Dropshipping with Alibaba: How to buy products safely

To start an online business, you need two main components: a trending product and a reliable supplier. If you already have a trending product idea and a business plan , the next step is to find the perfect supplier. It is quite easy to find a manufacturing or wholesale partner online. However, finding overseas suppliers can still seem like a daunting task for aspiring online entrepreneurs.

In this article, we will take a detailed look at how to buy on Alibaba. We will also tell you about the nuances of this popular business directory that you need to know for an effective and safe search for a supplier for the subsequent sale of goods in your store . We will introduce you to the pros and cons of cooperation with foreign partners and show you how to navigate and buy on Alibaba.

Important: Before making any purchases on Alibaba, please review the latest Alibaba shopping information and precautions here .

What is Alibaba?

If you have already made a firm decision to find a supplier from abroad, then there is a high chance that you will want to know how to buy from Alibaba or how to dropship on AliExpress. According to the numbers, Alibaba is the world's largest e-commerce company, which generated $78.6 billion in revenue in 2020 . It is also the best directory that connects suppliers (mostly from Asia) with buyers from anywhere in the world.

The Alibaba Group owns three Chinese marketplaces - Taobao, Tmall and Alibaba.com . There are more than one hundred million users, as well as a multi-million choice of sellers and products. In this catalog, you will find absolutely everything, which is why it is one of the most popular places for online shopping.

How safe is it to use Alibaba?

Since its launch in 1999 , Alibaba has been one of the largest marketplaces in the world. Like many other marketplaces, most sellers on Alibaba are trustworthy and have already proven their credibility. The company also offers Trade Assurance, a program to verify and list preferred suppliers and protect your transactions through the Alibaba.com payment platform.

Key benefits of the Trade Assurance program include:

• Multiple payment options: Alibaba offers a variety of payment methods, including credit cards, PayPal, and additional financial options for regular US buyers.
• Payment security: You can track all financial transactions with suppliers and get information about when they will receive your payment.
• Excellent support. When working with suppliers through Trade Assurance, a refund is possible if you are not satisfied with the quality of the product.

Trade Assurance protects you from being scammed or receiving low quality products from Alibaba.

This doesn't mean that you can't work fruitfully with other dropshipping suppliers who don't participate in the Trade Assurance program. It just means that you'll need to spend more time independently gathering information about the supplier's reliability.

Let's look at the steps that will help you buy products on Alibaba without risk:

1. Supplier Verification: Alibaba has its own program that includes several levels of verification. Below is a diagram that Alibaba offers that briefly describes the three different levels of verification. These verification icons will appear on the product listing and the supplier's profile (if they have an account). Aiming for this verification is a good first step.

   

   Here ismore information about Alibaba Gold Membership for suppliers.

   In addition to Alibaba's internal verification, there are also independent third-party services based in Asia that can visit factories on your behalf to check the supplier and product quality. If your order is large, a few hundred dollars for extra assurance may be worth it.

2. Don't be shy about asking questions. When you start selecting suppliers, be sure to ask as many questions as possible about the legality of their business and the quality of their products. Ask for a copy of their business license, ask for a phone number and call them. Have a Skype meeting with your future supplier. Ask for photos of the factory and product samples.

   Don't be afraid to ask questions that will make you feel more comfortable doing business with someone who is overseas. Even asking to take a photo in the factory holding today's newspaper and one of the product samples won't seem weird.

3. Ask for a sample of the product. It goes without saying that before you invest a significant amount of money, you should get samples to check and confirm the quality. You can even contact the supplier through an additional account or another email to get another sample. This way, you can compare them and not worry about the quality of the goods.

4. Don't get caught up in shady deals. If something looks too good to be true, it usually is. Be wary of prices or promises that don't seem right or are too different from other vendors you've dealt with. Always be prepared to walk away from a deal if you're not happy with it.

If you are looking for new suppliers on Alibaba, be sure to install WeChat on your smartphone. This will allow you to communicate with potential suppliers in real time. This will help you get to know them better and understand whether they are a good fit for your business.

How does Alibaba work?

Alibaba is a platform for those who want to buy large quantities of products from wholesalers at low prices. It is also a great option for private label products, as you are buying directly from the manufacturer. You can easily get a product with a custom design or logo that will be applied to the product during the manufacturing process.

What is the difference between Alibaba and AliExpress?

Alibaba and AliExpress are Chinese online marketplaces where third-party sellers list their offers. The main differences between Alibaba and AliExpress are as follows:

• Alibaba primarily focuses on business-to-business transactions.
• AliExpress is open to both retail and wholesale buyers.

While Alibaba is aimed at businesses that make bulk orders, AliExpress can be used in a dropshipping business model by anyone with no minimum order requirements.

Also, on Alibaba you buy the product directly from the manufacturer and can ask the manufacturer to put your custom design or logo on the product. Products from AliExpress are already made, so the ability to make additions is limited, and the products are also more expensive.

AliExpress sellers often offer ePacket shipping, which helps your e-commerce store get products to customers faster. Unfortunately, Alibaba has much longer shipping times.

If you are an e-commerce business and want to quickly get products from AliExpress without having to work with wholesalers, connect your Shopify store to DSers . This will help automate your dropshipping. This way, you will have more free time to market your products.

Pros and Cons of Dropshipping on Alibaba

The most common reason why many businessmen look to Asia, particularly China, for product suppliers is to take advantage of the low cost of products. Manufacturing costs in Asia can be significantly lower than in North America or other parts of the world. So much so that the only downside to easily starting a dropshipping business is that manufacturing is overseas.

Lower production costs are great, but that's not the only reason Asia is an attractive place to source from - there are some additional benefits, too:

• Lower production costs.
• Suppliers are more open to cooperation with small businesses and agree to supply small volumes of products.
• A huge number of suppliers, which allows you to choose the one that suits you.
• Sometimes Asia may be the only place where a certain product is produced.
• One-stop services like Alibaba have made it easier to find suppliers and purchase products.

While there are advantages to purchasing from overseas suppliers, there are also a number of disadvantages that store owners should be equally aware of. The biggest disadvantages include:

• Lower quality than stated.
• Low production and product standards.
• There is no intellectual property protection.
• The language barrier makes communication difficult.
• It is difficult or expensive to check the manufacturer and visit him on site.
• Longer delivery time.
• Cultural differences in business practices.
• Import of products and customs clearance.
• Lower level of payment security and legal protection.

Additional information on the topic: "The Complete Guide to Dropshipping".

Tips for Success on Alibaba

Here are some dropshipping tips and advice on how to buy products safely on Alibaba.

Search for products

Buying products on Alibaba and using the catalog is easy, similar to other marketplaces such as eBay . Browse product categories or search for the specific product you need.

There are two main approaches to searching for products on Alibaba. You can search for products by product description, such as "dog collars," which will return thousands of results. Alternatively, you can select "Suppliers" instead of "Products" from the drop-down menu and search for manufacturers who specialize in a specific type of product.

What to look for on a product page?

When you start looking for a supplier on Alibaba, there are a few things you should keep in mind. Pay attention to the product page. Let's look at an example product page and a list of dog collars we found on Alibaba.

Unit price

Price is one of the first things you'll notice when buying from Alibaba. In this listing, we see a FOB price of $2-3. FOB stands for "free on board international shipping vessel." This means that the seller pays all the costs associated with shipping the goods to the seaport (the cheapest way to ship goods from Asia), and the buyer pays the cost of actually transporting the goods across the ocean to their final destination.

Minimum order quantity (MOQ)

Next, you need to look at the minimum order quantity. This is the smallest order the manufacturer is willing to accept. However, it is important to note that this amount is almost always negotiable.

In our example, the minimum order is 200 units . Multiplying this by $3 per unit, we can see that the minimum order from this particular supplier for this particular product would be around $600 + shipping. This is useful to know for future reference when it comes to negotiations.

Payment options

After reviewing the price and MOQ, you need to choose a payment method for the supplier. There are several common payment methods, and each has its own pros and cons for both the buyer and the seller.

Let's take a look at the most common payment options below and the level of risk they pose to you as a buyer:

1. BANK TRANSFER (UPFRONT TT)
   Risk level: high.

   With a bank transfer, the supplier receives full payment before production begins. This payment method is associated with a high level of risk for the buyer and is generally not recommended when working with an unknown supplier. If something goes wrong, you will have little or no chance of getting your money back.

2. LETTER OF CREDIT
   Risk level: medium.

   A letter of credit is fairly secure for both parties, but it involves some complicated procedures and is generally only recommended for large purchases ($20,000 and up).

3. WESTERN UNION
   Risk level: high.

   This is a risky payment method for the buyer and is not recommended for paying suppliers unless the payment is protected by escrow. Western Union should generally only be used when you are transacting with people you know well. If something goes wrong, neither party is entitled to any compensation.

4. PAYPAL
   Risk level: low.

   PayPal is a popular payment method among buyers because it is much less risky, easy to use, and generally provides good buyer protection. While this payment method is popular with buyers, it is less popular with vendors due to difficulties in withdrawing money, high tax rates, and potential chargebacks from unscrupulous buyers.

5. ESCROW
   Risk level: low.

   When using the Escrow service, the buyer's money is held by a third party and is only paid to the supplier once the buyer has confirmed satisfactory delivery of their order. Escrow is a fairly secure payment method when buying and selling online because it protects both the buyer and the supplier.

As a general rule, if you're just starting out buying products on Alibaba, it's best to negotiate with suppliers to accept PayPal or some type of Escrow service to give yourself the highest level of protection.

Communication with suppliers

Now that you know how to best protect yourself when dealing with overseas suppliers, it’s time to communicate with them. Email or WeChat are the main methods of communication for contacting overseas suppliers.

In many cases, suppliers use programs like Google Translate to translate your letter as well as their response. Remember that computer translations can be poor quality, so expect errors and possible misunderstandings.

To keep communication as clear as possible, write briefly, concisely, in a good format, and without spelling errors. Not only will this make you look more prestigious, but you will also receive clearer responses.

Quick tip: When asking questions and formatting your emails to suppliers, it's best to number your questions so they can easily respond to each one. This will keep your email clean and organized.

Request for quotes

A request for quotation (often called an RFQ or request for quote) is a relatively simple process for buying on Alibaba. Taking a few extra minutes to craft your business letter can make a big difference in the number and quality of responses you receive.

Here are some important points to mention in your business letter when purchasing from Alibaba:

• Minimum order quantity (MOQ): Even if the product description states a minimum order quantity, you should make sure that the information is accurate and up-to-date. If the MOQ is much higher than what you can afford, ask if the supplier is willing to negotiate a minimum order. Be sure to educate them and let them know your acceptable budget limits. Keep in mind that minimum order quantities are almost always negotiable with overseas suppliers.
• Sample Cost: Samples are very important for quality check. First of all, ask what are the prices of samples. Some suppliers who receive many orders for samples may increase the retail price of samples, others offer samples at a discount, and some may even provide samples for free if they consider you a serious buyer.
• Unit price of the product. One of the most important questions is what is the unit price of your product. Often on Alibaba, the supplier will provide a range (e.g. $2-$3 per unit), but you need an exact unit price to allocate your budget correctly.
• Production Lead Time: How long it takes to produce your order is an important consideration and depending on the specifics of your business, time can be of the essence.
• Payment terms: Many suppliers require new companies to pay for the entire order upfront. This is important to know because inventory is one of the major expenses for new e-commerce companies. You can also ask if they have any payment terms for long-term cooperation.

Here is a sample email you can use as a template for contacting overseas suppliers on Alibaba.

As you can see, the template above is short, concise, and aims to communicate on a professional level so that both parties can ensure they are a good fit for each other.

It is better to conduct any correspondence with suppliers in English.

Agree on acceptable terms

Once you have started negotiating with several suppliers and have a good idea of ​​prices, MOQs, and payment terms, you can propose your terms. As mentioned in our tips, the minimum order quantity is almost always negotiable, you just need to propose. Remember that successful negotiations will leave both parties happy with the outcome, so you can be a little pushy, but not too pushy.

Choosing the best option

Once you have narrowed down your suppliers, the next step in buying products on Alibaba is to weigh your options. Keep in mind that when doing this, you should not only consider price, MOQ, and payment terms. Be sure to consider how well and quickly each supplier responded to you. Communication with suppliers can be a critical element for your business in the future, so you want to make sure you are on the right track.

Dropshipping on Alibaba with your own Shopify store

Buying products on Alibaba from a reputable supplier for your dropshipping niche can be a new experience, but it can be very rewarding. With some basic knowledge and taking common precautions, you have a safe and profitable business model for your Shopify store. Always double-check the information about suppliers and don’t take shortcuts that scammers usually offer. There are thousands of other reputable suppliers you can find with just a few clicks.