How to Tell the Difference Between a Trading Company and an Actual Manufacturer

When buying equipment and machinery from overseas, comparing suppliers on sourcing sites like Alibaba.com can be overwhelming due not only to the sheer number of vendors but also having to differentiate whether the vendor listed is the actual factory or an intermediary.

Trading companies are the most common type of intermediary appearing on sourcing sites. It’s important to know whether you’re placing an order with a trading company or an actual factory.

Purchasing directly from a factory means:

  • Lower prices and shorter lead times
  • You can customize the product to fit your needs

That being said, all of the overseas vendors on Toolots are actual factories, so the prices you see are true factory-direct prices.

Unlike vendors selling through Toolots, many of the vendors listed on sourcing sites are actually middlemen: trading companies, wholesalers, and sourcing agents. The reason for this is that the actual manufacturers – the factories who produce the products – do not have a strong foundation for dealing with non-domestic customers. This holds particularly true in equipment and machinery industries.

By Kyle Ryan / Unsplash

Almost every supplier listed on sourcing sites will tell you they are a real factory. To really find out whether you're getting factory-direct prices, here are some tactics to help determine whether a supplier is a factory or a trading company:

  • Check the seller’s business license and ensure that the specific business scope reads “manufacturer”.
  • Ask a technical question. If the contact does not reply within a few hours, it’s likely they aren’t the actual manufacturer.
  • Request a factory visit. Factories interested in doing business welcome visitors they are genuinely interested in doing business with.

These tactics can help determine which vendors are intermediaries aggregating equipment from various factories, as opposed to the factory themselves. However, particularly in this industry, you may find that your options for buying directly from factories are quite limited, depending on the type of equipment or machinery you’re looking for.

Less than 1% of Chinese manufacturers attempt their own overseas sales channels, leaving room for English-speaking trading companies to set up shop on US-facing sourcing sites and take a cut of the profit.

Less than 1% of Chinese manufacturers attempt their own overseas sales channels, leaving room for English-speaking trading companies to set up shop on US-facing sourcing sites and take a cut of the profit. Indeed, as is the case with any kind of intermediary, there are certain conveniences that come with working with a trading company. After all, if there were no upside, these companies wouldn’t be making a profit.

But that doesn't mean you have to cough up the cash to pay these intermediaries.

Toolots is cutting out the middlemen by providing a platform that alleviates the language and marketing barriers for Chinese equipment manufacturers. Our services thereby reduce the barriers and limitations that had traditionally kept the average overseas seller from attempting sales through the typical sourcing site. The buyer gets the variety and convenience offered by trading companies, but at factory-direct prices. Read more about how we’re revolutionizing the cross-border supply-chain here.