The Ultimate Guide to Safely Sourcing Your Product From Alibaba

The Ultimate Guide to Safely Sourcing Your Product From Alibaba

Finding A Product To Sell Online

If you plan to use Alibaba to search for a product idea to sell online, I highly suggest you read my other posts on finding and evaluating products.

How To Evaluate Your Product

Sourcing Products From Alibaba

Fraud is an inherent risk in any business transaction, when trading either online or offline. While sourcing a supplier, the best way for buyers and sellers to reduce the potential for fraud is to conduct proper due diligence before entering into any transaction.

Due diligence should not be forgotten when dealing with manufacturers and middlemen on Alibaba and other similar sites. You will also have to deal with different cultural perceptions of business and a language barrier.

When sourcing a supplier, you can do lots of things to better your chances of having a good experience, but it does take work. I have compiled the following tips from my experiences, friends’ experiences and from researching message boards. If you feel I have missed out on something, please let me know.

Things to Keep in Mind While Sourcing a Supplier…

  1. Everything is negotiable with sellers from China and India. When negotiating with a manufacturer, your goal should be to get a fair deal, not a good deal.

    Both sides should walk away saying, “That’s fair.” If you try to squeeze the manufacturer’s margins, you run the risk of starting out a partnership with one side feeling slighted. This has even been reported on the forums as one of the possible reasons for people getting scammed. The manufacturer couldn’t ship the product profitably so they disappeared.

  2. Many “manufacturers” are actually middlemen sellers. Keep in mind that you won’t always be dealing with the actual manufacturer.
  3. If one person is selling it on Alibaba, AliExpress or Indiamart, there is probably at least one other person selling the EXACT same product or very suitable substitutes. Search around and get a few prices and samples.
  4. If you ask ten manufacturers if they can make a product to your specifications, ten will say yes. The reality is maybe one of those actually can. Never take their word for it. Always ask to see examples and ask for references. If you have concerns, there are services available which enable you to can hire someone in the native country to tour the factory floor on your behalf.
  5. Most, if not all, sellers/manufacturers have a minimum order quantity (MOQ). This is negotiable, although you may have to pay more per unit for a lower MOQ. You need to decide what is more important: getting the product more cheaply or limiting your risk by reducing your inventory. The outcomes from you product testing may help you decide.

Here’s what to do:

Research - Research the product, the market selling price, the varying levels of quality for that particular product, common substitutions of materials etc. You should know everything you can about the product before making a deal.

While researching for sourcing a supplier, someone else suggested using Google Translate to convert the product name to Chinese and using the Chinese term to search e-commerce sites. My acquaintance reported that the list price in Chinese often worked out cheaper.

For example, the English price listing for a basketball kit was $30, whereas the Chinese listing was $10. Always do your research.

Be Clear in your Communication - The language barrier is very real. Sourcing a supplier on sites like Alibaba, Aliexpress, Taobao and Indiamart, you will mostly be dealing with manufacturers and middlemen from China and India. They speak little, if any English and frequently use translation programs to translate (or mis-translate) e-mails.

This can sometimes cause a frustrating game of broken telephone. Always use simple, straightforward English. Make use of bullet points and numbers as they get translated with no problems.

Introduction Email - When negotiating a supplier, keep your initial contact email concise and clear. Tell manufacturer/seller the exact product you are looking for, your expectations of quality, ask for pricing details (to be negotiated later), and request the cost of a sample unit including shipping to your address.

Here is an example of an email I might send out:

Example Alibaba Introduction Email - Sourcing a Supplier

Get Samples, Lots of em’ - Talk to many suppliers and get samples. For my first online business, I got almost a dozen samples before choosing one. Sure it cost me a few hundred dollars but this is probably one of the most important decisions you will make for your business. I would go so far as to suggest that when you lock down on a supplier that meets your quality/price expectations, contact them from an anonymous account/email and have another sample sent to you to verify consistency. For my first business, after my manufacturing run was completed and the packaging had my logo and design, I had another sample sent to ensure quality before having my whole shipment imported into the US and paying the final 50%.

Make sure you put the samples through their paces. Test them and push them to the limits to get a true sense of quality.

Be Ready to Walk Away - As with any deal or negotiation, always be willing to walk away. If the price isn’t what you believe is fair, walk away. From my experience, Alibaba manufacturers and middlemen follow-up relentlessly, it’s not unheard of to get an email from them a few days later with a better price.

Tips for Researching a Manufacturer

1. Check the manufacturers company information. Do they have valid address, telephone, website?

2. Does their e-mail address match the company name? Would you or should you trust a “manufacturer” communicating with a Hotmail or Chinese equivalent email address?

3. Do they have GOLD Member status on Alibaba? (Or equivalent on other sites)

4. Can they provide references in your country? Are they willing to hand over contact information for those references? When you do get contact details for referees, follow through and actually contact them! Make sure you ask your referees:

  • If they had any problems with the trade
  • What price they paid
  • How long have they been a customer
  • If they would recommend the manufacturer

Check the legitimacy of referrers as well. Make sure they have a valid website, contact information etc.

5. If you are buying something with licensed rights like a Disney plush toy, or Ray Ban Sunglasses, make sure the manufacturer has a license to sell those products. It’s often the case they won’t have one. I would caution against buying licensed products from manufacturers in China. Even if the product is original, but the brand already has a licensed distributor in your country, you could face import and legal challenges.

6. Although, this really isn’t an option for many people, try to visit manufacturer’s factory and tour of the factory floor. If you can’t do that, at least pretend that you are considering coming and ask if you can set up a time to come by. If they say no, it might be a red flag.

7. Invoices should be clear, written in English and specify all clauses and guarantees. Does all the information on the invoice match the previous information you know and have collected about the company?

8. Check/search the forums on Alibaba: has anyone else been scammed? Is the manufacturer’s name mentioned at all?

9. What are the payment terms? Does the manufacturer accept Escrow or PayPal? Neither of these services are perfect protection, but they are safer than Western Union wire transfers.

10. Ask for photos. Ask for photos of the factory, the products, and when your manufacturing run is over, ask for photos of your finished products before making final payment. I always get detailed photos showing my shipment before the boxes are sealed. This provides me with a little more confidence that you’re not being scammed because I can see that my logo has been printed on 10,000 units. It would be hard for the manufacturer to resell my products if they have my logo on them.

11. Use a tool like Who Is to look up the manufacturer’s website registration information. When was the website registered? By whom? What is the phone number connected to the account?

12. Call the phone number when the manufacturer gives you one. I once got a phone call at 3am from a really strange number. I answered and it was my manufacturer checking to make sure my number was correct. It was the most difficult conversation I have ever had but it scored a point for them. Skype can also be a great asset.

Conclusion

Completing all these steps and point can help you have a good business experience and avoid being scammed. Remember, there is no replacement for common sense. If something feels weird, walk away. If a deal seems too good to be true, it probably is.

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  • http://twitter.com/JasonGreenD Jason Green

    Great advice. I’ve been looking into importing from Alibaba recently, so these are great tips that I’ll follow before jumping in head first. What industry are you mostly focused on for your imports if you don’t mind me asking?

    • http://twitter.com/RichardABLS Richard

      Thanks for reading Jason.

      What type of product are you planning on importing? Or are you still trying to figure that out?

      I have imported several products. Mostly beauty products.

      • http://twitter.com/JasonGreenD Jason Green

        I’m in several niches now with affiliate marketing, and I’m considering jumping into the wholesale-via-Amazon-fulfillment thing. I’m very tempted by the vitamin/supplement industry since the markups are so high (similar to beauty supplies), but the labeling restrictions and liability issues are a concern. I’d definitely do independent lab verification if I went that route.

        Anyway, it’s great to see advice like yours so freely given. Thanks again!

        • http://twitter.com/RichardABLS Richard

          I agree. vitamin/supplements was something I looked at as well but like you, the labelling and liability also scares me.

          I also heavily considered a tea product from China and Japan but same issue.

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  • TheEarl

    The article is good, but staarts off as very sophomoric. The Chinese and some of the other up and coming Asian countries behave like Americans did back in the 1920′s when it comes to business. They always want a good deal for themselves and NOT for you! I have a friend who is a professer that goes to China to teach them business ethics of the West. Those who deal in that world know to do business like them and with an eye to deceit. It has nothing to do with race, but everything to do with surving in the business world. The many that act in this way believe it means they are smarter than you and better. This applies to many, but definitely not all businessmen in this area of the world. You’ll find deceit wherever you go. In this part of the world, please remember they have yet to develope the practice of business ethics; relying more on traditional practices. They are learning just as we are (How are grandfathers and great grandfathers behaved).

  • Telic

    Great read, but it seems like it ends too early… What happens after you choose a supplier? I’d love to read some stuff on actually shipping the items to NA.

    • http://twitter.com/RichardABLS Richard

      Hi Telic,

      I felt the article was beginning to get a little long and figured I would write a part 2. Hopefully I will be getting that done in the next month.

      Check back soon or subscribe to my blog to make sure you get that one.

      Richard

  • Christopher

    Great guide! Thanks!

  • ceree

    Hi Richard. Like Telic I am also interested in the shipping portion of process. Did you ever get around to writting a follow-up article? With all of the acronyms floating around such as EXW, FCA FAS, FOB, CFR, CIF, CPT, etc., it’s very confusing. Most Chinese manufacturers list FOB (Free on board) as the shipping method, but how much work is involved in getting the product to my door?

  • sade

    Great articles, I am looking to get make up brushes, any ideas? since you imported beauty

  • Michael Jessimy

    I know I’m extremely late to this discussion, but I have a noob question nobody can seem to aswer for me… I’m trying to setup my alibaba.com account, but then they ask for my address. I know it seems straightforward enough, BUT
    -I’m from Guyana, not the US
    - Is that the address they use to ship to? I don’t mind using my local address, but chances are I would want them to ship directly to Amazon’s warehouse. But then there are other technicalities involved, such as payment of customs, duties etc, which Amazon clearly states they aren’t responsible for…so, what’s a noob to do :-(