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In starting an online company, two things are required: a product concept and a supply source. In this guide, we talk about starting Alibaba dropshipping business, sourcing, and using the Alibaba supplier directory.
If you’ve already identified a popular product and developed a business plan, the next move is to identify the ideal supplier.
It has never been easier locating a manufacturing or wholesaling partner on the other side of the world in our global village.
However, for new online entrepreneurs, sourcing products from other countries can appear a tough ask.
We’ll look at how to use the popular business directory Alibaba to effectively and safely source suppliers for your product idea.
We’ll discuss the advantages and disadvantages of sourcing from overseas and demonstrate how to navigate this unfamiliar territory so you can find the ideal supplier for your product idea and begin selling online.
Before purchasing from Alibaba, be sure to familiarize yourself with the most current info and security measures in place to safeguard your purchase.
If you’ve decided and are committed to sourcing your supplier from overseas, the likelihood is that you’ll be purchasing through Alibaba or AliExpress dropshipping.
Alibaba is the world’s largest eCommerce company by revenue, forecast to generate $78.6 billion in 2020. Additionally, it is the most comprehensive directory connecting suppliers-primarily from Asia with buyers from around the world.
Alibaba owns three Chinese marketplaces— Tmall, Taobao, and Alibaba.com—which collectively have hundreds of millions of users and host hundreds of millions of retailers and products. There isn’t anything in its directory that you won’t find, which helped it become one of the most popular online shopping destinations.
Alibaba and AliExpress, what’s the difference?
Both Alibaba and AliExpress are online marketplaces based in China and comprised of third-party sellers. Between Alibaba and AliExpress, there is a significant distinction:
Alibaba, a marketplace for business-to-business transactions. It’s a marketplace for businesses looking to buy in bulk from wholesalers at the best possible price.
Additionally, purchasing private label products directly from the manufacturer is a better option. Custom designs or logos are simple to obtain because they are added during the manufacturing process.
Whereas AliExpress offers access to consumers. AliExpress allows anyone to drop ship products at retail prices with no minimum order requirement.
Because pre-made products are typically more expensive, they provide limited customization options. Additionally, sellers on AliExpress frequently offer ePacket shipping, which can expedite delivering high-quality products to customers.
It’ll assist you in automating your dropshipping service, allowing you to save time and therefore promote more and thus, increase profit margins.
Is Alibaba a secure platform?
Alibaba has grown into one of the world’s largest marketplaces since its inception in 1999. Alibaba, like many other eCommerce marketplaces, has a large number of reputable and trustworthy merchants. Additionally, the company offers Trade Assurance, a supplier verification program, to safeguard payments via the Alibaba.com payment platform.
Trade Assurance has the following advantages:
Superior support: If you are dissatisfied with the product’s quality after working with Trade Assurance suppliers, refunds are available.
Security of payment: Maintain track of and reconcile funds with suppliers, ensuring they receive your payment on time.
Convenience: Payments are made in a manner that is convenient for the customer. Alibaba accepts various payment methods, including credit cards, PayPal, and financing for qualified United States buyers.
Trade Assurance safeguards you against being duped from Alibaba or receiving substandard products. Although some back and forth between the seller and Alibaba could occur during the mediation phase, you will be shielded from dishonest suppliers.
It is not to imply that doing Business with dropshipping suppliers who are not members of the Trade Assurance program is negative. It simply indicates that additional research will be necessary.
Consider the following measures to safeguard your funds while sourcing from Alibaba:
1. Supplier verification. Alibaba has implemented its verification software, which entails several stages of verification. The chart below summarizes Alibaba’s three levels of verification. If applicable, these verification badges will appear on product listings and supplier profiles. An excellent place to start is by looking for these verifications.
Apart from Alibaba’s verifications, there are independent third-party services in Asia that visit factories for you to verify the supplier and product quality. Depending on the size of your order, an additional few hundred dollars for peace of mind can be well worth it.
2. Make follow-up with questions. When you narrow down your supplier list, you want to ask several questions about their company and products. Inquire about obtaining a copy of the Business’s license. Inquire about a phone number—and then dial it. Invite your contact to a Skype meeting. Inquire about factory tours and product samples.
You are free to request whatever makes doing Business with someone halfway around the world more comfortable. It would not be unreasonable to ask that your factory contact take a photo of themselves on the factory floor holding the current day’s newspaper and one of their products.
3. Obtain samples. It should go without saying that before investing a significant sum of money in inventory, you should obtain samples to test and verify quality. You are also welcome to contact them using a different (fictitious) name and email address to get an additional sample for comparison.
4. Resolve to leave should the situation demand. Finally, anything that appears too good to be true almost always is. Be suspicious of pricing or commitments that do not appear to be reasonable or differ significantly from those made by other suppliers you have contacted. Always be prepared to walk away from a transaction if something feels off.
If you’re on Alibaba in search of new suppliers, download WeChat. You can then communicate with prospective suppliers in real-time and better understand how the working relationship will work for your shopping store.
Start Alibaba Dropshipping Business advantages and disadvantages
The primary reason many entrepreneurs look to Asia, and especially to China, for product suppliers is to benefit from low manufacturing costs.
Manufacturing costs in Asia can be considerably lower than those in North America and other developed countries. Thus, without overseas manufacturing, it would not be easy to start a dropshipping company.
Although lower product costs are desirable, they are not the only reason Asia is an attractive location for sourcing; there are several additional advantages:
- Suppliers are (on the whole) much more receptive to dealing with smaller companies and supplying smaller quantities.
- Alibaba, for example, has simplified the process of navigating and purchasing from suppliers.
- Asia may be the sole source of production for a large number of products.
- Select from an extensive range of suppliers
- Costs of production reduced
Along with the benefits of buying from international vendors, there are several drawbacks that store owners should be aware of as well. Several major disadvantages include the following:
- It can be challenging to overcome language and communication barriers.
- Verifying the producer and visiting on-site is burdensome/expensive.
- Generally, production and labor requirements are less stringent.
- Payment protection and recourse are significantly reduced.
- Intellectual property rights are almost non-existent.
- Business practices vary according to culture.
- Import of products and clearance of customs
- Customer perceptions of poorer quality
- Shipping times are extended
Hacks for Alibaba buy
The following are some dropshipping tips and recommendations for sourcing products from Alibaba safely.
Commence your search
Purchasing on Alibaba and navigating the directory is relatively simple and similar to other marketplaces such as eBay. Browse through the product categories or search for a specific item.
There are two often used methods for conducting searches on Alibaba. You can also search for products based on their descriptions, such as “dog collars,” which returns thousands of results. Alternatively, you can pick suppliers rather than products from the drop-down menu and check for producers that specialize in a specific type of item.
When perusing product pages, consider the following.
When you first begin your search on Alibaba for a supplier, there are a few things you should look at and pay attention to on the product listing page. Consider the following example of a product description and listing on Alibaba for a dog collar.
The price is likely to be one of the first things you’ll consider. A FOB price of $2– $3 is indicated in this listing. FOB stands for “free on board,” which means that the seller will cover all costs associated with transporting the product to the marine port-the cheapest method of shipping products from Asia. In contrast, the buyer will cover the cost of transporting the products across the ocean to their final destination.
Quantity required for order (MOQ)
Following that, you’ll probably want to check the minimum order quantity. A manufacturer’s minimum order quantity (MOQ) is the smallest order they will accept. It is critical to keep in mind, however, that this is almost always negotiable.
Minimum order of 400 units is required in our example.
Multiplying that by the higher-end price of say $3 per unit quickly reveals that a minimum order of approximately $1,200 + shipping is required from this particular supplier for this particular product. This is valuable information to have later in the negotiation process, as it provides a good starting point.
Modes of payment
After you’ve figured out the price and the minimum order quantity, you’re probably curious about how to pay the supplier. There are several popular payment methods, and each has some advantages and disadvantages for both buyer and seller.
Consider the following most common modes of payment and the risk level associated with them for you, the buyer:
UPFRONT TT (BANK TRANSFER)
The supplier will receive full payment before the start of production when the payment is made via bank transfer. This payment method carries a high risk for the buyer and is generally not recommended when dealing with an unknown supplier. If something goes wrong, there is little, if any, recourse for a refund.
LETTER of CREDIT
While a letter of credit is relatively safe for both parties, it does involve some complicated procedures and is generally recommended for larger purchases-$20,000 or more.
Western Union is a risky payment method for the buyer and is not recommended when paying suppliers without escrow protection. Western Union should be used sparingly unless you are dealing with someone you are extremely familiar with. If anything goes wrong, there is no recourse.
PayPal is a popular payment method for buyers because it entails significantly less risk, is simple to use, and generally provides adequate buyer protection. While this is a popular option with buyers, it is less popular with suppliers due to difficulties withdrawing funds, high tax rates, and the possibility of chargebacks from dishonest buyers.
When a buyer uses an escrow service, the buyer’s money is held by a third party. It is only released to the supplier after the buyer confirms that their order was delivered satisfactorily. Escrow is a relatively secure payment method for online purchases and sales because it protects both buyers and sellers.
Generally, when you’re just getting started, you’ll want to seek out or negotiate with suppliers who accept PayPal or some other type of escrow service to ensure the highest level of protection.
Making contact with suppliers
Now that you’ve gained a better understanding of how to defend yourself while doing Business on the other side of the globe, it’s time to reach some suppliers.
When communicating with suppliers located overseas, email or WeChat would undoubtedly be your primary mode of communication.
In certain instances, suppliers can translate your email and answer back to you using software like Google Translate. Bear in mind that machine translation is still a work in progress, and as such, certain errors and potential misunderstandings are to be anticipated.
To ensure maximum clarity in correspondence, keep your emails brief, concise, well-formatted, and free of spelling errors. This not only benefits the producer but also results in more useful responses.
Tip: When posing questions to suppliers and editing your emails, it’s best to number them so they can quickly respond to each one. This maintains the integrity and organization of the questions and correspondence.
Getting a quote
Requesting a quote (commonly abbreviated as an RFQ or request for a quote) is a fairly straightforward operation. Taking a few additional minutes to prepare your correspondence, on the other hand, will make a massive difference in the quantity and quality of responses you receive.
Here are a few critical points to remember while writing your email:
Quantities needed for minimum orders (MOQs). Even if a listing specifies the supplier’s minimum order quantity, you can verify the information with the supplier.
If the MOQs are significantly higher than what you believe you can afford, you’ll want to inquire about the possibility of negotiating the minimums.
Ascertain that you communicate your financial situation to them. Bear in mind that for most foreign suppliers, the minimum order quantity is negotiable.
Sample pricing. Samples are critical for determining the consistency of the product. You’ll want to inquire about the cost of samples immediately.
Certain suppliers who receive a high volume of sample requests may adjust their full retail price to accommodate them, while others may sell samples at a reduced rate or even for free if they believe you are a serious buyer.
Cost of manufacturing. The price of your products per unit is a critical factor to consider. Suppliers on Alibaba may offer a range of $2– $3 per unit, for example, but you’ll want to know the exact price per unit.
Production time. Time required for production Knowing how long it will take to deliver your order is crucial since time can be critical in some industries.
Payment T & C. Numerous manufacturers would demand that new businesses pay for the whole order in advance. It’s critical to understand, as inventory costs are a significant part of the cost of doing Business for eCommerce startups. Additionally, you may want to inquire about potential order payment terms.
Consider the following email template as a guideline when contacting overseas suppliers via Alibaba:
My name is Samwel, and I currently work for (name) Business.
I’m interested in purchasing Widget A, but I have a few questions first:
1. How much do you charge for a minimum order quantity?
2. How much does each unit cost, and at what volume levels do you give volume discounts?
3. How do you handle new customers’ payments?
Additionally, I’d like to order a sample of Widget A before putting an order in bulk. Kindly give me the sample rate, including shipping, to:
Spadina Ave., 4th Floor80
Toronto, J4V 7K4
From the above email template, you can see, the sample above is brief and concise, intending to establish a high degree of fit between the parties.
Making a deal
After you’ve initiated contact with many suppliers and gained a firm understanding of their costs, minimum order quantities, and payment terms, you can begin negotiating with them. As previously mentioned, minimum order quantities are almost always negotiable; all it takes is a simple request. Bear in mind that successful negotiation results in mutual satisfaction, so press a little but not too much.
Evaluate your options
Once you’ve reduced your search to a few suppliers, you’ll want to consider all your options. Bear in mind that you’ll want to consider more than price, minimum order quantity, and payment terms when making this determination. Consider the quality and speed at which each supplier responded to your inquiry. Communication with your supplier can be crucial to the future success of your company, so you’ll want to get off to a good start.
Become a dropshipper on Alibaba.
Locating a reputable supplier for your Dropshipping niche on Alibaba may be a novel experience, but it can also prove a very rewarding venture. With some good judgment and precautions, it can be a healthy and efficient business model for your online shop. Always conduct due diligence and be prepared, and walk away if a contract seems too good to be true. You can also find a hundred additional suppliers in a matter of clicks.
Alibaba Dropshipping FAQs
Alibaba vs. AliExpress: which is better for dropshipping?
Which marketplace is best for dropshipping depends on the products you want to sell. Alibaba is a better choice if you are looking for wholesale or customized white-label products. If you’re going to dropship ready-made products with no minimum order requirement, AliExpress dropshipping might be a better option for you.
Is dropshipping possible on Alibaba?
Alibaba assists you in sourcing products from suppliers but does not facilitate order fulfillment. You can strike a deal directly with a supplier you find in the marketplace, or you can employ an order fulfillment service based in China or Hong Kong to dropship products from Alibaba.
Is it possible to be scammed on Alibaba?
Similar to other marketplaces, including eBay and Amazon, there is a risk that a supplier on Alibaba will dupe you. To stop being scammed by Alibaba, you’ll want to exercise caution while vetting suppliers.
Is Alibaba open to all customers?
Yes, Alibaba accepts orders from individuals and businesses alike. Alibaba enables you to purchase large quantities of products directly from Chinese manufacturers.
Why is Alibaba shipping costly?
Due to the distance between the United States and China, shipping from Alibaba is exceptionally costly. Since each supplier has its shipping costs and distribution schedules, you can potentially save money by negotiating with a prospective supplier.
Final thought on Start Alibaba Dropshipping Business
Alibaba is the world’s largest eCommerce company by sales, with $78.6 billion generated in 2020. It is the most extensive directory, linking suppliers, mainly from Asia, with buyers worldwide.
Buying products directly from the manufacturer is preferable to purchasing products directly from AliExpress. AliExpress allows everyone to dropship items at retail prices with no minimum order quantity.
Finding a reliable supplier for your Dropshipping niche on Alibaba can be a novel experience, but it can also be a very profitable venture.
It can prove a safe and profitable business model for your online stores if you use basic logic and precautions.
Always do due diligence and be willing to walk away if a deal seems to be too good to be true.
In a matter of clicks, you may also find a dozen more suppliers.
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