The world's retailers have been stocking their shelves for years with products made in China. Indeed, more than half of the goods of a few US retailers now come from that country. To get the merchandise into stores, many retailers rely on trading companies and agents for a wide range of services, such as managing local suppliers, overseeing logistics, and returning damaged or rejected items. Not every retailer can go it alone—the value some agents add is irreplaceable—and the solo approach doesn't suit every product category. For many retailers facing a continual margin squeeze, however, sourcing directly from China is proving to be an attractive option. After deducting the cost of building a sourcing operation, retailers can still reap net savings of 10 to 30 percent on purchasing, a recent study shows.

Goods that retailers purchase from China typically pass through at least two intermediaries—a Chinese export-trading company and an importer in the retailer's home market. By establishing a purchasing office in China, retailers can eliminate one or more of the agents that stand between them and their suppliers.

In 2003, Wal-Mart Stores bought $15 billion worth of Chinese goods, nearly all through its purchasing office in China. In the...