How does Alibaba work? Is Alibaba safe? If you’re new to the eCommerce world, you’ve probably asked yourself these questions several times. If you are interested to learn more about Alibaba and how it can help you find the best products and suppliers, then you’ve come to the right place.
In this blog post, I will explain what Alibaba is and how it works. Its pros and cons, how to source products, and find legit suppliers on its platform. I will also show you how to contact suppliers efficiently and how to negotiate and pay suppliers from China to make sure you won’t get scammed.
Make sure you don’t miss the last part because I’ll share some Alibaba alternatives you can also check out to give you more options.
What is Alibaba and How Does it Work?
Alibaba is a multinational company in China that specializes in retail, eCommerce, technology, and the internet. It caters to B2B (Business to Business), C2C (Consumer to Consumer), and B2C (Business to Consumer) sales services.
Alibaba is one of the leading platforms for wholesale trade worldwide, serving millions of suppliers and buyers globally. They offer millions of products in different categories, such as apparel, machinery, consumer electronics, and personal care to name a few.
Alibaba’s focus is more on trade between companies rather than a direct-to-consumer approach. Its business consists of goods being sold by suppliers in bulk at wholesale prices. The products are globally sold to small or medium-sized businesses, who then sell them for profit.
Alibaba connects manufacturers and wholesalers in China to international sellers who want to trade and sell. The online platform is an ideal starting point for anyone who wants to bulk-buy hundreds of items at once and for those who want to import low-cost custom-designed items.
How Sellers Can Benefit from Alibaba
Sellers can use Alibaba to source low-cost products and then sell them on their online stores or different marketplaces or platforms such as Amazon, Shopify, Etsy, and more. Many of the products on Alibaba are produced in China. These are often of good quality and are more affordable than those made in other countries.
When sourcing products to sell, make sure the products adhere to the platform’s guidelines. For instance, if you’re selling on Amazon, make sure you check their requirements, especially if they fall under restricted products or gated categories.
Alibaba also makes it easy for sellers to communicate directly with manufacturers and wholesalers. You can use the platform to connect with global suppliers who offer products at affordable prices.
Pros and Cons of Using Alibaba
Before you start using Alibaba, it pays to know its pros and cons to see if it’s something that’s worth using.
- Using Alibaba allows you to directly connect with numerous global suppliers who offer various products at affordable prices.
- Their website is easy to use, allowing you to easily and quickly find what you’re looking for.
- Alibaba also offers real-time business information and product catalogs.
- There’s the risk of fraud and payment scams.
- The final product is different from the sample product.
- There are hidden charges or additional costs after the initial quote.
- There are some incompetent suppliers that can waste your time.
Despite the downsides, many online sellers continue to use Alibaba due to its huge potential benefits. It is recommended that you start with a small purchase. Expand only after you have built a reliable relationship with a supplier.
How to Source Products on Alibaba
Alibaba made it easy for sellers to source products using their platform. You can find products on Alibaba by using keywords or images.
To search with keywords:
- Go to Alibaba.com, and enter the keyword of the product you want to sell. Make sure you’re on the Products page and not the Manufacturers page.
- On the search results page, you can filter the results by choosing the right category, setting the price, minimum order, supplier types, and more. Applying a filter will allow you to narrow down your search results.
For supplier types, tick Trade Assurance and Verified Supplier. This will help minimize the risks of dealing with fraudulent suppliers.
To search for products using images:
- Go to Alibaba.com. Click the camera icon.
- Click “Upload Image” to search for products with existing images.
If you want to learn more about sourcing products from Alibaba, watch this video.
Common Issues When Sourcing in Alibaba
Sourcing products from Alibaba can sometimes be risky. As a seller, it’s important that you’re aware of the possible risks involved to ensure that you know what you’re getting into.
Here are some of the most common issues with sourcing in Alibaba:
A huge problem when sourcing in Alibaba is that suppliers are mostly native Chinese and speak Mandarin. Communication barriers can result in misunderstandings
It can be hard to verify if a supplier is legit online. Buyers may not always be able to verify if the supplier has a license and permit for their supply. Failing to do so can endanger the sourcing process.
China is often associated with fake and low-quality products. It can be hard to determine the quality of the products at Alibaba if you rely only on pictures and samples sent.
Fraud and Scams
These are rampant on Alibaba, with the most common technique being the bait and switch scheme. Buyers may be sent inferior products or none at all.
How to Find Suppliers on Alibaba
Here are tips for finding trustworthy and high-quality suppliers on Alibaba:
- Choose suppliers who have completed a Supplier Assessment. It’s an external verification of a supplier provided by a third party. It’s a good verification check as it means that their company and factory are verified.
- Find a “Legal status checked” indication. This status is given to manufacturers visited by Alibaba employees and is verified to have a physical location. While it provides an extra layer of trust, it shouldn’t be the only way to vet a supplier.
- Research the supplier’s background by looking it up on search engines. Use a tool like “whois lookup” to check if the supplier holds the registered domain of their website. You can also check the Alibaba Gold Supplier scam website or the Alibaba forums.
- When searching for suppliers, set the results to find only Gold Suppliers and Assessed Suppliers. These memberships are proof that the suppliers have been vetted for their authenticity.
- Check how long the supplier has been trading. Find out how long the factory has been operating, if it has a lot of negative feedback, and if there’s any reference to them as being a scam. Finally, review their transaction history. Legitimate suppliers will have regular or consistent orders.
What is the Difference Between Manufacturing Companies and Trading Companies
There are two types of suppliers in Alibaba: trading companies and manufacturers. A trading company often called a vendor, does not produce any goods. It is an agent that connects buyers and sellers without being involved in manufacturing or ownership of the product.
A trading company offers a wide variety of products. It also takes some markup over a manufacturer, so its prices are higher. They are sometimes referred to as distributors or wholesalers.
A manufacturer, or a factory, is a place that produces various items. It has a limited product range but can customize the products for its clients. Manufacturers usually focus on one product due to the high costs of machinery needed in production.
How to Contact and Negotiate with Suppliers
To get the best price at Alibaba, start by developing a relationship with your Chinese supplier. First, contact them through the “Contact Supplier” option on their Alibaba page. Introduce yourself, inquire about their product, and ask if they can make your product.
If you want faster replies, you can use WeChat, a communication app that is widely used in China. It’s almost similar to WhatsApp but better as it offers other services other than the usual messaging app.
It’s also best to prepare a message template to send your suppliers. It’s a more efficient way rather than creating and typing new email messages for each of your suppliers. The important thing is you include all the necessary details and all your questions, so you don’t have to go back and forth with emails or even on WeChat.
When talking to suppliers, make them feel that they need you more than you need them. You’ll be able to get better quotes this way. Suppliers don’t mind negotiating, provided you’re polite, respectful, and not too pushy.
To learn more about this, please watch this video.
How to Pay Suppliers in China
Paying suppliers in China requires that you put up a 30% initial deposit and pay the remaining 70% upon completion of the order. You typically have to make two payments for every order. This payment term is typical for the first orders made. Below are several ways that you can pay your Chinese suppliers.
- International Wire Transfer
This is the most direct method of sending payments to your Chinese supplier. Fees for a bank transfer can range from US$20-50. The charges can come from your bank’s international wire transfer, SWIFT correspondent bank fees, currency conversion charges, and fees from the receiving bank.
- Set up a Business Account in Hong Kong to Make Payments
If you want faster transactions, set up a business account in Hong Kong and pay your Chinese suppliers by sending funds as a local transfer. It also helps you avoid international transfer charges and foreign exchange conversion fees.
- Use Alibaba Trade Assurance
Alibaba Trade Assurance is a payment and buyer protection service that adds a measure of security when you pay your Chinese suppliers. After placing your order, you wire the money to a designated Alibaba bank account, and they keep it in escrow.
The money is released to the supplier when the products pass a quality check. If your order is subpar or the shipment is delayed, you can withhold the payment or retrieve the amount.
- Letters of Credit
A letter of credit (LOC) is used as insurance issued by your bank on your order. It is often used for very large transactions or if suppliers use it as a business condition. LOCs reduce the supplier’s risk that the buyer doesn’t pay. With a letter of credit, the fees are very high and require comprehensive paperwork.
- Western Union
Small or medium-sized suppliers in China widely use Western Union because of ease of use, speed, and affordability. Its published fees are low, but they often charge customers more for purchasing Chinese currency. This option is recommended if you trust your supplier.
Alipay, or Zhifubao, is the most commonly used online payment solution in China. A fully verified Alipay account allows you to pay your supplier in Chinese currency. You need to download Alipay from your app store and set up your account. Alipay can be used to shop on Chinese websites, transfer money, pay bills, and perform other transactions.
Alibaba offers primarily three payment methods: debit or credit card, online bank transfer (direct-to-bank transfer), and wire transfer. All these come with extra charges that you can find on their payment page.
In addition to Alibaba, several other sites like Alibaba offer an extensive collection of products for business owners looking to sell and profit from affordable items.
AliExpress is an online retail service in China owned by the Alibaba Group. It is a B2B e-commerce company that offers products at affordable prices. As with Alibaba, AliExpress connects buyers and suppliers. Its most popular products are electronics and accessories, jewelry, men’s and women’s apparel, home appliances, and pet products.
1688.com is the sister website of Alibaba.com. This local B2B trading platform is China’s largest wholesale and sourcing website for wholesale and manufacturing. With thousands of products and suppliers, Alibaba 1688 is mainly used for domestic markets, but international sellers can also take advantage of them.
DHGate is a Chinese B2B cross-border e-commerce marketplace providing goods made in China. DHGate hosts more than 30 million products in a wide range of products that span several categories, including computers, electronics, jewelry, apparel, bags, consumer electronics, and more.
Global Sources is a business-to-business (B2B) multi-channel media company based in Hong Kong. For more than 50 years, it has connected authentic buyers and verified suppliers.
The platform offers a vast array of products ranging from auto parts and accessories to consumer electronics, hardware, machinery and equipment, furniture and home decor, and industrial supplies.
Taobao is a Chinese online shopping platform owned by Alibaba. It offers a platform for individuals and businesses to sell products online. Also referred to as Chinese Amazon, Taobao is the largest online marketplace that offers countless products, from bags and accessories to toys and baby products, mobile phones, home appliances, notebooks and network services, beauty care products, and medicine and health products.
Due to its wide reach and affordability, Alibaba continues to provide a host of advantages for sellers. Whether you’re looking to buy products for your business or wholesale in bulk, Alibaba is an excellent tool that you should take advantage of.
Are you using Alibaba to source products or find suppliers? Share with us your experience and other tips so we can learn from each other. Interested in learning more about Amazon FBA? Don’t forget to check my article on the Amazon FBA guide to help you succeed in your Amazon journey.