If you are a dropshipper looking to scale your dropshipping business, you’d most certainly have heard the phrase ‘Sourcing Agent’.
You have heard how sourcing agents can be helpful, how it’s critical to partner with the right agent.
Then you wonder, what a sourcing agent actually means. Given that you will buy products from a supplier and sell it in your target market, where does the sourcing agent step in?
Today, we will decode this term for you.
As sourcing agents, we often bump into potential clients who have no idea what value we bring to the table. Hopefully, this blog post will shine some much-needed light on this.
- What is a Sourcing Agent or Sourcing Company
- What does a Sourcing Agent do
- How does Sourcing Agent Charge
- The advantages of working with a Product Sourcing Agent
- When do You Need a Sourcing Agent
What is a Sourcing Agent or Sourcing Company?
A sourcing agent is an on-ground partner for dropshippers or brands who seek better quality, pricing, TAT or all of the above in their business.
That’s a little vague, isn’t it? Let us explain with a simple example.
Let’s say you are sourcing from Aliexpress and are generating excellent sales volumes. But the seller is unreliable. There’s a gap in communication due to linguistic differences. Their turn around times are not consistent.
Sometimes, during peak business season, you don’t get inventory on time. Even worse, the product quality is not consistent.
As a dropshipper, you’d rather expend your energy generating business than tackling unreliable sellers, or analyzing every batch for quality.
That’s where a sourcing agent comes into the picture. A sourcing agent is generally located in the city/country that you are sourcing the product from. For easy understanding, let’s assume that you source from Guangzhou.
You engage with a reliable sourcing agent in Guangzhou who has strategic tie-ups with multiple factories in the marketplace. They will find a better supplier for you, depending on the problem with the existing one.
Since they are well versed with the local language and culture, linguistic challenges become non-existent. Sourcing agents offer a bouquet of services, ranging from personal product inspection, to duty paid delivery dispatch.
Think of them like your partner on ground, who will be your eyes and ears.
What does a Sourcing Agent do?
Sourcing Agents are generally individuals with on-ground expertise in different aspects of ecommerce fulfillment. A lot of them start off working with large ecommerce companies, and then branch out to hang up their own shingle.
This gives them a great understanding of the nuances of the business. Not all sourcing agents and companies offer the same service bouquet. So, it’s important to understand the differences in the scope of services, and ensure that it matches your expectations.
Here’s a look at some of the common services that sourcing agents provide.
1. Product Sourcing
Every sourcing agent will help you find a supplier for your product. Suppliers are not limited to the ones you see on the internet on B2B sites. There are a lot more in the marketplace and industrial clusters who are not registered anywhere on the internet.
A sourcing agent with great networking skills, knows the market inside out, like the back of their hands. This means that you will have an extensive list of sellers to choose from, for selecting your supplier. More than what you can ever collect yourself.
Unlike sourcing from B2B sites, you are sourcing from a reputed and trusted list of suppliers. This means that the chances of unprofessional behavior are slim.
2. Communication & Negotiation
One of the biggest challenges that ecommerce businesses face is communication. Regardless of whether you source from China or an international destination, it’s tough to find a vendor who speaks fluent English.
Sourcing agents can communicate in the local language and speak reasonably good English too.
After an initial consultation and understanding your business model, Sourcing agents will select a few suppliers, meet them, analyze their credibility, check their lead times, factory capacity, scalability, and then negotiate the price, to get you the best deal.
They will check MOQ, average lead times, factory infrastructure, and capacity to scale, experience and flexibility before recommending a seller.
3. Consolidate Samples & Placing Order
Some products are relatively easier to source than others. That’s just the way the ecommerce business functions. If it’s not an easy product to source, then you are going to have a tough time finding suppliers that can match your product quality requirements as well as MOQ and pricing.
A sourcing agent can do the job much quicker. They can reach out to multiple suppliers, consolidate samples, neatly arrange them and pass them on to you.
The agent will also arrange the orders and pay the suppliers on your behalf, taking a huge chunk of workload off your head. It’s just fewer hassles to deal with, which is exactly the way ecommerce should function.
The biggest USP of choosing a sourcing agent is personal attention. This person will always be there on call to address your concerns. Think of it, like one-on-one attention. That’s what we at Sourcingbro offer our clients.
4. Quality Control
Selecting the right supplier is only the first step. Ecommerce demands astute attention to delivery lead times and consistent product quality. A sourcing agent will be your eye on the ground.
Some sourcing agents will personally visit the factory and conduct a complete quality check, while others do random checks. Depending on the scope of work, they can monitor production to ensure that the vendor does not cut corners and finishes the production as per contractual timelines.
If there are products in the final order that do not qualify or are damaged, those can be replaced. This will cut short your losses.
Also, these services are generally offered as part of the service bouquet by a sourcing agent. So you don’t pay them extra for doing quality checks. This saves you some money that you would otherwise spend on hiring a 3rd party company for inspections and QC.
5. Arranging Shipping
Sourcing agents can help you source the best shipping prices for your inventory.
Some sourcing agents do not offer shipping services and will just inform you about the necessary paperwork for customs clearance. But others include shipping services at no additional charge. There are different types of shipping services that you can choose from.
Some of these are:
- Freight Shipping – A sourcing agent can arrange for Air-Freight and Sea-Freight shipping for your inventory, to deliver it to warehouses in any part of the world. Timely inventory delivery is critical to match sales forecasts. Having a reliable partner to handle shipping will be half the battle won, especially during peak volume seasons when shipments tend to get delayed.
- Express Shipping – If you are looking for quicker deliveries, sourcing agents can pick the best special line delivery service for quicker TAT.
Shipping might seem relatively simple on paper. But there are various aspects of it, like which shipping provider to choose depending on the dimensional weight or volume weight. Which shipping provider’s track record during peak seasons are dismal, and which ones are more consistent.
At Sourcingbro, we offer Delivery Duty Paid shipping for our clients. This is an end-to-end service where you do not have to worry about unexpected charges or customs delays. The inventory will be safely and promptly delivered to the destination warehouse.
6. Order Fulfillment
Order fulfillment is the final leg of the ecommerce supply chain. Most dropshipping sourcing agents include fulfillment services, as part of their work profile. At Sourcingbro, we offer the entire gamut of fulfillment services including:
- Packaging – Depending on the product, the shipping cost and the client requirements, we choose from polybag mailer, foam bags & air bubble bags. The idea is to ensure safe packaging at the least cost.
- Pick & Pack – Our warehouse team picks & packs the parcel, weeding out uncertainty and manual error.
- Ship & Track
That said, not all sourcing agents offer fulfillment services. Some of them may include this as an additional payable service. So, you might want to clear this up front.
How does Sourcing Agent Charge?
Since there are no set standard fees for sourcing, the charges for sourcing agents vary extensively depending on the scope of work and the brand.
There are individuals who will work on an hourly rate. There are agents who work on a fix commission. There are brands which will offer all services for free provided you source the product from their marketplace.
Some agents who have become established brands generally offer very attractive pricing, which sways customers into signing up with them. But what matters in the end is the overall procurement cost per product.
That’s the product sourcing cost + the shipping charges + agent commission + cost of delays if any. Many a time, a seemingly cost-effective service can turn out to be more expensive than what you expected.
So, always read the fine lines before you engage any sourcing agent. Here are some of the common pricing models in the industry presently.
1. One time flat fee or a monthly retainer
It’s common to come across Sourcing agents on Freelance websites like Fiverr & Upwork. These guys generally have an hourly pricing model, or a fixed price for a stipulated time frame during which they will offer all, or some of the services we mentioned above. Think of it like a one-time flat fee.
This can also be a fixed price for every product they help source. However, the general consensus industry-wide is that freelancers on these sites are not really as skilled and experienced as they may seem to be.
So, you can end up partnering with a supplier that’s not as cost-effective as they could have been. Or not reliable even.
Some Chinese sourcing agents also work on a retainer ship model for a monthly remuneration. They will then work full-time for 3-6-months, or however long it takes for them to source for that project.
2. Commission based on product value
Some agents charge a commission based on the final order value. This generally ranges from 5-10%. But is product category specific as well. Some categories of expensive products can end up with total order value over hundreds of thousands of dollars.
The sourcing agent can settle for a much smaller percentage as charge in these scenarios. But it totally depends on the agent/company that you are dealing with.
On an average, 5% is the bare minimum percentage that Chinese agents and companies charge for normal consumer products. You might bump into agents who are willing to work for much lower. But they generally cover the difference by offering higher product cost.
3. Quote Based
Lastly, there are agents who will understand the project requirements and then give you a custom quote. Not all categories of products demand the same level of work. A custom quote works better if you have special product requirements.
For instance, you are looking to source large quantities of rolled steel.
P.S – Regardless of what fee structure a sourcing agent or company promises, look at the big picture. Does it reduce the overall procurement cost? Does it improve efficiency in lead times? Do you get satisfactory product quality? In the end, the business depends on all of these factors. Choose wisely.
The advantages of working with a Product Sourcing Agent
Dropshipping and Ecommerce are the easiest business models, on paper. That’s until you get started and face the realities. We are not trying to demotivate you, mind you. But many businesses are on the fence about engaging with a sourcing agent, for something that they believe they can achieve themselves with some elbow grease.
But is it really doable? Here are some of the advantages of working with a sourcing agent.
1. Finding the right supplier
The first step in establishing an ecommerce venture is to find a reliable supplier in an overseas country. Do you know the suppliers in that country? Do you speak the local language? How about QC or testing lead times and production capacity?
It’s one thing to create a swanky website, which any seller can do. It’s another to consistently match the quality and timelines that you promise.
The best sourcing agent will take guesswork out of supplier vetoing. They will iron out the creases ensuring seamless communication. The culture gap becomes non-existent. Time zones don’t matter anymore. You get prompt updates in your inbox each morning.
2. Its hassle free
The rule of thumb is that you speak to at least 5-10 suppliers to source one product. Eventually, you will filter them out on numerous parameters and pick 1 or two out of the list. But what if you have a store with 100 products in 10-15 categories?
Do you have the time, bandwidth and skills needed to contact, verify and veto 1000+ suppliers? A sourcing agent will make this easier for you. Sometimes, in a span of days, you get multiple quotes delivered to your inbox.
It’s the hassle free way to do ecommerce that lets you focus on generating business. That’s your core competency. That’s what you should be focusing on.
There are certain sourcing agents who are extremely skilled at finding vendors in specific industries. A case in point is leather, which is tricky to choose. So are medicines. Medicine suppliers are a rarity at industrial trade shows and exhibitions.
This is where a sourcing agent with the right network of vendors can be invaluable. If you have a special product requirement, it’s in your best interest to work with a sourcing agent who has the industry-relevant expertise.
Apart from sourcing, QC, production follow up, and shipping, sourcing agents can also offer private labeling, or product design. Some of these services are:
- Product development from a concept
- Custom packaging with logo and branding
- Product Photography for use on ecommerce websites
When do You Need a Sourcing Agent
As a dropshipper, it’s logical to wonder whether you need to engage a sourcing agent. Does your situation really warrant this service? Is it overkill?
Well, it depends. There are some situations in which we highly recommend a sourcing agent. Here there are.
1. You want to take more control of your supply chain
When you source from a vendor directly, or from a B2B website like Alibaba, you do not have control over several touchpoints of the supply chain. The vendor will in all probability, ship out the inventory using a logistics service that’s cheaper than anything else.
That’s regardless of your deliverables or sales forecasts. Similarly, there’s absolutely no way in which you can integrate quality control, unless you hire a 3rd party QC agency, or are willing to fly down to the factory yourself.
Finding a good sourcing agent gives you more control over the entire supply chain. Right from speeding up product research, to selecting the right vendor to choosing the packaging, shipping provider & fulfillment service, you exercise complete control over the supply chain.
Also, you are never left in the dark about any aspect of the supply chain at any point of time. You will always have regular updates. Something that you must manually do otherwise.
2. You are setting up a multi-category or larger SKU store
A multi-category store will amplify the challenges you face, many times over. In all probability, you have hundreds of products to source in different categories. That means gathering samples, getting quotes and dealing with scores of vendors.
How do you even keep track of which one’s not performing up to the mark and make changes? Even if you have a big team and infrastructure, dealing with vendors in a foreign destination is a specialized skillset. A sourcing agent offers a cost-effective and reliable alternative.
3. You need Sourcing & Fulfillment Solution
You are looking for a reliable extension to your business that will tackle everything from sourcing to fulfillment. You just want to focus on generating sales and analyzing KPIs. That’s what every businessman should be focusing on.
Leave the backend and the messy, time consuming bits, to someone who does that for a living. That’s what a sourcing agent is.
To Sum it up
It was a long read, we know. But we hope that it clears any and all doubts that you have in your mind about what is a sourcing agent and can they help your business, haven’t find any? Check out our how to find a reliable sourcing agent.
If you have anything to add to this, feel free to reach out to us. We are all ears.