Most garments cross the world with a middleman attached — an agent, a buying house, or a retailer’s own sourcing office. These layers are invisible in the finished product but very visible in its price. If you’re a brand deciding how to source, or you’ve ever wondered why two quotes for the same garment differ by 10%, this is the missing chapter. We’re a factory, so we have a position — but the numbers below are the industry’s, not ours.
The four kinds of middlemen
| Model | How they earn | What you should know |
|---|---|---|
| Buying agent | Commission, typically 3–10% of order value | Works for you; finds factories, follows samples, checks quality |
| Buying house / trading company | Invisible margin between factory price and your price | You often never learn which factory made your goods |
| Retailer sourcing office | Salaried — the retailer’s own team in Dhaka, Delhi, Istanbul | How H&M, Inditex and M&S actually buy; not accessible to small brands |
| Full-service sourcing giant | Fees across the whole chain | The Li & Fung model — see below |
The cautionary tale is Li & Fung: the world’s largest sourcing company peaked at US$19.3 billion revenue in 2014, lost most of its value within six years, and delisted in 2020 — hollowed out as e-commerce shrank its retail clients and brands increasingly went direct to factories. The middle layer is thinning across the industry; the question is whether you still need it.
What the middle layer really costs
The stated commission is only the visible part. In South Asian practice the commission is often deducted from the factory’s price — which means the factory prices it in, so you pay it invisibly. And practitioner accounts document a harder truth: agents taking a disclosed fee from the buyer plus undisclosed rebates from factories is, in one veteran QC professional’s words, not just common but normal. A buying house’s margin never appears on any document you see. None of this makes middlemen useless — it makes transparent pricing a thing you should actively test for, whoever you buy through.
What agents check before trusting a factory (worth copying)
- Licences, machine lists, real capacity, financials, and 6–12 months of wage records.
- A social audit — SMETA/Sedex or amfori BSCI are the standard keys; most factories get a corrective action plan, not a pass/fail.
- No hidden subcontracting — the fastest way for a factory to be dropped.
- Pricing that isn’t suspiciously low — experienced agents treat a too-cheap quote as a corner-cutting signal, not a bargain.
If you source factory-direct, this checklist is yours to run — and a factory that volunteers these documents before being asked is telling you something important. Our full guide to vetting a manufacturer.
Agent or direct? The honest decision rule
Use an agent when you genuinely need what they sell: multi-country programmes, many categories, no internal capacity to manage production, or first-time imports where you want a hand held. Go direct when you have locked tech packs, repeat styles, and a factory you’ve tested — you gain the fee layer back and, more valuable, direct technical dialogue with the people making your product. The middle path covers most small brands best: factory-direct plus third-party inspection, at roughly $270–420 per inspection day from firms like V-Trust or QIMA. On a $30,000 order, a 7% commission is $2,100; two inspection days are under $900. The inspection replaces the agent’s QC function — you keep the sourcing relationship yourself.
The Nepal footnote that matters
Unlike Dhaka or Delhi, Kathmandu has no dense layer of buying houses and no global retailer sourcing offices. That cuts both ways: agents rarely offer Nepali factories, so buyers who want Nepal’s 0% duty and low minimums mostly find factories direct — through trade fairs, the Garment Association of Nepal, TEPC, or content like this. It also means the sector never learned to hide behind intermediaries: you deal with the factory, and the price you see is the factory’s price. We think that’s the better model anyway — here’s how we back it up.
A good agent earns their percentage. But the best supply chains we know are two parties long: a brand that knows what it wants, and a factory that answers its own phone.
Talk to us directly — owner-level contact, transparent quotes, and we’ll welcome any third-party inspector you appoint.