How to Buy From Alibaba: Is it Safe? Complete Guide for Beginners

Alibaba is one of the biggest companies in the world, especially when it comes to buying goods online. The online sales arena is likely to be the next big area of global commerce, as the physical retail space drops off a cliff.

For many people, from the introvert to the time challenged, online shopping is a virtual dream come true. Never leaving the house, battling crowds, worrying about parking, the online commerce world is literally at your fingertips, a convenient means to have the material world delivered to your door.

With the coronavirus keeping people in their homes, stressed, worried, and bored, online retail has dramatically increased. From Vitamin C and food to shoes and thread, packages are left safely with contactless delivery. Overall, it is a more preferable method than standing in line, wearing masks, and social distancing.

The other side of this trend is that malls are dying. Malls killed mainstreet In many nations, and now online shopping has done away with the mall. While there are likely to be a few remaining stores that do physical selling, the online selling space will likely be the most popular for generations to come.

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Alibaba is a Massive Marketplace

Alibaba is probably one of the best choices for anyone that wants to start buying internationally. There are loads of sellers from China on the site, but it also has vendors from other nations as well.

There a dizzying array of e-commerce sites, but also myriad options like direct buying, drop shipping, FBA, shipping options, and membership programs. All of these make shopping of any kind more complicated than merely pointing, clicking and buying.

In addition to online shopping for personal satisfaction and COVID-19 avoidance, there are the bulk buyers, the budding entrepreneurs, and the seasoned retailers, all hoping to start or to continue buying from China. In these hotly contested political times, buying from China might appear to be a complicated process, rife with untold difficulties.

Nonetheless, buying from China is easier than anticipated, even without attending the Canton Fair or visiting the actual factories. Sites like Alibaba help this transition, although there are ways to become a smart shopper. If you ever wanted to start your own online business (don’t we all, really?), it is easier than ever before.

From Amazon to Alibaba

Of course, Amazon dominates the e-commerce world, but there are alternatives, especially if you wish to deal directly with production in China.

The Alibaba Group, a Chinese multinational company specializing in e-commerce, retail, internet, and technology, is vastly superior to its competition, including TaoBao and Wish. It is a comprehensive directory of suppliers, connecting them directly to buyers all over the world. There are millions of products to source, with insider rates.

However, given the overall reputation of Chinese e-commerce sites, it is understandable why you might be cautious about using Alibaba. There are plenty of stories of people who were scammed, and that might be enough to dissuade you from trying the site.

Nonetheless, Alibaba really is a safe shopping platform, particularly if you shop and negotiate shrewdly. It is worth noting that some shady grifters might loiter on the fringes of the site, but trust me, grifters are everywhere, not just the virtual and/or retail world. Therefore, it is possible to have an enjoyable and secure shopping experience on Alibaba.

A Foot in the Door

Please note that Alibaba is geared towards helping small businesses become competitive by leveling the proverbial field, and therefore, sourcing is relatively easy, costs of good is lower for better profit margins, products can be tested (see below) and manufacturers can be scalable.

When you first arrive at the site, you should know what kind and how much of a product you want. In fact, a business plan or strategy is a great guide because it can help you to maintain focus. When faced with such a range of options as Alibaba has, it can be easy to lose track of the game plan.

You will have to set up an Alibaba account, complete with User ID and password, its a quick and easy process.

Once this is done, you search for a manufacturer, of which there are two types. The first is the actual factory that will make your sourced goods. At this stage in the trade game, most factories have a sales team to deal with retailers.

The second type if the trading company, a “middleman” that sources directly from the factory and sells to you. If it is difficult to locate a factory that produces your goods, a trading company may assist you.

Find the Stuff You Want to Sell

There are different ways to search the site and to identify potential suppliers. One can search by products, such as shirts or keychains, but the more specific you are, the better the results will be.

It is important to note that there are certain terms used on Alibaba, terms worth mentioning since they can help you in your sourcing.

MOQ – Minimum Order Quantity. It is the lowest quantity of a certain product that a supplier is willing to sell. If you cannot guarantee the MOQ, then the supplier will not agree to produce.

OEM – Original Equipment Manufacturing. This refers to a supplier who will produce a unique product under your brand name. They will create the product to your own specifications, requirements, and product details. In this situation, the supplier is manufacturing the product from scratch.

ODM – Original Design Manufacturing. This may seem similar to the above term, but an ODM factory provides you with ideas for the product. You provide the function, performance, and conception of your project, and the factory can help you make that dream into a reality.

QC process – Quality Control, and that is definitely a good thing.

• IQC – Incoming Quality Control means the control of raw material that enters the factory for manufacturing purposes.
• OQC – Outgoing Quality Control (if it comes in, it must go out too) refers to finished goods ready for transport.
• QC & QA – Quality Control and Quality Assurance are the means of actually controlling the quality, and these means are assured at all times during the manufacturing process.
• IPQC – Process Quality Control monitors all of the steps in the manufacture of a product.

FOB – Free on Board or Freight on Board. This is the cost of delivering the goods to the nearest port is included, but you, as the retailer, are responsible for shipping from the port to the intended destination, entailing all fees and transport.

CIF – Cost Insurance and Freight. The seller/supplier pays the costs and freight, including insurance, to bring the goods to the port of destination. Risk transfers to the buyer/retailer once the goods are loaded onto the ship.

With these vocab words in mind and with practice, you will be using them in no time, like an expert. Learning them will definitely help you in your negotiations with suppliers, particularly when it is time to strike the deal and sign the contract.

How to Search for Products

When searching for suppliers, check all three boxes – Trade Assurance, Gold Supplier and Assessed Supplier. Trade Assurance is particularly important, as it is escrow protection for the money sent to the supplier’s bank account. If something does go awry, you will have some sort of financial protection, and you can submit a claim to Alibaba.

Gold Supplier is a membership tier exclusive to select sellers on Alibaba. As a result of their status, they have more product exposure and additional company perks.

Because it is expensive to be a Gold Supplier, the cost the supplier pays should protect against scams, but truth be told, there are some dodgy Gold Suppliers who provide both inadequate service and products. Nonetheless, Gold Supplier is a badge to seek.

Another level of assurance is to check the number of years the supplier has been Gold because longer is better.

Supplier Assessment might be the most important of these three checked filter boxes. In creating our onion of trust, the supplier assessment adds yet another layer to help ease any buying anxiety.

Like its name, Supplier Assessment indicates that a third, or outside, the party has screened the company and its corresponding factories. This is actually a difficult title to procure, and therefore, if the business has this award, then it has been recognized for its export abilities.

Verification and details of the company, including performance, capabilities, and trade shows, are provided on their page.

Do Some Homework Before you Buy

Other things to consider when choosing a supplier is the price (of course), MOQ, supplier reputation and reviews.

It is always a good idea to check the company via a Google search. Such a search can stop you from making a major shopping mistake, especially if the company might have optimistically marketed itself on Alibaba.

Examination of the website can provide telling evidence:

• Is the webpage detailed?
• Are there pictures of the factory?
• Do they have professional descriptions?
• Do they reveal their QC process?

Because even suspect businesses can have fancy websites, it is advisable to perform an additional search of the company name plus “scam”. It might yield great reading material. Also, a Whois search is recommended, since it analyzes the website and the email, looking for anything suspicious and weird.

Expanding the search to “Alibaba Forum” will result in plenty of information on the supplier, the product and/or the category. In this manner, you are using all resources available to ascertain if the supplier is legitimate.

Get to Know the Companies

Alibaba also assigned diamonds to companies based on their transaction level points. There is a transaction hierarchy and the trading level is an accumulated score awarded for total transaction volume and amount. The diamonds demonstrate volume and quality.

In each company page, there is a section entitled “Transaction History”, which is a summary of their yearly transactions. A company with many transactions is most likely trustworthy because more volume implies consistent business activity for a certain period of time. A substantial transaction history is another layer of the onion of buying trust.

If you are planning to buy a lot of goods from a company, or are unsure of how it is organized, you can use private investigators to learn more about the actual nature of the business you may deal with. This is an expensive option, but if you are going to spend a lot of money with a company, it may make sense.

Look for Manufacturers

In general, it is important to know the difference between manufacturers and traders.

Manufacturers will offer you a better deal, and if you are hoping to find a long-term supplier, a manufacturer is preferable, since they can offer more competitive prices. A long-term business relationship offers many additional benefits as well, so this is another possibility.

Once you have identified suppliers that meet your criteria, you should contact them, introducing yourself and your business.

Describe your interests, and inquire about sample costs and shipping. In this manner, you will be able to ascertain which suppliers can meet your requirements and which are reliable in their communication.

Most suppliers respond within 24-48 hours and their reply gives more insight into the company.

Clear communication is key, so unless you are fluent in Mandarin, you will need a supplier with English speaking employees. Make sure they answered all of your questions, from the mundane to the essential, and respond in a timely manner, so correspondence is a two-way street.

Always Request Samples – And Know Your Payment Options

Another essential tip is always to order a sample before you arrange a deal. Even with legitimate gold standard suppliers, you need to assess the product and the company. Most complaints involve how the item “looked different online” and this phrase will become a throbbing headache on a massive scale if you buy sight unseen.

It is simply good business to verify the quality of the product and to ensure that high standards are met and maintained. Manufacturers might charge you for express shipping and the sample, but you might get a refund if you choose them for the larger order. Each business handles the samples differently, but they are expecting you to ask for one, and it is important that you do so.

While all of the aforementioned issues are significant, payment is by far the most urgent matter. A good solid company will offer multiple ways to pay, including the escrow via Trade Assurance. It is of utmost importance that everything in the business agreement is clear and that there are no hidden fees in the fine print. The devil really can be in the details.

Upon completion of the negotiating, you should receive an invoice that matches all of the agreed details, including payment method, reached on Alibaba.

More Considerations

If you are selling the product as is, you have successfully finished your Alibaba journey. However, should you intend to private label, then there are a few more steps.

Please remember that you cannot buy branded items from Alibaba. Parent companies of branded items have strict distribution policies with factories in China, so if a supplier offers bulk branded items, it is a scam. Private labeling is different. It involves the difference between OEM and ODM.

With all of the searching, haggling, and paying done, it is time to focus on how the goods will reach their destination.

Although the sample piece should provide an indication of this logistics, shipping can be another facet of the negotiations. Will they arrange transport or will you have to hire a shopping broker? By asking the vendor, you will know if shipping is included in the cost of the order or if it is a separate entity altogether.

Expect anywhere between 15 to 45 days to receive your shipment, depending upon the order size, specific factory and their backlog. Also, note the time of year, since ordering during Chinese New Year definitely means a delayed shipment.

Amazon and Alibaba Work Together

If you plan on selling your product on Amazon, there are shipping options specifically for this arrangement. You can ship directly to yourself and then to Amazon or you can use a third-party middleman, popularly known as Pick and Packs or 3PL (third party logistics).

Amazon has three fulfillment methods for sellers, one of which is Fulfilled by Amazon (FBA). FBA is a service in which the seller ships inventory to Amazon and Amazon fulfills the order of the seller’s behalf. In this service, storage, packaging, and shipping assistance are available.

The perk to this is that it relieves the transportation burden on sellers, giving them more flexibility in their selling practices.

Costs for FBA are quite dynamic, varying according to a variety of factors including item type, item size, seasonality, storage duration, storage size, weight, inventory removal, disposal, and return.

In general, Amazon charges all sellers 15% of the product’s selling price on each item sold, regardless of the fulfillment method. In addition to this basic fee, there are two additional fees – fulfillment and storage.

Fulfillment includes picking, packing, and shipping to the consumer, while storage is for keeping the products at an Amazon center. Ultimately, your FBA fees depend upon the nature of the product you are selling.

There really is no one size fits all category, and you will have to look for suppliers that fit your business model.

Do You Need White Label Shipping?

Keep an eye on other fees, including package prep, inventory removal, product return and the infamous penalty fees. If you don’t follow Amazon’s rules, for example for barcodes or packaging, they will penalize you.

Another issue to consider is that your product will be shipped in an Amazon box, with its brand and label front and center. If you are serious about creating and nurturing a private label, and gaining your own logo recognition, then Amazon’s packaging might not be the best option.

AliExpress Explained!

AliExpress is the e-commerce retail platform of Alibaba, serving buyers all over the world. Established ten years ago, AliExpress is available in 220 regions and in 18 languages, with more than 150 million buyers and 600 million app downloads.

Like its associated site Alibaba, AliExpress caters to small to mid-sized businesses, helping people to start an online customized business and to “power up their brand”.

You can become an AliExpress seller, with support from the platform, and reliable delivery to your buyers. It is easy and free to set up a store, and AliExpress only charges 5%-8% commission, depending upon the item. Orders are shipped immediately after the buyer confirms the payment receipt.

Dropshipping?

Yet another option (so many choices!) is dropshipping, which is a retail chain management method wherein the seller does not keep goods in stock, but rather transfers a customer’s order and shipping details to a manufacturer, another retailer or wholesaler, who then ships the item directly to the customer.

The dropshipping method works with many e-commerce platforms including AliExpress and Shopify. Two common approaches to dropshipping is to seek a supplier (see above) via Alibaba or another app.

Some apps are actually marketplace that helps independent business owners find products to sell. Browsing different sites like Alibaba or AliExpress, you can then import products directly to your online store.

The app allows you to fulfill a customer’s order once he or she has bought the product. As the store “owner”, you merely have to confirm the details and click the order button. The product is then sent from the supplier to the customer.

Get Up and Running on the Cheap

For many people, especially those just starting their online retail revolution, dropshipping has many benefits. You have much more flexibility in experimenting with business ideas and it requires less capital, which is always an important perk

You can launch an e-commerce store without having to purchase products upfront. This basically translates into less financial risk, which means anyone with some creativity and motivation can be an entrepreneur.

In conjunction with less capital is the low overhead. No need to purchase and store inventory in a brick and mortar warehouse, complete with utility bills and rent. Because it is purely digital, then it can be run from anywhere in the world that has an internet connection.

Consider the Pros and Cons of Dropshipping

With the good must come the bad. Even though there are many positives for dropshipping, there are some disadvantages. Even though there are low costs and capital, there are low margins. With heavy competition, it can be challenging to grow revenue, meaning that you will not immediately become a retail magnate.

The beauty of not actually owning any inventory can be problematic, when you are sourcing from multiple warehouses, who are in turn, dealing with multiple sellers on a daily basis. In conjunction with this is shipping itself, which can be quite convoluted and can complicate the shipping costs.

As discussed above, even with the best suppliers, and the best intentions, errors can and do occur. As a retailer, you will have to take responsibility for any mistakes, even if they are not technically your fault.

Low quality and medium suppliers will cause endless frustration with botched shipments, questionable packaging and missing items. Therefore, it behooves you to take the time to vet your suppliers on Alibaba using the listed tips.

Dropshipping does not give you control over the product itself since it is usually designed and branded by the supplier. Private labeling has been addressed briefly in the article, but as you can surmise, branding and logos are important.

If you are trying to develop and grow a private label, then FBA, and perhaps even dropshipping, may not be viable options.

Shopify Could be a Great Option

Yet another e-commerce platform is Shopify, a Canadian multinational company, with online stores and retail point-of-sale systems. Potential retailers such as yourself subscribe to a software service that allows you to create a website and use their shopping cart solution to sell, ship and manage your commerce.

Because it is a subscription service, there is a hierarchy of costs, from Basic to Advanced, ranging in price from $29 USD per month to $299 USD per month. On top of this fee is a small commission per online transaction.

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A Turn-Key eCommerce Solution

Shopify is akin to a tool that is used to run multi-product e-commerce stores, helping with inventory, marketing, and customer history. It might not necessarily be the best tool for you.

The platform has a self-developed PHP language called “liquid” which makes customization difficult unless you happen to know how to code in “liquid”.

With so many choices, including FBA and dropshipping to Shopify and AliExpress, it can be difficult to make a decision. Nonetheless, the best approach is research, a business plan and a business strategy. Without a plan or a product idea, you will be lost in the e-commerce wilderness.

Once you have decided on a product or concept, including private labeling, then you will want to consider how you will sell it.

Do you want to use:

• An Online platform?
• Dropshipping?
• FBA?

How you sell impacts the shipping method. You will need to decide on a few things, in order to figure out the costs involved with the operation.

Consider:

• Are you shipping to yourself?
• To Amazon?
• Will you just let the supplier do that?
• What are the pros and cons of each option?
• Most importantly, what are the costs involved?
• How much will you spend on shipping, fees, subscriptions, and commissions?

There are no easy answers to these questions, but you will need to craft a plan that will work for your own operation. Be sure to consider how you will scale up the operation if your eCommerce platform is successful, as this can be a major hindrance to growing a substantial online sales business.

Overall, Shopify is an amazing platform for anyone that wants to do business online and lives in the USA or Canada. It has loads of built-in tools and options for customization and can help you take an idea to market in a minimum amount of time.

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Lots of Options for Online Businesses

As mentioned multiple times throughout this article, there are so many choices which is good…and bad. The choices mean that you definitely have the opportunity to start that online retail business you have dreamt about for years, to create and to distribute your own products to the world.

With platforms like Alibaba and Ali express, SMEs have a chance not only to open but to thrive. Alibaba connects you literally to the other side of the world, diminishing geographic distance and language barriers.

You can find great suppliers, and establish a business relationship that hopefully will grow into the future. It is now easier than ever to manufacture goods in China. Big names like Amazon and Shopify can help spur your business growth, or you can use other apps and platforms if you want to do it yourself.

Although it seems overwhelming, there has never been a better time to take the small business plunge. As many people across the globe move away from franchises and chains, you have the chance to carve a niche as unique as you and your ideas.

Keep Track of Your Common Sense in Alibaba Land

The last tip in this long list is to trust your instinct, a tried but true method.

If something seems off, then it probably is. Nonetheless, by following these simple rules and contemplating the many choices before you, you are well on your way to helping ease any basic instincts of distrust in dealing with China and carving out a new career for yourself.

The scope and depth of the products that are available on Alibaba is amazing, and it is likely one of the best sourcing platforms in the world. Unlike many eCommerce platforms, you will need to do some homework to get the most out of it and stay safe as you build an online business.