Today most buyers don’t need a manufacturer, they need a trader, but they ask ‘are you a manufacturer or trader?’ Let's take a look at why and what can be done to address the underlying concerns.
What are they really asking? They are asking if they can trust you. They are asking if you have the capacity to deliver. They asking if the quality of the goods they order will be consistent. They are asking if you are a genuine company.
This article will focus on China because mutual language barriers exacerbate the misunderstandings, but it applies to other supplier markets like India and Turkey.
Failure to Understand China's Export Licensing Requirements.
The simple fact is buyers in English speaking markets generally do not understand the role of China's export licensing system or the role of traders in Chinese production.
Here is the Chinese Export licensing system in short:
Exporters must file an application in advance and be approved as an exporter by the Ministry of Commerce (MOFCOM).
The exporter then registers with their local Foreign Trade Department to become a Foreign Trade Company (FTC).
The license is one of two sorts of licenses:
1. A general license which is issued for their approved scope of business and covers all transactions.
2. A special license. These are for items on restricted lists and are issued on a per transaction basis. Here is MOFCOM's Catalogue of Commodities Subject to Export Licensing Administration.
A license is required to ship from China and it is the exporter's responsibility. If the exporter (supplier company) does not have a license additional costs will be incurred arranging the shipment through an FTC, sometimes this is done through the freight forwarder, again at additional cost.
It should also be kept in mind that production in China is often smaller manufacturers clustered in a region, each making only a few products rather than the consolidated mega-manufacturers of Western industry. Many of these manufacturers would never reach export markets without Traders acting as their agents.
The role of Traders as licensed FTCs exporting products they have commissioned or purchased or acting as agents for manufacturing companies becomes clearer once this system is understood.
So why do they ask? History.
When trade between the new manufacturing economies and English speaking and other Western countries became easier a couple of decades ago, almost all of the early buyers were looking for manufacturers. Some traders knew this and pretended to be manufacturers to win business. Some traders still do this today.
The result is that ‘don’t deal with traders’ became a ‘rule of thumb’ . Of course even more traders pretended to be manufacturers because buyers didn’t want to buy from them anymore.
With the popularity of successful platforms, like Alibaba, interfaces with e-commerce sites in the west, like Shopify, and now successful dropshipping companies, most buyers need traders, not manufacturers. So how does a good trader overcome the misunderstandings of the past?
What Traders can do to help assure buyers.
By considering what buyers are really asking it is easy to address their concerns if you are a trader.
For example (continuing the fashion industry theme) : “We select our cotton fabrics from manufacturers in Ningbo, Hangzhou, Kequiao, Wenzhou, and Huzhou and arrange shipment with the best transport companies to ensure delivery, on time, every time”. If I an a buyer, I am busy with my own business in another country so I don’t have the time or resources to go and visit all the manufacturers in Zhejiang for good cotton fabric. If you are a trader there you can find it, you can develop relationships with the manufacturers and make sure I have it when I need it so I can use it to make my customers happy and that is very valuable to me so I am happy to pay you as a trader to take care of that.
It sounds obvious - but is that what your buyers see when they look at your page?
For example PRC has the IEC number and in Australia only registered companies can use .com.au and they must display their company registration number on any pages that makes an offer for a product or a service.
If your company (or a product you sell) has them and put them up make sure the issuer, number and expiry date are all readable. It is better to have no certifications on display than ones that people cannot confirm.