Where the margins hide in a sourcing quote
An intermediary has to earn something. The question is whether you can see it.
Where the fee is stated and agreed, you can judge whether it is worth paying. Where it is spread across a unit price, a freight charge and a handling fee, you cannot, and the total is usually larger than any fee you would have agreed to openly.
Seven places margin hides. Most quotes contain at least three.
1. Commission from the factory
The oldest one. The agent negotiates a price with the factory, quotes you a higher one, and separately receives a percentage back from the factory.
You see one price. The factory has quoted two.
This is why an agent may resist you speaking to the factory directly, and why some will not tell you the factory's name at all. The commercial reason given is protection of their supplier relationships. Sometimes that is true. Sometimes the reason is that a conversation would reveal the arrangement.
It also creates a conflict that is worth naming. An agent earning a percentage from the factory has a reason to keep you with that factory, whether or not it remains the best one for you.
Ask: do you receive any payment, commission, rebate or discount from the factory on my orders? Ask for the answer in writing.
2. Freight markup
The agent books freight at one rate and bills you at another. The margin is invisible because you have nothing to compare it against.
Freight is easy to check. Ask two forwarders for a rate on your volume and route. If your agent's number is materially higher, you have found a markup.
Ask: is freight billed at cost, and can I see the forwarder's invoice?
3. Inspection folded into unit price
An inspection has a cost, usually a few hundred per day. When it appears as a line, you can judge it. When it is absorbed into the unit price, it can be several times that and you would never know.
Ask: what does inspection cost per visit, and is it billed at cost or with a margin?
4. Exchange rate spread
You are quoted in one currency and the factory is paid in another. The rate applied to the conversion is a decision, and a spread applied quietly across a large order is a meaningful amount.
Ask: what rate is applied, what is it referenced to, and is a margin added on conversion?
5. Tooling and sample costs
Tooling is a one-off cost and it is easy to mark up because you have nothing to compare it against. Sample costs are sometimes recovered from several customers for the same sample.
Ask for the factory's tooling quotation rather than a number. And settle tooling ownership in writing at the same time, because paying for a mould that stays in someone else's factory is a separate loss.
Ask: can I see the factory's tooling invoice, and who owns the tooling once it is paid for?
6. Payment terms arbitrage
Subtle and worth understanding.
The agent has sixty days to pay the factory. They ask you for full payment before shipment. For those sixty days your money is funding their business, and on a large order that is a real financing benefit.
There is nothing improper about an intermediary financing an order, and there is a genuine cost to carrying it. The problem is only when they take payment early, pay late, and describe the terms as the factory's requirement.
Ask: what are your payment terms with the factory, and what are mine with you?
7. Unexplained fees
Handling fee, service charge, documentation fee, coordination fee. Some are real costs. Some are a fee by another name.
Ask: what is this fee for, and what happens if I decline it?
How to ask for a quote that separates everything
Send this rather than asking for a price. Most of the ambiguity disappears at the request stage.
> For each item, please quote:
>
> 1. The factory price, EXW, in the currency the factory quotes
> 2. Your fee, stated separately, and how it is calculated
> 3. Inland transport in China, at cost
> 4. Export clearance, at cost
> 5. Freight, at cost, with the forwarder named
> 6. Inspection, at cost, with the provider named
> 7. Tooling, with the factory quotation attached
> 8. Any other charge, itemised and explained
>
> Please also confirm in writing whether you receive any commission, rebate or discount from the factory on our orders, and what exchange rate you apply.
The response tells you what you need to know. A supplier who prices openly will answer it. A supplier who does not will explain why the question is unreasonable, and that answer is also information.
What an open invoice looks like
Every third-party cost appears at cost, with the underlying document available. The intermediary's fee appears once, as its own line, at the amount agreed before the order.
Attached or available: the factory invoice, the freight invoice, the inspection invoice and report, and the tooling invoice where relevant.
If you can add up the third-party costs and the stated fee and arrive at the invoice total, the invoice is open. If there is a gap, there is a margin you have not been shown.
One fair point in the other direction
Open pricing does not mean the fee should be small.
Qualifying a supplier properly, running inspections, holding stock, fronting cash between paying a factory and being paid, and carrying liability as the seller are real work with real cost. A visible fee that covers them is better value than a hidden one that is larger.
The purpose of separating the lines is to let you judge that, not to drive the number to zero. An intermediary who cannot cover their cost will either stop doing the work or start hiding the margin again.
The short version
Ask for the factory price and the fee as separate numbers, ask directly about factory commission and exchange rate, and ask for third-party costs at cost with documents available.
You will learn most of what you need from whether the questions get answered.
Verified August 2026. Next review February 2027.