Sourcing agent, trading company or factory direct? Who you are really buying from

A factory makes the furniture; a trading company buys from factories and resells, with its margin inside the price and the factory usually kept confidential; a sourcing agent acts for you, for a disclosed fee, and lets you contract with the maker. Many Chinese suppliers are hybrids — factories with an export department — so check the business licence, the workshop and the name on the contract rather than the label on the website.

What is the difference between a trading company and a factory?

A factory sells what it makes; a trading company sells what others make and earns the difference. Between them sits the most common type in Chinese furniture: the integrated factory-trader, a manufacturer with its own export team that also buys in items it does not make.

The clearest descriptions of these models on Xiaohongshu come not from buyers but from Chinese graduates choosing where to work. A Fujian export veteran’s post, saved nearly 4,000 times, points out that manufacturers usually pay salespeople a share of turnover, while trading companies prefer a share of profit — which tells you where each one’s attention goes. A job-seekers’ guide adds that integrated firms and large trading houses understand quality control and export paperwork, while factories new to export tend to offer a single category and cannot easily fill a mixed order.

None of these is bad in itself. What matters for an overseas buyer is knowing which one is on the other end of the email.

Trading company vs factory vs sourcing agent: how do they compare?

They differ in who you contract with, who you can hold to the specification and whether you can see the margin.

A trading company earns its margin by carrying risk and convenience: one invoice, one contact, one shipment. A sourcing agent provides the same convenience without owning the goods, and you pay a disclosed fee instead. How that fee should work is covered in our complete guide to furniture sourcing agents in China.

How can you tell if a Chinese furniture supplier is a factory or a trading company?

Ask for documents and a live look at the workshop making your product; a genuine maker can show both within a day. When a reader of the job-seekers’ guide asked how to recognise an integrated factory-trader, the author’s answer was to ask directly or check online whether a factory exists. For a buyer, six checks go further:

1. Business licence. Does the registered business scope include manufacturing, and does the company name match the quotation?
2. Address. Is the registered address a workshop, or an office or showroom?
3. Live video. Ask for a walk-through of the line that would make your item — frames and foam for a sofa, spray booth for lacquer — not a showroom tour.
4. Contract and bank account. Is the seller on the contract the same company that receives the deposit?
5. Export declaration. Who will appear as the exporter on the customs documents?
6. Production photos. Will they send photos of your pieces at frame, upholstery and packing stage?

Foshan adds a local twist: makers on Xiaohongshu describe many Lecong mall showrooms as intermediaries for workshops elsewhere. Our explainer on Foshan furniture guides and the tour-guide model covers who is paid what when a buyer is walked from shop to shop.

What does the comment section add?

The comments were written by people who work inside Chinese export firms — which makes them unusually frank about how trading businesses run.

• The factory stays hidden. The top comment (140 likes) describes a small trading firm where staff were never told the profit, prices changed at the boss’s whim, factory information was kept confidential and quality was poor — yet the company had survived for twelve years.
• Look-alike “factories”. Another commenter lists husband-and-wife firms and factories that had just opened an online B2B store expecting quick orders — small operations that can present themselves as larger than they are.
• Red flags in one list. A reader’s ten-point list of firms to avoid includes those with no trade-fair presence and no advantage in quality, technology, price, supply chain or lead time.
• Just ask. Asked how to tell whether a company is an integrated factory-trader, the guide’s author said to ask outright and check online whether a factory exists.

Is factory direct furniture always cheaper?

It is cheapest for what that factory makes, but rarely for a whole order. A sofa workshop in Longjiang will not make your dining table, and a small order may fall below its minimum or its interest. Export packing, labelling and consolidation with other suppliers still have to be arranged by someone. Buyers who go factory direct for every item often end up managing five contracts, five deposits and five delivery dates.

Our factory-direct buying procedure shows how to do it properly, and our furniture sourcing and consolidation service shows how we combine several makers into one shipment. Before signing with anyone, run through our 15 questions to ask a furniture sourcing agent.

How Source Foshan handles it