculating this fee is:
Purchasing agency fee = Manufacturer’s cost + (Manufacturer’s cost × commission percentage) + shipping costs
Shipping costs vary based on factors such as weight and distance. Therefore, purchasing agents provide prices for these services on a case-by-case basis, rather than including them in the cost of the order.
| Pros | Cons |
| High-quality and reliable professional purchasing services | Manufacturer contact details are a trade secret |
This was true a few years ago. Bribes happened between unregulated purchasing agents and unregulated small and medium-sized manufacturers. China’s purchasing agency industry is now highly regulated and carefully monitored. Many better purchasing agencies post on their websites they do not accept bribes from manufacturers.
Some excellent manufacturers ignore buyers wanting bribes.
There is no fool-proof way to identify a bad agent. Look for buying agents who publically state they do not take bribes. An agent who says this is likely more reliable than one who does not make the same statement.
Western purchasing agents and quality inspection companies in China tell overseas buyers that hiring them means manufacturers will not bribe Chinese purchasing agents.
If you believe this, you are already fooled.
Many third-party inspection companies ask for bribes from the manufacturer. If the manufacturer does not pay, the inspection company will find fault with the product order, create a failing inspection report and submit to the buyer.
Some western sourcing companies demand more in cash bribes and kickbacks from manufacturers than their Chinese counterparts. The companies threaten the manufacturer unless bribes are paid.
Basically, it is hard to determine who is and who is not honest.
Some buyers send emails like this: “Hi. Another company quoted me X dollars on my product. I will pay you Y, which is good for Chinese manufacturers. You do not need more money than this.”
We cannot change people who think this way. Sourcing Nova is not interested in the cheapest prices. We are interested in finding the best manufacturer for the best products possible. We are looking for customers with a similar mindset. In other words, customers who do not mind paying more for the best possible quality product.
What is the best purchasing fee?
There is no one-size-fits-all solution. No one model of China sourcing agency fee is better than another.
The answer depends on your specific situation.
Consider: One man’s trash is another man’s treasure. In other words, what works best for one buyer may not work well for you. You need to choose the option that suits you and your business needs.
This is why we wrote this. No matter which method you select, it is important to know the services covered in the fee. Avoid models or agreements that are not upfront with their fees and terms. This will be bad for you down the road.
Which purchasing agency fee is best for you and your needs? Do you know of another purchasing agent charging model?
Let us know. Leave us a message.
0 comments
