You can start an eCommerce website if you have two things: a product and a website. However, products can only come if you have a reliable supplier. Fortunately, you live in an age where a supplier is just a few clicks away. Their location doesn’t even matter anymore. You now have the access to source your products anywhere.
What is Alibaba?
One of the websites that makes this possible is Alibaba. Alibaba is a business directory of suppliers from all over the world. It allows you to contact suppliers no matter where they are and allows you to secure your products with ease. Most of the suppliers in Alibaba came from Asia. This means lower prices for each product making it a very attractive offer to online sellers. Aside from that, it has the most extensive list of products. In fact, it has millions of products and around 100,000+ suppliers in just about every category. Some people even say that there’s nothing that you cannot find in Alibaba. Due to its extensive list of products and suppliers, it is considered as the largest eCommerce website on the Internet (Yes. It even beats Amazon and eBay combined. That’s how big it is.)
While buying products from Alibaba may seem enticing, that doesn’t mean that there are no risks attached to purchasing from them. In fact, I’ll show you more than just the risks. Instead, I will go into the full advantages and disadvantages from buying from Alibaba.
Advantages of Buying from Alibaba
One of the main reasons why people love buying from Alibaba is the price. Since most of its suppliers are from Asia, they are able to lower their prices. This comes from the cost of manufacturing. It seems that manufacturing in Asia is relatively lower compared to their Western counterparts. Lower prices increases the return-on-investment so it is enticing for both big and small businesses alike.
Aside from low costs, there are other reasons why Alibaba is enticing. Aside from the relatively lower manufacturing costs, it seems that the personalities of suppliers are also more open to adjusting to the needs of their clients. Some suppliers would only offer their products in bulk. But in Alibaba, there are suppliers that are able to provide products in smaller quantities.
Another reason why Alibaba is popular is its diversity. You will not see another website on the Internet that has the extensive list of products and suppliers that it has. With its extensive database, you’ll be able to search for any type of product in any category. And it doesn’t stop there. The website is even able to display variations of the products that you have searched for. This allows you to filter through suppliers to find the lowest price or to find the supplier that is the easiest to work with.
Lastly, I think that Alibaba stands out because it helps you find your supplier in one location. There’s no need to hop around websites to contact your desired supplier. In Alibaba, everything is in one location. There are the products, specifications, price and supplier details in one convenient website.
Disadvantages of Using Alibaba
The lower manufacturing costs may seem great on the surface. After all, it will result to low-cost products that will yield a higher return-on-investment. However, there are some disadvantages to this setup.
First, the standards for production or manufacturing is lower. This means that some of the suppliers that you will work with may have lower manufacturing and labor standards. You may even find that there is no intellectual property protection for you and your business.
Next, there may also be some issues with the final product. Due to lower manufacturing standards, the product is often not at par with countries with stricter rules. In effect, the quality of the product may suffer and your customers may not like it.
Third are the cultural differences. As I have said earlier, most of the manufacturers in Alibaba comes from Asian countries. This means that you would need to overcome the barrier of culture and communication if you want them to be your supplier. Aside from that, there is also the barrier of distance. This means that you cannot personally visit your supplier to see their items. There is also the risk that the supplier is a scammer or non-verified.
The fourth problem is shipping. Since the products will come from a faraway country, shipping will take time. And this does not discount the fact that there may even be some fees for import and customs clearance. On top of these, there may even be some issues on security. There is a risk that products may not get delivered and you’ll end up losing a lot of money in the process.
How to Use Alibaba for Your Business
You can use Alibaba in two ways: Products-first or Supplier-first. Let me show you how to do the two methods.
Method #1: Products-First
Using Alibaba is easy. If you can shop in online marketplaces like eBay and Amazon, then you’ll know how to navigate Alibaba.
The homepage will greet you with a search bar. In here, you can put the name of the product that you are looking for. It’s pretty straightforward.
On the side are the categories. This will allow you to easily navigate the website in case you are undecided on the product that you like to sell.
The easiest way to use Alibaba is to search for products.
Let’s say that you want to sell some mobile phone cases. You can then search for the keyword ‘iPhone cases’ or ‘Samsung cases’. For example, a search for ‘iPhone cases’ will yield the following result.
Clicking on the product will reveal its price and give you access to the supplier.
If you will scroll down, you’ll get more details about the product.
There are some terms that you must understand in this area. I will break down each term for you.
One of the first things that you will notice is the price. After all, you want to get the most out of your money, right? For this listing, we see a price range between $6.71 to $7.46. There are some instances where you’ll see the acronym FOB. This means ‘free on board’ which pertains to the fact that your supplier will shoulder costs associated with getting the product to the marine port. Else, you would have to shoulder the expenses
Minimum Order Quantity (MOQ)
Beside the price is the minimum order. For this product, we can see that the minimum order is 10 – this is the lowest amount of order for that product that your supplier is willing to accept. But even if it is listed, that doesn’t mean that you can’t negotiate it down. After all, a high minimum order quantity will often require higher capital. If you don’t have enough capital, you can always present your case with your supplier. This will help you negotiate a lower MOQ.
Below the product, you will see credit card signs. These shows the payment options that the merchant is willing to accept. This can be done through bank transfer, PayPal, Escrow, Western Union or through a Letter of Credit.
These payment methods differ from each other in terms of risk. The riskiest is Western Union and Bank Transfer. While it is fairly easy to transfer money through these channels, the chance for reversal is zero. This means that if your supplier is a scammer, they will just run away with the money.
A good workaround is to pay through PayPal, Escrow or through a letter of credit. PayPal is fairly safe because of its Buyer Protection rules. This allows buyers to pay for suppliers and ask for a refund if the item did not meet their standards. Another way is through Escrow. This is where another party holds the money while the transaction is not yet completed. Money is only released when both parties are satisfied. The fastest is through a letter of credit. There is just a limit of at least $20,000 in your purchase for you to use this payment method.
It is also important to note shipping. This will allow you to know how your products will be shipped and when it will be shipped. This gives you an estimate waiting time.
You should also take a look at the supplier’s company profile. This will allow you to know the name of the supplier so that you can do a background check before you proceed with the transaction. I highly suggest that you only go with verified sellers for it is safer.
From here, all you need to do is contact the seller. This will allow you to set a date for item delivery and complete the transaction.
Method #2: Supplier-First
Alternatively, you can also use Alibaba to go straight for the suppliers. When you search for an item or a keyword, it will immediately give you a list of suppliers that sells the item. All it takes is just a change in the tab or choosing ‘Suppliers’ from the dropdown menu in the search bar.
This will lead you to a company information page that has more details.
This will show you the business type, location, main products, total number of employees, total annual revenue, year established and its top 3 markets. On top of that, it will give you an overview of its capability through its trade capacity, production capacity, R&D capacity, it business performance through buyer interactions, feedbacks and transaction history as well as its participation in trade shows and its transaction level. All of these are shown along with pictures of the insides of the company. From here, you can just click on the orange ‘Contact Supplier’ button to proceed with your transaction.
WARNING: Watch Out for These Three Types of Sellers
Let me give you a word of warning. While Alibaba is a wonderful directory of suppliers from all over the world, it is not free of scammers and low quality sellers. So buy at your own risk.
With that said, it is important to get yourself acquainted with the different types of sellers in Alibaba. These are the three that you should avoid.
These are ‘companies’ that claim to deliver your products on time but doesn’t deliver anything. They wait for you to send payment and they will usually restrict payments to Western Union and Bank Transfer to ensure no chargebacks. Although Alibaba is trying its best to weed them out, they are always there, presenting themselves in the best possible way only to take your money, change their IP and try again.
Even though there are tons of ‘companies’ claiming that they are ‘manufacturers’, you have to do some research to know if this is true. Here’s the thing. Since signing up on Alibaba is easy, there are lots of middlemen who would sign themselves up as a manufacturer just to take a cut from orders. This is the reason why there are many suppliers with insanely high minimum order quantities. The problem is not really in the fact that they are taking the cut but on the fact that it leads to miscommunication since shipping has to go through 2 channels: manufacturer to middleman and middleman to you.
Low Quality Manufacturers
These are the ‘companies’ who deliver items that are completely different from what was displayed on their listing. And if it looks the same, the quality is different from the description. Since transactions are done online and you have no way to check their manufacturing houses, these companies take this opportunity to cheat materials and send low quality products in hopes of higher revenue.
To avoid these, I suggest that you only buy from verified suppliers. Alibaba has its own verification program and it will immediately tell you if a certain supplier is verified. Next, you should also do your own research. Try to look for some information about the supplier on the Internet.