Buying from Alibaba is the go-to option for most businesses looking to source products from China in 2019. No online business can truly reach its full potential without the right supplier.
Knowing how to find the perfect supplier for your business can determine whether you succeed or fail on Amazon FBA. In this post, we’ll cover every step you need to understand in order to effectively source your products from Alibaba.
This article covers:
- What is Alibaba?
- How to Navigate Alibaba
- How to Open an Alibaba Account
- Key Information on Product Pages
- Advantages and Disadvantages of Alibaba
- Trading Companies Vs. Manufacturers
- How to Buy From Alibaba
- Common Alibaba Vocabulary
What is Alibaba?
China is infamous for being the manufacturing hub, for not only the U.S. but the rest of the world. Alibaba - by extension, has become the portal that connects these manufacturers with buyers from around the world.
Alibaba is an online marketplace similar to how Amazon works. While Amazon brings customers and products together on their platform, Alibaba connects manufacturers and trading companies to businesses and sellers looking to source products.
The major reason for buying products from Alibaba is attractive to Amazon sellers, is primarily due to the price point of products in China.
Manufacturing costs are low in China, relative to the USA. This means you can increase your profit margins and grow your business faster by buying your Amazon products from Alibaba.
Amazon sellers looking to source products from Alibaba, can go on Alibaba and buy products at wholesale prices and even create their own private label brands to bring to market.
Let’s look at how Alibaba works.
How To Navigate Alibaba
If this is your first encounter with or buying from Alibaba, it could understandably seem overwhelming at first. Let’s take a look at how to navigate the important sections of this website.
The first important section of Alibaba to familiarize yourself with is the “My Alibaba” menu. This is where you can sign-up or sign-in to your account, check your messages and manage your orders among other things.
The Alibaba search bar is where you can search by-products or suppliers to find exactly what you are looking for. New this year, you can also search Alibaba’s directory by uploading an image of the product you’re looking for, similar to how Google revere image search works.
Below the search bar is a section for advanced filters. You can refine your product search by supplier types, supplier country (23+ available), and minimum order quantity.
Another important section on Alibaba is the categories menu. This menu helps you refine your search based on the category or niche of the products you’re searching for. This is often useful when browsing without a specific product in mind.
Lastly, once you log into your Alibaba account, below is how your dashboard will look. This is where you can view your messages from suppliers, start new orders, and manage your new and existing transactions.
How to Open an Alibaba Account
Now that you have an idea of how to navigate Alibaba, here is how you create an Alibaba account.
Go to Alibaba and Join for FREE
Enter your email address, verify it and agree to the terms of service.
Make sure to open a new email account just for Alibaba. This will allow you to avoid clogging up your personal email with messages from suppliers from Alibaba.
Fill out your basic information including password, name, and phone number.
Once you confirm your new account via email confirmation. Your Alibaba account is now open and you’re ready to source products.
Key Information on Product Pages
When you first start your search on Alibaba, there are some critical information to pay attention to. Although this information is not always final, as you can negotiate, it provides everything you need to get a good understanding of the potential product.
Let’s take a look at an example listing for an umbrella.
- Unit Price - The first thing to examine on the product page is the per-unit cost of the product. For the above umbrella, the unit price is $1.25 - $2.63 FOB. FOB stands for Free On Board, which means that the supplier will pay for the costs of getting the product to the port.
- MOQ - Another important detail to look for is the minimum order quantity or (MOQ). This is the smallest amount of units the manufacturer is willing to accept. Keep in mind, more often than not this is always negotiable. In the above example, the MOQ for this umbrella is 500 units.
- Lead Time - Your lead time or how long it will take for your products to get from the manufacturer to you is also an important factor in sourcing. The shorter your lead time, the faster you can grow on Amazon. In this example, the lead time for 1 - 1000 units is 35 days, 1001 - 3000 is 32 days, and orders over 5000 units are negotiable.
- Payment Options - There are several commonly used methods of payment on Alibaba. In our example, the suppliers accept the following forms of payment: Visa/Mastercard, Bank Transfer (TT), Online Bank Payments, and Western Union.
Advantages & Disadvantages
Buying from Alibaba, like all things, has advantages and disadvantages. Let’s examine some of them.
- Quantity of suppliers - Alibaba has hundreds of suppliers you can choose from to source your products.
- Cost - Factories in China, due to low manufacturing cost, are the cheapest option for sourcing products.
- MOQs - Ordering from China allows you to negotiate and order smaller quantities of products. This could be advantageous for sellers just starting on Amazon.
- Control - You have a lot of control over your product when sourcing from Alibaba, from packaging to shipping and quality monitor.
- Communication - Due to the cultural and language barrier, communication with suppliers can often be difficult.
- Shipping time - Shipping from China to Amazon can be long or expensive. Sea freight can take up to 4 weeks but is the cheapest option. Airfreight can take about 5 days but it is more expensive.
- Quality - Because labor and manufacturing costs are lower in places like China, consumers often associate products from there with being of lower quality.
Trading Companies Vs Manufacturers
Understanding the difference between manufacturers, distributors, and trading companies on Alibaba can make or break your Amazon sourcing experience.
On every Alibaba product page, there is a tab for “Product Details” and “Company Profile”. You can simply click the “Company Profile” tab and identify the type of business you’re dealing with.
Manufacturers On Alibaba
Manufacturers on Alibaba are the actual factories that make the products. When sourcing from Alibaba, buying directly from manufacturers is the best way to ensure you have direct control over your products.
Working with a manufacturer will also ensure you retain the most profit on your products by cutting out all the middlemen.
Trading Companies On Alibaba
Trading Companies on Alibaba buy from manufacturers and resell products to business. They don’t produce any of the products they sell, they are just middlemen.
They typically buy a variety of products from factories and resell them wholesale to businesses similar to distributors. Since they also need to make a profit to stay in business, their prices are always higher than the manufacturers.
Although trading companies can have some advantages if utilized correctly, you are generally always better off dealing directly with manufacturers.
Manufacturer / Trading Company
A lot of companies on Alibaba are both a manufacturer and a trading company. In China, anyone looking to ship products to the U.S. or any other country must have an export license. Factories without an export license would need to work with trading companies that have them, in order to export products.
Manufacturer/Trading Company simply means the company manufacturers the given product and can also export it themselves. This structure is a good fit for Amazon sellers looking to work directly with manufacturers without the middlemen.
Here are some advantages and disadvantages of manufacturers and trading companies on Alibaba.
Before you get to the point of finding your supplier, it is critical for you to understand the difference between a trading company and a manufacturer or factory. There are scenarios where using a trading company versus a factory might make more sense, but in large part, you will want to go directly to the manufacturer to source your products.
How to buy from Alibaba
When buying from Alibaba you must diligently research the suppliers and their capacity, the price point of the products, and most importantly the quality of the products. Alibaba is notorious for scams and it’s your job to take every precaution before ordering anything.
Here is what to look for:
- Suppliers with 5 years or more of experience selling.
- Verified suppliers with Trade Assurance
- Past history exporting to the U.S.
You can also look at the company response time, response rate, and reviews to get an idea of their capacity.
After your done researching, it’s time to contact potential suppliers. You should aim to have a list of around 5 suppliers to get price quotes from.
Keep in mind there is usually always variance in the price quotes among factories. It’s up to you to filter suppliers and make sure they meet your requirements.
For detailed videos and templates on how to safely find suppliers on Alibaba, check out the sourcing section of The Last Amazon Course. It covers every step in the Amazon FBA sourcing process in depth.
Once you find the right supplier next, you need to order a sample of your product before moving any further. Always order samples before investing in a product! Ordering samples from your potential suppliers will help you narrow down the best option among them.
Never just take the supplier's words, product photos on Alibaba are irrelevant when deciding the ultimate quality of your products. Do your due diligence!
Hack: You can filter your Alibaba product searches by “Free Samples” to find suppliers that will send you samples free of charge. Keep in mind, you will still need to cover the shipping cost in most cases.
Place Your Order
The next step is to place your order. Your payment method will depend on the terms agreed upon with your supplier. An ideal situation would be to pay 30% of the total cost upfront and the final 70% after production and inspection of your products.
Shipping & Logistics
The last step of this process is getting your products shipped from the supplier to Amazon’s fulfillment center.
This process can be intimidating because of the rules and regulations that come with importing products into the United States.
Evaluating Alibaba Suppliers
Once you start getting replies from Alibaba suppliers, here are a few questions to keep in mind to help you pick the best suppliers.
- Which suppliers are the quickest to respond, and which never reply?
- Who are the most detail-oriented, and which are the most sloppy?
- Which suppliers are the cheapest, and which are the most expensive?
- Who provides you the best value without compromising quality?
- Which supplier accepts payment terms that are ideal for your situation?
Supplier are essentially your business partners. Their work on your products can dictate the success of your business. Therefore, It’s important to build a relationship with your supplier with the long term view in mind.
Key Alibaba Vocabulary
In order to successfully use Alibaba, you need to become familiar with the following terms.
- Trade Assurance: Trade assurance is Alibaba’s mechanism for protecting buyers on their platform. If you have a dispute with your supplier, you can submit a claim to Alibaba for a refund.
- Gold Supplier: Companies with “Gold Supplier” badges pay Alibaba to appear more favorably in the search result. This a positive sign, because these suppliers are investing in promoting their company.
- Verified Supplier: Alibaba uses a third-party inspection company to visit factories and qualify them for the “Verified Supplier” badge.
Sourcing your Amazon products successfully is one of the most important steps on your journey as a successful Amazon seller.
Buying from Alibaba might seem intimidating to anyone just starting their Amazon FBA journey. However, with the right information and safeguards, sourcing from Alibaba can be a rewarding experience for your business.
As with any entrepreneurial endeavor, there is always risk involved. Buying from Alibaba has its own advantages and disadvantages. Amazon sellers can take steps outlined in this post to help minimize the risk associated with sourcing their products from Alibaba.