Alibaba Website: Why Is It Profitable for an Amazon Seller to Buy Goods Here?
Alibaba is a Chinese wholesale directory of selling firms and factories. In this platform, nearly all suppliers will enable you to put your own brand on your item that they call “private labeling.” You see, many suppliers on this platform are factories and manufacturers. Therefore, they typically oblige you to buy a minimum order quantity with each order you have to purchase in bulk.
Some advantages include:
- Ideal for business owners who are experienced and wish to sell their own goods, have the lowest prices, and wish to have a competitive gain.
- Lowest wholesale price per item.
- Make your own custom goods from scratch.
- Higher selection of items to choose from in a wider array of niches.
Is It Safe to Use Alibaba Site to Buy a Batch of Goods?
Similar to most things in life, you will run some issues when sourcing from Alibaba. One of them is that you will encounter some quality control problems.
Among other shortcomings, you may encounter such problems:
- Language barrier - not all suppliers are well aware and understand the English language, so explaining to them the specification and characteristics of the product you want to receive can be quite difficult.
- Almost complete lack of protection of property rights - if you are going to create your product from scratch, your supplier will be aware of all the details in the process of its development and can use your ideas for his own purposes.
- Long delivery of goods - if you want to save money, you will choose to deliver your goods by sea, and it will take at least 30-35 days (sometimes longer).
- Customs clearance of goods - difficulties can also arise on this tap, which will entail losses in money for storing goods in the port. However, it’s very difficult to calculate how much you lose due to the lack of goods in the Amazon warehouse. Besides, the use of additional customs duties in the amount of 15-25% makes the import of goods from China (and hence their purchase on Alibaba) almost unprofitable for most sellers.
Make sure you follow the rules and best practices we will mention in this guide to prevent it.
How to Get Started With the Site?
Visit alibaba.com and join for free. Enter your email address and confirm it. Don’t forget to agree with their terms of service. Fill out your information, including your phone number, name, and password. Once you confirm check your email for verification, and that’s it. Now you can search for a supplier on Alibaba.
You can also personalize your profile by answering a few questions. This will simplify the search for suppliers, as the results, it will be more relevant to your criteria. You can do this immediately after registration or at any other time.
How to Navigate Alibaba?
To navigate the platform, you will find different menus that are available for you. This includes the Advanced Filters, Dashboard, and Search Methods that are categorized by Supplier and by Product.
Let's look at the most important areas with which you will need to work most often.
1. Personal account. Notifications about your orders, messages received, selected products and suppliers, and much more are displayed here.
2. Search for products and suppliers.
The principle of searching for products on Alibaba is the same as in any other product catalog. You have the opportunity to choose two options:
- Search by products - the results will display all goods that are similar to yours.
- Search by suppliers - manufacturers specializing in the production of the goods you are looking for will appear in the search results.
- Search by image - use the product photo to find similar options on Alibaba; upload an image by clicking on the Camera icon on the right in the search bar.
We show the search results for all three ways for the keyword Kitchen Knife further.
Alibaba Search by Products
Alibaba Search by Suppliers
Alibaba Search by Image
3. Categories and Filters.
A simple search for the product you need will lead to the fact that you will spend hours looking at the results due to too many of them. To narrow your search, use categories and filters.
From the Categories menu, select the one that best suits your product. If you do not know yet what product you want to find, then choosing a category will also help you to decide this. Here are hundreds of products, looking through which you can find the right one.
Use filters to narrow your search as much as possible: Supplier Types, Supplier Region, Min. Order and other.
- Alibaba Dashboard.
In your account, there is another important option - Dashboard. It contains all the information about your money transactions, orders, messages from suppliers, and much more. Here you can easily manage your purchases on Alibaba and control the execution of orders.
Key Information on Product Pages
On the search page for each product information is available not only about the product itself but also about its supplier:
- Price - for most products, the price range is indicated, because the larger the number of units you buy, the lower their cost.
- Minimum Order Quantity (MOQ) – This is the smallest number of units that the manufacturer is eager to accept in order.
- Supplier’s period of the transactions on Alibaba.
- Supplier statuses - Trade Assurance, Gold Supplier, etc.
- Time of response to customer questions.
- Transaction Level - sales volume made by the manufacturer on Alibaba.
- Supplier rating (according to customers).
There are different things you need to pay attention when navigating Alibaba and looking at the product page.
- Payment Options – You will find different payment options when buying in Alibaba, such as Escrow, PayPal, Western Union, Letter of Credit, and Upfront TT or Bank Transfer.
- Lead Time - the time during which your product will be shipped after the payment is made.
- On-time delivery rate - how timely the supplier delivers orders (as a percentage of the calculation for the last 180 days).
How to Evaluate the Supplier?
On every Alibaba product page, there is a tab for Product Details and Company Profile (and sometimes Transactions tab). Take note that you must read the information about the supplier carefully, which is indicated in the profile. What’s more, look at their website (if it is specified). Doing this will help you to assess their capabilities and willingness to cooperate.
- Working with a manufacturer will guarantee you receiving the most profit on your items.
- Trading companies purchase from manufacturers and resell products to businesses. In short, they are only the intermediary.
- Manufacturer/Trading Company denotes the company that manufactures the item and could export it.
Make sure you conduct some basic research first. This will help you to know if you must reach out to the supplier or not. One resource you can use is Supplier Blacklist that offers user-generated complaints about the supplier.
Alibaba Vocabulary: OEM and ODM
OEM – Original Equipment Manufacturer
This category includes manufacturers who can produce the product you need using the original (specially modified for this purpose) equipment. Here, absolutely all your wishes regarding functionality, design, the color will be taken into account. The finished product will be marked with a private label.
You have an intellectual property right, and you can quite simply make changes to the functionality and design of your product at the stage of its development and produce.
Despite the obvious benefits, you may encounter several disadvantages:
- The long time required for the production of goods.
- Payment for the creation of forms, new equipment, with which your goods will be produced.
ODM – Original Design Manufacturing
Such manufacturers already produce certain products according to their design. They have a list of products in the production of which they specialize. If you plan to sell goods that are already on the marketplace, without significant changes in functionality and design, this option may be the best for you. Manufacturers often agree to be labeled so that the product is sold under your brand name. You save time and can quickly start selling your product. You can even ask to make minimal changes to the finished product (for example, change the color or size). Most of these manufacturers will agree to this.
However, as elsewhere, there are cons:
- You do not own intellectual property rights.
- You can choose only those products that this ODM company produces.
- If you want to make design changes, this may take some time. Sometimes even more than when creating a product from scratch.
- It will be difficult for you to compete with other sellers because your product will be almost identical to other similar ones that are available on the market.
How to Negotiate Price With a Supplier on Alibaba
Consider many vendors as you could and get as many quotes as possible if you want to know how to negotiate the price with a supplier on Alibaba. Some of them will come back low while some are high. However, the majority of quotes will fall in a similar range.
If the supplier offers too low price in comparison with others, it is worth considering. Probably, the reason is the decline in the quality of the finished product (low-quality materials, the presence of multiple defects, etc.).
The Minimum Order Quantity may not always meet your needs. And there are certain difficulties in this. You can ask the suppliers to reduce the number of goods in the trial batch and explain the reasons for this. However, do not expect each of them will agree to this easily. Too small, by their standards, orders are disadvantageous, so suppliers are reluctant to reduce the MOQ.
Suppliers usually offer higher unit costs for small order quantities. Therefore, the more goods you purchase, the lower the price you can request.
At the same time, you should not expect that the supplier will make a discount of 30-40% of the initial cost. If you manage to negotiate a 10-15% reduction, that's great!
Arrange for a price in the early stages, even before you get a sample of the finished product. If you see that the price of the supplier even after the request for a reduction exceeds your target price, you should either consider another supplier or reduce the requirements for the quality and functionality of your product. This is due to the fact that when issuing niche goods, the supplier always incurs additional costs. And your price may simply not cover its costs.
After you find the ideal supplier, the next thing you must do is to ask for samples. Do it before you invest in an item. Ordering them from your prospective suppliers will guide you to find the perfect option.
Samples are vital to assess the quality. You need to ask what their pricing is for samples. Some suppliers may provide you with samples at a discounted cost if they will like your business-doing manner during the negotiation. Not to mention that are might even deliver samples free of charge if they think you are a serious buyer.
To obtain samples of the goods, it is better to use air delivery. Yes, it will cost more, but when starting a business on Amazon, this time is very important. You don't want to receive your first samples only after a month and then find out that they do not fully meet your expectations, do you?
Another important point is the quality of the samples. You must understand that the first product that the supplier sends will be the best. Therefore, really look at its quality, adjusted for the fact that other products will be slightly worse.
How to Place an Order?
When you place an order, make sure that you indicate all the most important points:
- unit cost;
- total order amount;
- delivery method.
Even if you have already discussed all the details with the best Alibaba Supplier, once again clarify the specification and characteristics of the product or provide the supplier with files with a detailed description and photo of the goods.
Secure Payment to Supplier
If you order product samples, you will most likely need to pay for the entire order at once. Use PayPal for this or make a payment through the payment system on Alibaba.
Your payment choice for subsequent orders will vary on the terms agreed along with your supplier. Ideally, you must pay thirty percent of the overall cost upfront as well as the final seventy percent upon inspection and production of the goods.
Don't forget that you must also secure the payment to your supplier. You can learn more about Alibaba Supplier Payment Methods to avoid mistakes.
The majority of suppliers will need to pay for the overall order upfront. This is crucial to understand, that inventory is a key cost for them.
Why Do I Need to Inspect the Goods Before Shipping?
By inspecting the product before shipping, the supplier will acknowledge a detailed report of the order. They could make a smart decision about whether to ship the items or perhaps hold the order for rework. Doing this leads to a stronger relationship between you and the supplier.
If you can visit the factory yourself and control the dispatch of the first consignment of goods it will be an ideal situation. However, most people who start their own business do not have such an opportunity. Therefore, it is better to hire a third-party inspector who will conduct the audit, take the necessary photos and fill out the control form. You can see the quality of the prioritized product.
Sourcing from Alibaba, a trustworthy supplier for your product might be a new experience for you. However, it is a rewarding experience in the end. It could be somewhat safe with some common safeguards and basic expertise. Make sure you perform your due diligence. Always be prepared and walk away if the deal feels too good to be true.