How much commission in the stone business?

Distinguished business persons, :smiley:

my partner has been asked by his relatives, who own a natural stone business in mainland, whether he would be interested to sell their stones in Europe.

They offer a 3 percent commission but I have heard from an “expert” that the more common commission is around the 8 percent mark. :help:

Would anyone know what the going rate is in the stone business or in other sectors of the building industry?



I don’t think your issues are about the stone business, they are more about the being a middleman between the Chinese guy who will screw you as soon as he can, and the buyer who will also circumvent you if he can.

It depends on how much “value-add” you can deliver. Is it a language thing? Is there some technical knowledge that you have? Whats to stop the Chinese guy going direct once you’ve done all the hard work of finding European buyers?

Also, I imagine that one of the most significant barriers in this industry is the transportation and storage, given the sheer weight / volume of stone… so there needs to be significant margins… Are you going to be organizing the transportation?

Also… a 3% commission is perfectly acceptable, if you are selling 3x as much as the guy with an 8% commission, so it all depends on the competitive advantage.

Ask Mr He for his opinion. He understands the trade business well and can give you a few pointers on how to protect yourself.

I have been working in textiles trading and our commission is 7-8%, if that is any help. Also my ex-wife exports marble from Turkey so I will ask her about it.

Sorry, I didn’t realise it was family… I think that adds a whole new area to it of which I have no experience. However… I think back to all those chinese kids working in their parents chinese restaurants back in Australia as slave labour… sometimes the biggest exploitation happens within the family.

Middlemen do serve a valuable function - at times that is.

Here are a few scenarios, where you as a middleman can be reasonably sure that your customer wont’ circumvent you:

  1. Your job is to coordinate production runs between several producers, and require that more than 2 producers have to deliver complementary products at the same time. (most US or European mid size importers can’t be bothered coordinating that while not on the ground)

  2. Your commission is seen as insignificant by the paying party. (If their margin is 200%, and you demand 5% - and he customer sees you as adding just a little bit of value, your job is fairly secure)

  3. You show you have value by ironing issues out fast and efficiently. (If the customer has a quality issue, and he has to communicate it to Chinese or Taiwanese who as a rule will try to avoid admitting to screwups and don’t have a great grasp of English to boot, then you have a relatively stable gig going)

  4. The product is fairly complex and requires quality control at several stages. (You are the customers eye and ears on the ground - and you are cheaper than sending staffout here several times per year, then you are OK).

  5. If the customer needs a whole industry to be monitored, and buy from several sources. (Trade shows, factory visits, follow-ups, and other supplier identification is done best here, by people who can talk and understand the locals).

I have taken customers I more or less trust to see suppliers several times without any ill effect for my profits, rather the other way round. also don’t forget that for smaller importers, IE people buying for less than NT$100m per year spead over several products, you are the cheapest option for sourcing efficintly there is. Also don’t forget that you being here and talking the talk/knowing the locals and spending time with them should be able to get savings, which basically means that you are paying for yourself - while a few Taiwanese or Chinese suppliers will try to screw you over, if there’s not much in it for them moneywise, they won’t bother unless they don’t want to deal with you.

The key to the longevity of your sourcing/commission business is not on the Chinese side though. It’s on the western side. You have to be very clear about and explain what value you deliver to the customer, offer advice and guide them thru the jungle here. If the customer perceives that you are earning your keep, they are likely to keep you.

I have had 2 suppliers trying to bypass me. How did I learn about that? simple, the customers wanted to know why they were getting Chinglish emails, and what the f**k was going on.

As mentioned before, making sure that you are delivering more than 1 product to a customer helps. My best sourcing business customer is currently getting products from 2 suppliers, and that will double over the next months, and most likely double again over 2-3 years. In case he screws me over on 1 supplier, he will be left in the dark on where the rest of his products are actually coming from.

But in general, if you are perceived to deliver value, you will have more buying agent business walking in the door than you can handle.

And adding:

There are situations I would avoid like the plague:

  1. I don’t trust the foreign customer.
  2. The product is a very simple one, where my continious help is not required.
  3. The product is a commodity or close to being one.

I would keep my commissions low, and lower them further, if business took off.

Not trusting the Chinese is not an issue, I have met 1 supplier here I trust, apart from traveller. I expect the worst from the rest.

Mr He,

my hero, thank your very much for your input. It is much appreciated! :notworthy:

Perhaps it might be useful to add some meat to the information given so far:

We live in Germany and my partner’s family (3rd cousins, five times removed - I gave up on figuring out the exact relationship) is currently importing stones to Germany and a few other countries in Europe. But the quality of stones ordered and their quantity is much lower compared to the orders from Japan and the US.

They visited us on a business trip to Europe earlier this year and we saw them again in Taiwan in April when they proposed to us to sell their stones for them. To put it very politely we (partner and me) are both very innocent when it comes to stones or business matters, but I am prepared to invest in a sales representative (got the guy and he is ready to go for October) to start selling the stones.

Now we are busy getting the fine print sorted out in our business agreement, but the bottom line seems to be that you do not need any paperwork within the familiy. Having gone through some limited legal training this makes me move to panic mode. But perhaps this is one of the celebrated cultural differences and I should resign to similing a lot and hoping for the best.

In terms of risk assessment this whole thing is mad because all parties involved can ripp me off. The sales rep, the customer and our supplier although this seems to be excluded by definition, that the family will take advantage of us. Well, the business is so simple that the only guarantee I have is placing my trust on the fact that within the family oral agreements are honored. :astonished:

So back to the business: if they offer 3% in commission would anyone know whether this is the going rate in the stone business? This is based on the normal market prices. I had an expert check the quality of the sampels and they are ok and the prices seem to be competitive in the market.

So what y’a thinking?

I have no idea about the natural stones market, but you should estimate your periodical costs (1), then calculate how many stones you’d have to sell in that period to make a reasonable profit. Compare that figure to their current sales to Germany and other places and to all other relevant figures you can find (total market size, competitors’ market shares, historical and expected market growth). If the sales volume is too ambitious, 3% is not enough. Anyhow, it doesn’t really matter if 3% is the “going rate”, the important question for you is if 3% are good enough to make a profit.

(1) Get a good book for this task if you don’t know where to start or a good consultant (there are many ressources available in Germany if you want to start your own business).

Also, be careful:

  • Having no written agreement is a bad idea because writing things down forces all parties to think about them (like: when do you get paid, what happens if a deal fails because they made mistakes, what happens if a customer doesn’t pay, are you going to get 3% on existing business relations, too, will you have exclusivity for Germany/EU and for how long, are they going to pay extra for some expenses like trade fairs, ads, translations, websites, etc. etc.).

  • So they’re not happy with their current sales in Germany. This could mean:

  • The market is not as big as they think
  • Their products are not as competitive (price, quality, availability…) as they think
  • Their marketing could be better

They probably want you to improve their marketing. In any case, you’re supposed to increase their sales above the current levels. They’re willing to pay you 3% on this additional revenue. Frankly, I wouldn’t look twice at such a proposal. The distribution of risks and chances is far too one-sided. Too me, it looks like they’re not risking anything while you’ll have to spend a lot of time (=calculatory costs) and money up front.

If they are family friends at least you can trust them not to go around you and if the customer tries, they will let you know about it.

Also, if it is family, then you can be assured they are not raising their price to pay for your piddly commission. Since they live in China, they are probably cheap bastards. Every Chinese that travels to China becomes an even cheaper guy than he already was because everything is so cheap there. They won’t pay much commission because they already think that 3% is so high compared to the salaries of people in China. Howver, this is almost surely a first price. Offer higher. Chinese always negotiate everything. They expect you to bargain for a higher commission. If you want 5-10% ask for 15%. Be careful and don’t play hardball like saying 15% or I won’t help you. They might just walk away. Keep it good natured and allow him a way to save face by offering a higher commission. He will need a reason to do that and he will need a reason to not pay you 15% if he doesn’t want to. That is what I mean by not saying 15% or else…

Don’t worry about the contract. If he doesn’t pay, you can make trouble for him with the customers in Germany no? Just make sure he is offering you a very competitive price. YOu also can jack up the price and make even more money, even if he he pays directly to the China place. If it is family, they should slide you your cut after the transfer, quite common with the Chinese.

If it’s family good luck with the written agreement, you won’t get any, but you most likely won’t need it either. That said, even among family, people have been known to screw each other over.

However, the mere fact that the product has issues competing is a red flag for me. They are most likely too expensive, or their quality is too poor.

Push for your commission as a percentage as the total sales to Europe, not just on new customers, the latter is way too risky for you. (if you manage to increase sales by spending time talking their current customers into buying more, will that be old sales or new sales, IE will you get commission?)

A good idea would be to spend lots of quality time with their current customer base, and understand the issues facing the customers. That will most likely be more valuable than anything the chinese family can tell you. Getting sales up at your current customers is also easier than getting new ones from scrathc, an if you make them happier, their reference value will be top notch when it comes to getting new biz.

I don’t know the overall figures, if it’s US$10m per year or will be with a little bit of work, 3% might be OK.

And, you should not employ a sales yourself. You have to go out on your own, if you are a european agent, sales is your life blood, and should not be handed to an employee lightly.

Thanks for the info Mr He. Very interesting.

I’m interested in learning more about trading (exporting out of China).

If anyone knows of any good books or websites on trade and could share that info with me I would much appreciate it.

I have some connections in China but would like to make more. I want to learn more about selling internationally and also know how to put a deal together and protect my commission.


You protect your commission by delivering something unique, which the customer can’t get from the supplier.

Also, if you buy then sell, they will have a harder time getting to know each other.

Try to see what’s available on amazon, I have learnt by doing, basically.