In this guide, we will take a look at what Alibaba is, how the wholesale market works, and how to buy safely from Alibaba. We will cover everything you need to know to find a supplier for your product idea using this popular trade directory. We will present the advantages and disadvantages of buying from abroad and show you how to purchase from Alibaba and navigate this new field so that you can find the perfect supplier for your product idea and start selling online.
What is Alibaba?
Alibaba is a global wholesale marketplace owned by a Chinese company founded in 1999. If you’ve decided and are determined to get your supplier from abroad, there’s a good chance you want to know how to buy from Alibaba or AliExpress.
In terms of numbers, Alibaba is the largest e-commerce company in the world, generating around $135 billion in 2022. It is also the most comprehensive directory connecting suppliers (mainly from Asia) with buyers from all around the globe.
How does Alibaba work?
Alibaba is a wholesale marketplace for buyers looking to purchase large quantities of products at the lowest price. Alibaba allows buyers to negotiate directly with manufacturers, create custom products, and achieve significant cost savings.
It is also the best option for purchasing private label products because you are buying directly from the manufacturer.
Alibaba Group owns three Chinese marketplaces – Taobao, Tmall, and Alibaba.com – which host hundreds of millions of users and facilitate hundreds of millions of merchants and products. There’s not much that you won’t find in its directory, which is why it has become one of the most popular online shopping destinations.
How to drop ship with Alibaba
Here are some tips and recommendations for drop shipping to safely purchase goods from Alibaba.
1. Start searching for products
When buying from Alibaba and using the directory, it’s straightforward and similar to other marketplaces like eBay. Browse product categories or search for the product you are looking for.
There are two common approaches to searching for purchasing goods from Alibaba. You can search for items based on product description, for example, “dog collar,” which will yield thousands of results. Alternatively, you can choose suppliers from the dropdown list instead of products and look for manufacturers specializing in a certain type of item.
2. Check product listing pages
When starting your search for a supplier on Alibaba, there are a few things you’ll want to consider and pay attention to on the product listing page. Let’s take a look at an example of a product description and listing for a dog collar that we found on Alibaba.
Minimum Order Quantity (MOQ): This is the smallest order that the manufacturer agrees to. However, it’s important to note that this can almost always be negotiated.
In our example, the minimum order is 50 units. Multiplying it by the highest price per unit of $2.15, we can quickly see we would be looking at a minimum order value of approximately $107.50 + shipping costs from this particular product supplier. This is good to know later when negotiating, as it gives you a solid starting point.
Payment options: After understanding the price and MOQ, you’ll likely want to know how you can pay the supplier. There are several common payment methods, each with its advantages and disadvantages for both the buyer and seller.
Let’s take a look at the most common payment options below and the level of risk associated with them for you as a buyer:
1. Upfront Bank Transfer (Upfront TT): Level of risk: High. With the bank transfer, the supplier will receive the full amount before production starts. This payment method carries a high level of risk for the buyer and is generally not recommended when dealing with an unknown supplier. There’s no recourse if something goes wrong.
2.
Credit Letter: Risk Level: Medium. The credit letter is relatively secure for both parties, but it involves some complex procedures and is usually recommended only for large purchases (20,000 USD or more).
3. Western Union: Risk Level: High. This payment method is fraught with risks for the buyer and is not recommended when the payment is not protected by a guarantee. Western Union should only be used when dealing with people you know well. There’s no compensation if something goes wrong.
4. PayPal: Risk Level: Low. PayPal is a popular payment method among buyers, offering a lower level of risk, ease of use, and good buyer protection overall. Although it is a popular choice among buyers, it is less common among suppliers due to difficulties in withdrawing funds, high taxes, and the potential for chargebacks from unscrupulous buyers.
5. Escrow: Risk Level: Low. When using an escrow service, the buyer’s money is held by a third party and is only released to the supplier after the buyer confirms that their order has been delivered satisfactorily. Escrow is a relatively safe payment method for buying and selling online as it protects both the buyer and the supplier.
In general, when you’re just starting to purchase goods from Alibaba, you may want to look for suppliers that accept either PayPal or some type of escrow service to give you the highest level of protection.
3. Communicating with Suppliers
Now that you understand how to better protect yourself when conducting business online on the other side of the world, it’s time to communicate with some suppliers. When communicating with suppliers overseas, email and social media or WeChat are likely to be your primary means of communication.
In many cases, suppliers will use software like Google Translate to translate your emails and their replies to you. Remember that machine translation is still an imperfect art, so expect some errors and potential misunderstandings.
To ensure that communication is as clear as possible, keep your emails concise and well-organized, free from spelling errors. This will not only help the manufacturer but will ultimately save you in getting more useful responses.
A quick tip for buying on Alibaba: When asking your questions and formatting your emails to suppliers, it’s best to number your questions so they can easily respond to each one. This keeps the questions and communication neat and organized.
4. Requesting a Quote
Requesting a quote (also known as RFQ or Request for Quotation) is a relatively straightforward process for how to buy from Alibaba. However, taking a little extra time to plan your email can make a significant difference in the number and quality of responses you receive.
Here are some important questions to consider in your email when buying from Alibaba:
– Minimum Order Quantities (MOQs). Even if the listing provides a minimum order, you should double-check with the supplier for accuracy. If the order quantities are much higher than you know you can handle, you’ll want to ask if they are willing to negotiate the minimum for you. Make sure to give them an idea of what you can afford. Note that the minimum order quantity is almost always negotiable with overseas suppliers.
– Pricing for samples. Samples are important for quality inspection. You’ll want to ask about their pricing for samples right away. Some suppliers who receive a lot of sample requests may change their retail pricing, while others may offer samples at a discounted price, and some may even provide free samples if they feel you are a serious buyer.
–
Pricing for Production. One of the most important questions is how much your products cost per unit. Often on Alibaba, the supplier will provide a range (for example, $2-3 per unit, for instance), but you’ll want to know exactly how much each unit will cost you.
– Production Time. Knowing how long it will take to produce your order is an important consideration, and depending on your specific business, timing may be critical.
– Payment Terms. Many suppliers may require new businesses to pay the full order amount upfront. This is important to know, as inventory is a major cost for emerging e-commerce companies. You may also want to ask whether they offer payment terms for future orders.
Here is an example of an email template you may want to consider as a guide when contacting overseas suppliers from Alibaba:
Hello,
My name is John, and I am with XYZ Company.
I am interested in placing an order for Widget A. Before I do that, I have a few questions:
– What is your minimum order quantity? What is your unit cost, and at what quantity levels do you offer volume discounts? What are your payment terms for new customers?
I would also like to request a sample of Widget A before placing a full order. Can you send me the sample cost, including shipping costs, to:
John Doe
123 Fake St.
Toronto, Ontario M5V 2J4
Canada
Thank you.
John,
XYZ Company
www.xyzcompany.com
416-444-4444
As you can see, the above template is short and concise, aiming to ensure a high level of alignment between both parties.
5. Negotiate Your Terms
Once you start discussions with multiple suppliers and have a good idea of their pricing, order quantities, and payment terms, you can begin to negotiate with them. As mentioned earlier in our tips for buying from Alibaba, minimum order quantities are almost always negotiable, just ask. Remember, good negotiation leaves both parties happy with the outcome, so negotiate down a little but don’t go too low.
6. Look at Your Options
Once you narrow down your choices to a few selected suppliers, the next step in how to buy from Alibaba is to review all your options. Keep in mind that when doing this, you’ll want to consider more than just price and order quantities and payment terms. Make sure you take into account how well and how quickly each supplier responds to you.
Communication with the supplier can be a crucial element of your future business, so make sure you start off on the right foot.
Is Alibaba Safe?
Since its launch in 1999, Alibaba has become one of the largest marketplaces in the world. Like many modern commercial marketplaces, most traders on Alibaba are reliable and trustworthy, making the marketplace relatively safe and legitimate.
The company offers Trade Assurance, which is a verification program for selected suppliers to protect your payments through Alibaba.com’s payment platform.
The benefits of Trade Assurance include:
– Convenient payment options. Alibaba provides multiple payment methods, including credit cards, PayPal, and financing options for qualified buyers in the U.S.
– Payment security. Track funds and reconcile with suppliers and know when they receive your payment.
– Better support. When working with Trade Assurance certified suppliers, refunds are available if you are not satisfied with the product quality.
Trade Assurance protects you from fraud or receiving low-quality or unsafe products from Alibaba. Although there will be some negotiation between the seller and Alibaba during mediation, you will be protected from bad suppliers.
This does not mean that working with drop shipping suppliers who are not part of the Trade Assurance program is bad. It just means that you will need to do more research to keep yourself safe.
Let’s
Let’s take a look at several things you can do to protect your money when purchasing from Alibaba:
1. Verify suppliers. Alibaba has its own verification program. Verification is based on onsite inspection by a third party, as well as feedback from previous customers. If a supplier is verified, you will see a sidebar item on the left side of any product page that looks like this:
Searching for these verification badges is a good first step in assessing whether the supplier is ready to ship to you. Here, you can see the supplier’s verification duration, number of personal inspections, response times, and customer satisfaction rates.
Additionally, Alibaba includes specialized badges for suppliers based on their performance. In the example above, you can see two badges; Supplier Evaluation Procedures (indicating the supplier has been assessed for quality control) and Minor Customization (indicating the supplier offers custom packing for some products).
Additional specialized badges may be added for environmental compliance, a large number of repeat customers, fast shipping times, and more.
2. Ask questions and follow up. When you start to narrow down your options for suppliers, make sure to ask plenty of questions about their business and products. Request a copy of their business license. Ask for a phone number – and actually call it. Set up a conference call with your contact. Ask for pictures of the factory and sample products.
Don’t hesitate to ask for anything that makes you feel more comfortable doing business with someone on the other side of the world. It wouldn’t be crazy to even request your factory contact to take a picture of themselves on the factory floor holding today’s newspaper and one of their products.
3. Get samples. It should be a given that before investing any significant amount of money in inventory, you need to receive samples to inspect and verify quality. Don’t hesitate to even contact them using a (fake) different name and email to get an additional sample so you can compare.
4. Be ready to walk away. Finally, if something seems too good to be true, it usually is. Be cautious of pricing or promises that seem incorrect or that vary greatly from other suppliers you’ve contacted. Always be prepared to walk away from the deal if something doesn’t seem right.
What is the difference between Alibaba and AliExpress?
Alibaba and AliExpress are two online marketplaces based in China made up of third-party sellers. The major difference between Alibaba and AliExpress is:
– Alibaba is for business-to-business transactions. AliExpress is open to consumers.
While Alibaba targets larger and smaller businesses that buy wholesale bulk orders, AliExpress provides dropshipping products at retail prices for anyone, with no minimum order. With Alibaba, you buy directly from the manufacturer and can easily private label with custom designs or logos.
AliExpress items are typically pre-manufactured, so options for customization are limited, and they tend to be more expensive.
AliExpress sellers also typically offer ePacket shipping, which can help your eCommerce store deliver quality, reliable products to customers faster. Shipping times on Alibaba are usually longer.
If you run an online business and want to quickly get products from AliExpress instead of working with wholesalers, connect your Shopify store with a dropshipping app. This will help you secure your dropshipping service to save time (so you can promote more) and increase profit margins.
Advantages
Disadvantages of Direct Shipping from Alibaba
The most common reason many entrepreneurs seek suppliers in Asia, especially China, is to take advantage of low manufacturing costs. Manufacturing costs in Asia can be significantly lower than in North America and other parts of the world. So much so that it would be difficult to start a direct shipping business without overseas manufacturing.
Cheaper product costs are great, but they are not the only reason Asia is an attractive place to find a supplier. Advantages:
– Low manufacturing costs: suppliers (generally) are more open to working with small businesses and providing smaller quantities.
– A large number of suppliers to choose from.
– For many products, Asia may be the only place that produces the item.
– Comprehensive services like Alibaba make navigating and buying from suppliers easier.
Together with the advantages of getting wholesale from suppliers abroad, there are also several disadvantages that store owners should be aware of:
– Consideration of low quality and insecurity from a customer perspective.
– Manufacturing and labor standards (typically) lower.
– No protection for intellectual property or almost none.
– There may be difficulty/cost in verifying and visiting the manufacturer on-site.
– Long shipping times.
– Importing the product and customs clearance.
– A lower level of payment security and compensation.
How to Become a Direct Shipping Supplier from Alibaba and Secure Products Safely
Buying goods wholesale via Alibaba from a safe and reliable supplier for your direct shipping category can be a new yet rewarding experience. With some basic knowledge and general precautions, it can be a safe and profitable business model for your online store. Always conduct the necessary research, and if a deal seems too good to be true, be prepared and ready to walk away. You can find hundreds of other suppliers with a few clicks.
Happy searching!
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