- Marketplaces
October 5, 2020
For first-time buyers, buying from Alibaba can seem a bit intimidating.
You’ve probably heard stories of online sellers being scammed on the marketplace and left out of pocket. You may even be worrying that it’ll happen to you. Is Alibaba safe?
Here’s the truth:
Alibaba is a perfectly safe online platform to find products to sell online, providing that you know which suppliers and manufacturers to trust, and which you should avoid.
So, how do you know what to watch out for?
In this guide, we take a look at Alibaba, discuss how the Chinese B2B marketplace operates and share ten tips to help you have a safe, secure and profitable experience on the platform.
Firstly, what is Alibaba all about?
The simplest way to sum up Alibaba is to look at it like the Chinese equivalent of Amazon or eBay for B2B wholesale. But, it’s actually a little more complex than that.
Alibaba.com is a B2B marketplace, but the Alibaba Group is the parent company of nine major companies and has further operations in more than 200 countries and territories, specializing in ecommerce, retail, the internet, artificial intelligence and technology.
This is where some people can get a bit confused. But we’re going to clear that up.
Alibaba (Group) is the world’s largest retailer, one of the world’s largest internet and artificial intelligence companies and one of the biggest venture capital firms and investment corporations in the world.
Just so we’re clear, Alibaba is bigger than Amazon and eBay. In a pretty massive way.
In fact, Alibaba (Group) has been beating the sales and profits of all US retailers combined since 2015 – including all the big players, such as Amazon, eBay and Walmart.
But, when you hear online sellers discussing Alibaba, they are most likely talking about Alibaba (.com), and it is this B2B selling platform that our guide will be covering. Any talk of Alibaba from here on in will be referencing this marketplace, rather than the Alibaba Group.
Alibaba is the largest business-to-business marketplace across the whole of Asia. It connects international online sellers with manufacturers and suppliers.Many online sellers use Alibaba because it provides a lucrative way to find low cost products to sell online at a profit.
In fact, it’s not uncommon to find Amazon sellers or eBay sellers using Alibaba to source their products to then sell at a profit on the consumer-based marketplaces.
Alibaba can be an ideal starting place if you fit one or more of the following criteria:
- Are looking to bulk buy hundreds of products at once
- Want to import custom-designed products and/or packaging at a low cost
- Have quite price-sensitive products
See more: Amazon Business – an alternative B2B marketplace.
Who should you buy from on Alibaba?
Broadly speaking, there are two types of companies you’ll come across on Alibaba:
- Manufacturers
- Trading companies (i.e. typical wholesalers)
Manufacturers
A manufacturer will manufacture products in-house. When using Alibaba to promote themselves, they will be likely to list very high minimum order quantities (MOQs) as they manufacture products for each individual order.
Stock is also rarely held by manufacturers on Alibaba as those who want custom products and packaging will also want their company’s logo on the products and packaging.
As a result, minimum order quantities can be high. It simply makes no sense for a manufacturer to hold stock or run their entire factory just to make ten or twenty items.
Therefore, you will need a sizeable budget if you’re seeking custom products on Alibaba.
Trading companies
A trading company (i.e. your average wholesaler) will buy products from factories to re-sell in smaller quantities. These will always be unbranded products – if you come across brand names then steer clear as this is illegal and such items are likely to be counterfeit.
Unlike wholesalers in the United Kingdom, Chinese wholesalers are far less likely to hold stock. A large number of Alibaba suppliers will source products on demand, as the orders come in – companies carrying hundreds of unrelated products follow this route.
As a result, MOQs can be high, but it is perfectly possible to negotiate these terms with many suppliers on the marketplace. We discuss how later on in this guide.
A smaller number of Chinese trading companies on Alibaba cover niche product areas, which can be ideal for businesses on a budget as MOQs are either very low or non-existent.
Want to start selling online but don’t really have the capital? Find out how to start a dropshipping business.
12 tips for buying from Alibaba safely
When searching for products to buy on Alibaba, a good practice to get into is make sure that you’ve refined your search with three particular search functions:
- Gold Supplier
- Trade Assurance
- Assessed Supplier
A Gold Supplier is a business that has made a personal commitment to providing reliable products and services. Suppliers pay Alibaba on a monthly basis to have this status on their profile.
Trade Assurance is a free service provided by Alibaba to create more trust between buyers and suppliers. It acts as extra protection in the event of shipping or quality-related disputes.
With trade assurance, there is a set of rules that such suppliers will follow, or they will be in breach of contract. These include:
1. On-time shipment protection
If a supplier does not ship by the agreed data, Alibaba will provide you with a refund.
2. Product quality protection
Alibaba will refund you if the product quality or quantity does not meet the terms set in your contract.
3. Payment protection for your covered amount
If the supplier breaks either of the above rules, Alibaba will refund the covered amount of your payment. You can see the terms and conditions of the Trade Assurance service here.
Finally, an Assessed Supplier is a company that has paid an external third-party service to verify their business for them. It does have to be said that this is difficult to achieve.
Ticking all three of these boxes when searching for items acts as an extra layer of protection when it comes to vetting potential suppliers and can give you more confidence in your purchasing.
4. Choose Gold Suppliers who have been selling for years
When you are assessing the validity of a supplier, one of the first things to do is to look for verified Gold Suppliers. These are Alibaba users who have purchased Gold Supplier status directly from Alibaba.
Keep in mind that this isn’t a sign of external verification as the status is bought, not earned.
That said, as the cost of Gold Supplier status is pretty steep (£600) it is likely to weed out those who do mean real business on the marketplace from those who do not.
A second check you can do is to look at how long the user has held its Gold Supplier status for. If they’ve held it for several years, they’re more likely to be a reliable and trusted source.
5. Select suppliers who have completed a supplier assessment
A Supplier Assessment is an external verification on a supplier from a third-party.
If a supplier has completed this assessment, then it means that a third-party has vetted out the company and factory. You may find that suppliers with these checks will give you extra detail about their capabilities and business performance.
What’s more, these assessments are difficult for suppliers and sellers to achieve so it can be a good verification check when thinking about buying from Alibaba.
6. “Legal status checked” may not be sufficient proof by itself
If a supplier on Alibaba has had its “legal status checked” then Alibaba believes that the business exists in real life. An employee will have visited and verified the physical location of the supplier’s business address.
Although this creates an extra layer of trust, tread carefully if this is your only method of verification. After all, it is technically possible for a someone to rent a building and offices for a day or two as leases are not checked by Alibaba.
7. Take the time to understand what “Secure Payment” really means
Alibaba’s “Secure Payment” contract gives the illusion of security to many first-time buyers on the Chinese B2B marketplace. If you’ve heard of “escrow” then this is the same thing, but the name has been changed due to legal reasons.
Why is this a problem?
Within the contract, there lies many loopholes that suppliers who understand the system can – and will – use to their advantage should you experience any problems with them.
What’s more, they’re not actually doing anything illegal.
The average buyer on Alibaba simply doesn’t take the time to understand how it works. As a result, many buyers can (and do) lose out on money.
8. Ask for UK-based or US-based references
When you’re about to spend thousands of your hard-earned business capital with someone you’ve never met before, you need to do all the background checking you can possibly do.
One simple way to build trust with your chosen supplier is to ask for UK-based or US-based references. If they point blank refuse to do so and offer up little explanation as to why, it may be best to cross them off your list and move on.
Another background reference check you can do is to call your potential suppliers directly.
Establish a rapport and ask them specific questions only someone within their product niche would know the answer to (but do be mindful that English may not be their first language).
9. Consider why you want to go with this supplier
It may seem obvious, but ask yourself this:
What drew you to this particular supplier in the first place?
If it was the price being far lower than any other potential suppliers with similar offerings, then all we can say is proceed with absolute caution:a very low price is often the first sign that something may not be quite right.
If you do still decide to go ahead and buy from them on the marketplace, then make sure you are completely up to date with “Secure Payment” and do a test order first.
10. Look up the company name, email address and website of the supplier
Use a tool like “whois lookup” to complete your own external checks on potential suppliers to see if they are who they say they are. The tool will help you to find out who is the registered domain holder of a supplier’s own website.
You can also use Google to your advantage.
Type in:scam:[company name]
After doing so, you should receive a page of search results that may be able to tell you if the supplier you’re considering has scammed anyone on the internet before.Another check you can do is to search the Alibaba forums to see if any members have dealt with the suppliers you’re considering.
Lastly, it’s worth considering whether or not the email address of your potential supplier uses the supplier’s company name or if it’s a free email account service like Gmail.
If your potential supplier has bought Gold Supplier status for the last few years and is a reputable business, then it’s likely they’ll have invested in their own website and have a company email address. If they haven’t, consider why this might be the case.
Still unsure? Cross them off your list and move on to the next suitable supplier.
11. Don’t be disheartened by Minimum Order Quantities (MOQs)
If you’re a business on a tight budget, then there are ways around the (usually large) minimum order quantities available from Alibaba suppliers.
First of all, negotiation is possible.
Most suppliers are open to bartering, providing you know how to do it properly.
Start by introducing yourself and developing a relationship with the supplier. Ask all the usual questions, such as payment and shipping options, how long it takes to produce and dispatch an order (i.e. order lead time) and sample availability.
The key here is to not enter a negotiation just yet.
Instead, order a sample product first.
You may have to cover the cost of shipping, but the sample is likely to be free. And yes, you may have to wait an extra few weeks to receive the item before being able to place a real order, but it’s a far better position to be in than being left out of pocket, right?
If it’s an expensive product and you’re required to pay for a sample, don’t be put off.
Suppliers do this to ward off retail customers looking to buy a single unit. If the cost is higher than the wholesale price, they may refund the difference on your first real order.
Happy with the sample? Great. Contact the supplier again and tell them you’re interested in buying from them in bulk, but as your first order you would like to order a smaller quantity.
Remember to be reasonable here.
You are unlikely to get a supplier with a MOQ of 1,000 units all the way down to 100, but they are more likely to agree to a minimum order of 500 units or above.
Test the waters and play it by ear for each individual supplier you’re interested in.
12. Consider using PayPal when paying for orders
You may find that using PayPal adds an extra layer of security around your order.
Keep in mind that to do this, you will need to place your order offline and directly with the supplier. Alibaba does not facilitate the use of PayPal with online orders and in doing so, you will not be covered by any of Alibaba’s warranty.
Instead, you’ll be covered by PayPal’s Purchase Protection Program.
If the products that you receive are not as described, then remember to return the parcel back to China with a tracking number to minimize any potential disputes with the supplier.
Top tip: Check how much tracking your parcel back to China is likely to cost you before buying on Alibaba so that you’ve covered all bases for when you do make your first order.
Buy safely and sell profitably
When it comes to buying on Alibaba, it is perfectly possible to do so safely and securely.
Yes, there are some undesirables that lurk on marketplace, but the same can be said for any online selling platform. Alibaba provides a cost-effective way to find products to sell online.
You just need to use your head and only do business with suppliers that you can trust.
Want to sell the products you buy on Alibaba all over the world? Check out our complete list of online marketplaces and find out the best places to sell your items.
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