by Renaud Anjoran
A few years ago, in Hidden commissions between China factories and sourcing agents, I wrote about a very common practice that unfolds this way:
I tend to see this practice as highly unethical. But not everybody agrees. Yesterday, a reader left this comment:
I’m surprised that anyone thinks this is wrong, as though it is some type of sin. As agents our goal is to make money.
If I am bringing business to a factory they would otherwise not get, that is a service and I intend to bill them for it. As long as the price my client is getting is what they need, the quality is good and delivery on time and I’m doing my very best for the client, I’m doing my job.
Everyone should know up front what the rules of the game are. If I’m hiding a bloated commission that impacts quality or price to my client, then I’m unprofessional and lack integrity. To think we do this work for free, is absurd in it’s total naivety.
Let me clarify why pretending that the job is done for free is wrong. And why charging a commission to the buyer without disclosing that another commission is charged to the manufacturer is wrong.
The main problem is that it totally distorts the agent’s incentives. The importer trusts the buying agent because she thinks the agent is on her side. If the agent is actually acting as a salesperson of the manufacturer, the tables are turned.
When things go wrong, the agent will naturally tend to defend the current relationship at the expense of the buyer’s interests. Here are two examples.
Would this happen with a truly honest and long-term-thinking agent? No. But such an agent would not hide the main source of her income, in the first place. Not to mention, who would seriously expect a Chinese factory or agent to think long term?
Who agrees? And, equally important, who disagrees?
UPDATE 7 May 2014:
For fun, I pasted below an excerpt from an email I received this morning from a sourcing agent:
I can be a good companion of you in China! Help you find good supplier and
settle everything during the buying trip, help to deliver your goods to your
hand from China.
MOST IMPORTANT! I won’t make any COMMISION from you!And not like other
sourcing agent charge you high charges.
All I can get ,It is just a little fees:
1. Produce price survey: Free
2. Car transport service:60 USD/day
3. Translate service/guide service:20 USD/day
4. Collect goods service/quality check service:5 USD/SHOP