Alibaba 101: How to Safely Source Products from the World's Biggest Supplier Directory

Sourcing products for your business to sell is one of the easiest parts of your business to complete. Once you know what you are going to be selling, all that is left to do is locate the perfect supplier that will be able to consistently deliver and meet your demands. One of the most popular marketplaces to sourcing suppliers is Alibaba, where most suppliers are based in China. Let’s have a look at Alibaba, and how it can be used to source all of your product needs and requirements.

 

Advantages Of Sourcing Products From Overseas

Products manufactured in China generally cost only a fraction what they cost to have manufactured here. This is one of the most appealing reasons that business owners choose to source their products and suppliers from Alibaba. You can also take advantage of:

  • Manufacturers willing to sell smaller quantities than most local suppliers.
  • Huge number of potential suppliers to choose from.
  • Easy to navigate and places orders with suppliers.

 

Disadvantages Of Sourcing Products From Overseas

Everything has both its advantages and disadvantages. What unfortunately stands out the most for Alibaba in this case, is:

  • Lower manufacturing standards than local manufacturers.
  • No intellectual property protection.
  • Language barriers can be hard to overcome.
  • Hard to verify the legitimacy of supplier.
  • Takes a long time to ship (sometimes several weeks, or more).
  • Different cultural practices of business.
  • Customs may reject some items without warning.
  • Lower payment security.

 

What Actually Is Alibaba?

Alibaba is considered to be the biggest e-commerce marketplace in the world, and is larger than the combination of both eBay and Amazon. It also boasts the largest directory in the world in terms of being able to connect buyer and seller from thousands of different suppliers who are mostly based in China and other parts of Asia.

 

How To Search For Products And Suppliers?

If you have used eBay or Amazon before, then you should have no problem using Alibaba. Simply enter in a search term or choose a category. You can also modify your results based on price, supplier rather than product, shipping costs, and so on.

 

What Should I Be Looking For On The Product Pages?

There are several factors which you should consider when you find the products that you have been looking for. These include:

  • Unit Price – this is the cost per individual item, and is most commonly priced in US Dollars. If you see the word FOB, know that it stands for “Free On Board”, which basically means that the seller will pay the cost to have the product shipped via boat (the cheapest option when shipping from Asia) to your address. Note also, that the more that you purchase, the cheaper that the unit price will be.
  • Minimum Order Quantity – also known as MOQ. This basically means that you might have to purchase a minimum of 50 products in order to be able to make a purchase. Order quantities will also affect price too. For example, the unit price might be $3 for 50-100 units, but only $2.50 for 101-300 units. Sometimes it can work out cheaper to purchase nearly double the amount for what you would have paid at the higher unit cost.
  • Payment Options – Alibaba has a wide range of payment options to choose from based on the offerings of each supplier. These range from Bank Transfer to Western Union, however you should only ever pay via PayPal or Escrow. If you pay upfront, you run the risk of either not being able to get a refund, or not receiving the items at all. At least PayPal and Escrow have buyer protection.

 

3 Things You Should Be Aware Of (And Try To Avoid)

  • Middlemen – Alibaba is home to literally thousands of manufacturers, however, sometimes you might find that some of these “manufacturers” are operating as the link between you and the manufacturer, raising costs, and profiting off of the inconvenience. Always do your research before making a purchase to ensure that you are actually dealing with the manufacturer and not a greedy salesperson.
  • Scammers – middlemen will complicate your sale and cost you a little more money, but scammers will cost you all of your money. Alibaba tries very hard to remove all scammers from their page, but time to time people will still fall victim to them. Just be cautious.
  • Quality – always order a sample first, because sometimes the product in the photo looks nothing like the product that you receive.

 

How To Protect Yourself

How are you able to protect yourself from the 3 things that you should be aware of above? Unfortunately, there is not a perfect method that works 100% of the time. What you can do in order to make your experience a whole lot easier on Alibaba, is to consider trying the follow methods that seem to work most of the time:

  • Verified Suppliers – always look for this symbol when you are on suppliers pages. This means that Alibaba has verified that this supplier is indeed the real deal.
  • Ask Questions – often scammers will not be able to answer the questions that a proper supplier or manufacturer would know. Also consider asking for their address and then finding their number online and actually calling them to see if they do exist. You may also consider setting up a meeting via Skype.
  • Order Samples – as explained above, make sure that you order samples from a few different suppliers before you first make a large order. Just in case the quality is not up to the standard that you require, and sees you out of pocket several hundred (or thousand) dollars.

 

How To Contact Suppliers

Once you are aware of what you need to do to try and protect yourself online, you should be ready to start getting down to business. The first thing that you will want to do is contact the suppliers which you have found to be able to give you what you want, and then ask them specific questions to see if they actually can deliver you what you want.

For example, you should be asking them questions like minimum quantities, how long the products take to manufacture or whether they are in stock and ready to be shipped, terms of payment, quote prices, and most importantly, how much does it cost to have a sample shipped out to you. When sending them an email, you might want to consider using the following template:

 

Hi,

My name is John and I am with XYZ Company.

I am interested in placing an order for Widget A. Before I do however, I just have several questions:

  1. What is your minimum order quantity?
  2. What is your cost per unit and at what quantity levels do you offer quantity discounts?
  3. What are your payment terms for new customers?

I would also like to order a sample of Widget A before placing a full order. Can you please send me the cost for the sample including shipping to:

John Doe
80 Spadina Ave., Floor 4
Toronto, ON, Canada
M5V2J4

Thank you.

John,
XYZ Company
www.xyzcompany.com
416-444-4444

 

 

How To Negotiate

Once the conversation with the supplier is flowing, you will now want to be focusing on negotiating both the price and the terms and conditions of payment and fulfilment. The minimum order quantities are almost always negotiable, and you may even be able to save yourself a couple of hundred dollars by knocking a few cents off each item.

 

Making The Decision

Now comes the hard part. You have done your research, made contact with several suppliers, and made successful negotiations with each. Now, which do you choose? Do you choose the supplier with the cheapest per unit cost? The supplier with the quickest delivery turnaround? The shortest manufacturing cost? The choice is up to you. Personally, I prefer to choose the supplier who always responds to my emails and questions the fastest. This means that if anything goes wrong, I know that it can be fixed with the supplier very quickly.

 

Conclusion

Always take your time researching and finding the right supplier based on the needs and requirements of your business. Alibaba is similar in layout and format to both eBay and Amazon, so have a bit of fun in the process.