Building up a business and selling through Amazon FBA is no easy feat. You’ll first have to find a product to sell, use the best keywords to boost sales and learn how to find the right supplier. What’s the best option for most? Heading straight to Alibaba.com.
Being the largest marketplace to connect buyers with over two million suppliers, Alibaba.com is one of the easiest ways to buy large quantities of a product of choice and get your business rolling. The problem is, for many businesses or individuals getting set up overseas, it can be risky to send a large payment to a company you don’t know a whole deal about. Heck, it’s unlikely you’ll ever meet these people in person.
That’s why it pays to be safe. In this guide, we’ll walk you through how to stay safe when buying on Alibaba. This is especially essential for those who use Amazon seller software such as AMZScout or Jungle Scout, seeing as these services connect you to Alibaba suppliers.
How does Alibaba work?
So, on the topic of Alibaba, it’s best to get to know what the global marketplace is and how it works.
Alibaba is a Chinese-owned technology company specialising in ecommerce. Through its online B2B marketplace, Alibaba.com, it connects manufacturers and wholesalers mainly based in China to businesses worldwide. Need a truckload of meal prep containers delivered to a warehouse or an Amazon fullfilment centre lickety-split? A quick search on Alibaba.com will connect you to a manufacturer. From there, you can negotiate order numbers, delivery times and locations, and method of payments and boom – you’ve got yourself supply.
It’s the largest online marketplace for good reason. Alibaba provides an extensive list of suppliers manufacturing large quantities of products of all kinds for low prices. Being able to contact the manufacturer directly also means there’s no “middleman” malarkey, and individuals can also negotiate customisations to a product to make it stand out.
It can all seem a tad “too good to be true.” Unfortunately, sometimes it is. The good news is there are various precautions set in place, and there are easy ways to do background research on a supplier to ensure you’re getting a good deal. After all, you’re here to build a business and make money, not get swindled.
Is Alibaba safe?
The simple answer is: yes. But only if you know what you’re looking out for. As mentioned, Alibaba set up a Trade Assurance verification program to protect buyers from being scammed by dodgy suppliers. These types of suppliers may deliver terrible-quality products, outrageous prices for what is offered or may not send over the product.
That’s bad business for both buyers and Alibaba, so you’ll see a “Verified supplier” badge on many of the top-listed and most trustworthy manufacturers. To get this badge, the supplier must pass third-party inspections and authentications via TüV Rheinland (a well-known global inspection services company).
Check out the example below.
With this widget, you can see how long the company has been running, its on-time delivery rates, how many orders have been deliver, response time and more. Some suppliers will also boast certain services, or “Verified capacities,” that are worth noting. For example, the supplier displayed above offers minor customisations, centralised procurement, and small and large-volume orders.
This is a great way to know if a supplier you’re interested in is up to scratch, as they will be inspected and authorized by a reputable company to let you know it’s safe to negotiate.
Still, you’ll want to put trust in your own research skills, too.
How to stay safe on Alibaba
From middlemen posing as suppliers to manufacturers delivering poor-quality goods, you’ll want to keep yourself safe from any malicious suppliers out there. Here’s a few things to keep in mind.
Stay away from the middleman
One of Alibaba.com’s greatest strengths is communicating directly with a supplier – not a middleman. However, some listings may be middlemen in disguise who benefit from getting the most out of the supplier and the buyer. One noticeable sign you’re actually doing business with a middleman is how much a product costs, which is usually higher than it should be. However, there are other factors you can look into.
The first is the business license. Companies in China will have a Unified Social Credit Code on their business license. To make sure they’re legit, these can be looked up on the National Enterprise Credit Information Publicity System (NECIPS). A middleman may show you a business license, but it’s better to see if everything lines up using the NECIPS.
Like below, put in the Unified Social Credit Code or company name here and see if it all adds up.
As Sino Inspection points out, another section to look out for is the business activities the company is involved in. If “Manufacturing” isn’t one of them, then it’s likely to be a middleman making trades. Of course, this also works with any shady company that may not be delivering what they claim to sell. This leads to…
Research your supplier
We want to think that every supplier will deliver a non-faulty product for a fair price and deliver it on time, but let’s stick with reality. The excellent news is marketplaces such as Alibaba have set up built-in protection services to make sure everything, from placing your order to delivery, is a smooth experience. That’s thanks to Trade Assurance, but you’ll still want to do some background checking of your own.
Purchasing a large stock of goods overseas can be daunting, especially when a majority of your communications and transactions are done online. So, you’ll want to quickly look up the supplier company before making a deal.
For example, I’m looking to contact a supplier for a product (Tumblers) they manufacture. A quick scroll through the Alibaba listing page leads me to the companies profile. Here, it tells me the name of the company, where it’s based, when it was established, pictures of the company floor, the main markets it supplies, factory inspection reports and more. It even shows a store rating (out of five) and on-time delivery rates.
These are good indications of a reliable supplier, but it’s also better to do a Google search of the company yourself. Checking to see if others have had problems with the products it manufactures, like a faulty design, will let you know if the supplier can be trusted.
Refusal to ship samples
Samples are an important step in the process of selling quality products. If a supplier refuses the request of a sample, then something is up. Samples should be readily available by any supplier, as its an understood process of the transaction. If the “supplier” keeps evading the request, it’s time to move on to the next supplier.
Unable to answer questions
When communicating with a supplier, they should understand and answer all questions you have about the product. Whether it be the function of the product or the time it takes to ship, the manufacturer will know every step of the process – it’s their bread and butter. If they find it hard to answer these questions, or take too long to respond (days or weeks), then it’s a red flag.
Form of payment
Handing over a large amount of cash to a supplier based overseas is a critical step. This is where all your time and research, quite literally, pays off, and the amount one spends on quantity is nothing to sneeze at. If, for some reason, a negotiation doesn’t go as planned, you’ll want to be sure you have the opportunity to get your money back.
There are various forms of payment you may encounter when dealing with a supplier. Everyone wants a transaction to go smoothly (unless one of the parties have malicious intent), so it’s best to make an exchange the safe way.
For example, sending money with a straight-up bank transfer is quite risky. The supplier will receive the agreed amount before delivering the product, and it’s nearly impossible to get your money back if something goes awry. If a buyer uses the form of payment, they need to be absolutely sure they can trust the supplier.
This is why its recommended to use other forms of payment such as PayPal or escrow. The former is popular as its easy to use and allows order cancellation and a refund if a buyer encounters an issue. The latter allows a third party to hold the money until the supplier holds up the end of the deal, and only then is the payment, well, paid.
Using these two forms of payment offer the best security for you. Nobody wants to fork over a substantial amount of cash only to get nothing in return, so its better to negotiate the best form of payment.