The difference between the middleman and the actual factory

I am traveling to the Canton Fair in search of suppliers. How can you tell who is a middleman and who is an actual factory?

Dear Jonathan,
Your question may be the most asked question in Guangzhou every April and October. And it is very much worth asking!

I’d like to offer some comments for your consideration in regards to middlemen. First, there are good and bad ones. The good ones add legit value, the bad ones cause problems. To determine who is legit, the single most powerful question you can ask is “can I speak to a few references”. If they can’t give you a handful of legit clients, run away. Having an intermediary is not always a bad thing, but let’s assume you want to go factory direct for whatever reason, then here are some red flags that you may be dealing with a middleman:

Avoid factories that refuse to list the name or location of the production facility.

Focus on those factories that can clearly show production experience with your particular product or production method. They should have samples and quality documents readily available if they are a real factory.

If you are able to arrange a factory visit:

1. Do your contact’s business cards match the factory staff’s information? If the cards don’t match in name, color and address, then your contact is probably a middleman.

2. Do the people at the factory clearly know your contact or does he give out business cards to factory staff when giving you the tour of “his factory”? At worst case this may be his first time working with the factory and you may as well build your own relationship without him.

Look for clear information about operation size, equipment and staffing on the website. Most intermediaries don’t offer the same level of detail that real factories present.

Be wary if they supply a very large range of products. If they say they make toothbrushes and TV sets, most likely one or both are outsourced!

Be aware that polished English skills do not reflect production skills. Often the most polished websites are set up by trading companies.

Ask for ownership papers of the factory. By law, the business license should be hanging from a wall in an easy to see location. Granted, it is often in Chinese, but get a copy (and make sure the copy you are given matches the one on the wall) and later you can translate the Chinese to show valuable information like ownership, years in business, scope of business and such.

Other tips:
Be explicit that the production location may be audited by you or a 3rd party, and that this location cannot be changed without approval from buyer. You will be surprised at the number of middlemen who will take the buyer on a visit of a factory only to change the location to a less expensive and poor quality option after the buyer leaves.

Hope your Canton trade show was a profitable one!

PS: I like the HK trade shows, especially those sponsored by www.GlobalSources.com, as they don’t have as many trading companies like Canton Fair. Keep in mind that decades ago the Canton Fair only allowed companies with import-export licenses to exhibit and even today not every manufacturer has an im-ex license. So it is natural that Canton is ripe w trading companies.

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