7 Step Guide to Source Profitably from Alibaba.com
While most sellers are wary of doing business overseas, sourcing products abroad has become easier thanks to technology. It is well-known that buying from Alibaba is usually the best choice (it’s bigger than Amazon and eBay combined).
Browntape tells you how to source products from suppliers on Alibaba.com and the main points to remember are:
- Identify the best Suppliers
Always opt for suppliers (and not middlemen), as they give you the best pricing.
- Request for samples
Before placing a bulk order, insist on a sample of the product first- you will be charged for shipping, but you will be safer!
Also, make it a point to speak/interact with the supplier before placing the first order.
- Getting to know the supplier is important to build a long term relationship
- Calling the supplier is the best choice – you should prefer video calls
- A Genuine supplier will provide any information that you ask of him
- Ask for a factory tour via video call
- Search for his warehouse location on Google Maps, ask if he has a warehouse in India (reduce customs hassle and avoid unnecessary taxes)
- Send short and simple queries for ease of comprehension
- Be Careful & Cautious
- Be sure to check whether the supplier’s name and his company name match
- Ensure the email ID is of his own domain. Others will use the free services such as Gmail
- Avoid suppliers who force/insist on early payment as they could be fake
- A genuine supplier who does bulk orders regularly rarely insist for early payment
- Don’t trust extremely low prices
- Before buying, ensure the product works properly
- Check how old the supplier is, how the transactions take place, what are the supplier’s reviews and response rates, etc.
- Inquire about Customs Clearance & Import Duties
- The buyer covers customs & import duties, and the supplier usually won’t be responsible for clearance
- Samples don’t incur import duties as they are not for resale.
- DHL, UPS, etc. will charge customs
- Re-selling products from China legally will require customs clearance, and bulk orders attract customs scrutiny (documents & payments)
- An IEC code will be needed and is fairly cheap to acquire. Else you can agents who import under their code for a fee
- While finalizing a deal
- MOQ (Minimum Order Quantity): Double check MOQ with the supplier, and negotiate as required
- Product pricing: Never accept the first proposed offer as everything is negotiable with suppliers from China. When negotiating, prefer a price that is agreeable to both parties, as the supplier may lose interest in the deal
- Production time: Agree on a timeline to produce and deliver products. Small courier companies will take a month, whereas FedEx/DHL might deliver within 15 days
- Selecting a product to buy from Alibaba
- Search the product on any Indian marketplace, check the following:
- Product Reviews
- Offers: select the best offer you can find
- Search the same type of product on Alibaba.com. Keep the following in mind:
- Selecting a Supplier: Ignore those with transaction level less than 1. Genuine suppliers have transaction levels of 2 or 3 diamonds
- Suppliers with high response rates (80%+) are better
- Alibaba provides trade assurance to suppliers who pay their fees annually (Gold Suppliers). Check how long these supplier has been doing business as well
- Payment Options
- PayPal: Popular and widely used, Free, fast & flexible, good buyer protection. Less popular in China. Buyer pay transaction fees.
- Escrow: free for buyers, flexible options, formerly “Alibaba Escrow”, fairly safe mode of payment. Few qualified suppliers, full payment required, additional buyer fees.
- Telegraphic Transfer (TT): International trade’s oldest payment method, fixed transfer fee. Transfer takes 4-7 days to be completed. Difficult to get money back.
- Letter of Credit (LC): most formal & complex, only for larger purchases. Complex paperwork, exorbitant bank charges.
- Western Union: Use only if you know supplier well, no recourse,
- Selecting a Price to Re-Sell
- Check the cost price (as displayed on Alibaba)
- Add shipping charges & import duty applied.
- Selling charges: commission, shipping, tax, packaging, etc.
For any further questions, please feel free to click here and ask us!
