Product Sourcing

USA Retailers and Brands prefer to work with Wholesalers/Middleman?

Dan Dan Co-founder of a few Startups

August 20th, 2017

Hi, I was told by people that USA Retailers and Brands prefer to work with Wholesalers/Middleman? They do not want to go directly to factory especially those outside of USA. Is it true?

Jack Lee Multi-disciplined....I provide a unique blend of strategic insight and tactical application.

August 21st, 2017

In a perfect world, the answer would be "no". But as Paul G. so accurately presented, US companies look for a more cautious alternative.

Dane Madsen Organizational and Operational Strategy Consultant

August 20th, 2017

Some do. Some do not. Depending on your business and the space you supply, it may be different. Once measure is if there are many, many suppliers in your space, a broker or middleman can challenge them against each other to get better terms, quality, and delivery and the Brand is only there for that last decision. Some retailers depend on the middlemen to find unique products that meet their Brand standard. If there are very few in your space, and that is a sustainable barrier, then this is not usually the case. If you as a supplier have a secret sauce that others to not have (price is a weapon all have) then you could find traction going direct.

Paul Garcia President at TABLE

August 20th, 2017

Yes, it's true, particularly when dealing with China, where you are. Unfortunately, and although your company may not be one of the culprits, but there have been so many sketchy and faulty dealings with factories and suppliers in China, the aggravation of doing business directly is not a risk many companies are willing to take.


A broker who handles the complicated paperwork for importation, who guarantees the on-time delivery, who communicates in the local language to ensure there aren't mistakes in understanding, and who can accept payment in dollars without an international wire transfer in advance of an order, are all preferable benefits that don't happen when dealing directly with an overseas factory.


Very few people are willing to learn and risk mistakes in first-hand ordering with Chinese factories. They don't know the right questions to ask. They are suspicious of delivery times. They aren't sure the quality will be as expected. And they don't know how to recover if there are errors or other problems.


I'm sorry to say that this is a big hurdle for the majority of businesses. While there is certainly a lot of business happening over Alibaba, direct with factories, this is one of the few places where USA retailers even know how to find manufacturers. It still has risks even though there are ratings and brokerage help.


One of my companies I started in the past did work directly with factories in China. I spent a lot of time and effort learning how to conduct those steps very carefully so I would not make mistakes, so communication was very clear, and so the products arrived on-time and exactly as designed. I worked with a good importation broker. And still with all that effort my bank warned me again and again about doing business with Chinese factories and that it was considered hi risk, and asked me if I was sure that I wanted to send money to China.


I'm sorry that this is a barrier for you. Even if you are the most trustworthy businessman, you will face a lot of resistance because of other factories in your country that have not been honest. The reputation for the country is not something you will fix by yourself. But, if you understand why the USA mistrusts the process, you can prepare for those resistance points and stand out as a supplier who has done everything possible to make it easy and trustworthy.


Good luck.

Pascal Nyiringango COE and Cofounder of Piscosmuka tours and mentor of entrepreneurship at university of rwanda and RMI

August 24th, 2017

very true, it is easy for market penetration. it is advisable strategy to enter into a foreign business environment through an existing firms. it will be well known brand and lest costly for marketing