Five quick tips for trading with Alibaba.com
It’s truly surprising how many people in the West are still not aware of Alibaba. This is strange considering group CEO, Jack Ma, has made himself something of a rockstar in the Chinese dot-com industry and Alibaba changed the way goods are sold around the world.
For those looking to take advantage of the extraordinary size and scope of China’s manufacturing industry, Alibaba is easily the best way to acquire bulk volumes of almost any item you can imagine. From lingerie to chicken feeders, it’s all available in the thousands or millions.
Still, there are plenty of risks. The sheer size of the marketplace means there are always going to be dodgy traders. Here’s some simple tips to protect your business from unscrupulous listings.
1. Do your research
Simple advice, but some people are easily excited by a bargain. To service the hole in the market that has been identified, be sure to look at more than one supplier, ask for samples and check for references.
If you’re really serious, reputable suppliers will arrange for you to inspect the factory and see other products coming off the assembly line.
2. Get suppliers to come to you
Alibaba is a two-way street. While you enter queries into the search box and scroll through tens or hundreds of listings, there are suppliers who are much more pro-active in seeking business.
They do this through AliSource – and will come straight to you. Within the AliSource pages, you, the buyer, carefully describe the item you you are looking for, as well as the volume you wish to purchase and include extra details such as colours, branding and packaging.
Within 24 hours you will have a bunch of quotes from companies looking to fulfill your order. After that, it’s time to undertake the due diligence described in Section 1.
3. Avoid brand names
It should go without saying, but if an Alibaba supplier is offering you Apple iPhones for US$100.00 per unit, then you can be absolutely assured this is a scam.
Our advice is to avoid globally-recognised brand names almost entirely. These companies have exclusive arrangements with distributors, and operate on contracts worth tens of millions of dollars.
Instead, make sure your own idea is a good one, and then grow your business with the help of a supplier making a quality product that you might have access to for years.
So, avoid the promise of a quick buck. It’ll be the supplier, not you, that makes the money.
4. Scale up
Many Alibaba suppliers mention a minimum Order Quantity (MOQ) to deter time wasters and to ensure they receive revenue that justifies the time involved in processing your order.
However, good suppliers will accommodate with small orders in the MOQ. This helps to build trust between the buyer and manufacturer, and works to strengthen the relationship between the two.
This strategy also allows you to test the product in the market and make any adjustments that might be necessary.
International transactions can be fraught. Most companies will ask for full payment prior to production, however this is highly risky and leaves you with little recourse should the deal go bad.
It is possible to pay a deposit and then develop a Letter of Credit (or 'LC') that is held by the bank until receipt of a Bill of Lading ('BL' or 'BoL'). Any international trading company will be familiar with these arrangements, so it pays to familiarise yourself with these processes (and others such as escrow) to protect your outlay.