Why You Should Not Do Business with a Middleman
- Higher cost, lower profit margin
- Higher communication cost, potential delay of delivery
- Little or no quality control since they do not have direct access to products and their manufacturing process.
Signs of a Middleman
1. Misinformation on Business License
Every company legally registered in Mainland China has a Unified Social Credit Code. You can find a company’s Unified Social Credit Code on its business license. You can find public information of the company at the National Enterprise Credit Information Publicity System (NECIPS). You should cross check the information on their business license with their information on NECIPS, since pictures of business license could be easily forged with Photoshop.
Companies registered in Mainland China are only allowed to perform business activities in fields listed on the business scope section of the business license. If “manufacturing” is not in their business scope, they are most likely a trading company.
Manufacturing is a capital-intensive industry. A company with a registered capital of a hundred thousand Yuan RMB is obviously not a genuine manufacturer.
2. Refuse to Ship Samples
Factories should have samples and documents readily available for shipping unless you ask for custom samples, in that case, samples should available within a few days. You should move on to the next seller when they are reluctant to ship samples.
3. Suspicious Factory Location
Most factories locate in the industrial areas of a city. If the address of the factory they provide is in the urban area, you should ask them to explain about it. You can use online maps services to check the factory location.
4. Putting Off / Refusing Sudden Video Calls
Give them a surprise video call via Skype or WhatsApp without appointment and ask them to show you around their factory. If they keep finding excuses, they are highly likely middlemen.
5. Unable to Answer Technical Questions
If the person you are negotiating with works for the factory, he/she would be able to answer your questions about the technical details of the product with confidence. If it is a sales person, he/she would have the personal who can answer technical questions at disposal.
It’s a red flag if the person is reluctant to answer or tries to change the subject.
Any Easy Solution?
If you are not so familiar with the seller, you probably want to use a 3rd party service and let the professional do the verification for you. Here at sinoinspection.com we offer 4 types of enterprise credit report. Whether you are an owner of a small business or manage supply chain for big enterprise, there is one report that will suit your needs.