alibaba

Alibaba and Globalsources

We have covered important groundwork and the necessary steps to successful importing.

Now let’s get to one of the most important parts of finding products and suppliers.

ALIBABA AND GLOBALSOURCES

ALIBABA:

If you don’t have contacts the easiest way is to start looking at

www.alibaba.com.

Ever heard of the biggest IPO in history? Yes, that was Alibaba in 2014. Alibaba is the world’s largest directory for suppliers.

Alibaba is also relatively simple to use.
You create an account, fill in your company information and details, and then you can start sourcing right away.

You can filter by products or suppliers. Nowadays it’s pretty safe to use Alibaba. Most suppliers are pre-assessed by Alibaba through document checking, phone calls, and various other methods. Some suppliers even have on-site checks, which means that a third-party did a factory audit and you can actually download that audit.

There are many other cool functions, such as filtering by country or region. Say you plan on going to Shenzhen or Guangzhou. You can narrow down the province in filters (in this case Guangdong province), so you only see suppliers from that region.

Most products are made in specific areas. Here are a few examples:

– Guangdong province (South of China): Electronics of any kind, especially consumer and household, toys
– Zhejiang province (Shanghai area): DIY products, tools, metals and fabrics, lighting
– Hebei province (Beijing area): Textiles, coal, steel, iron, engineering, chemicals, power, ceramics, and food.

Section 1) Begin your search:

This is fairly straightforward. You can browse two options, products and suppliers.
We will start with products since we are assuming we don’t know the supplier.

We are looking at a Bluetooth speaker.

Wow, over 1,000,000 products!!


Bear in mind, many of them are duplicates because of multiple entries by the same supplier. Also, you will often find that popular and openly available products are offered by different suppliers.

Insider tip: It’s also very easy to tell the trading companies, middle men, and scammers from the real factories.
How? Simple. In the middle of the columns I can filter by:

Gold supplier: This is a paid membership from Alibaba for the supplier. They get featured and can put up a lot more items in their catalogue (among other functions).

Onsite Check: The onsite operation of the factory has been checked by Alibaba and a third party confirmed its legal existence.

Assessed supplier: This is a third-party assessment usually done through a testing company to verify various parts of the company. This includes machinery, staff, engineers, workers, certification, and much more.

So how do I tell if it’s a trading company, an illegitimate company, or a real factory? Simple. Trading or fake companies would not be a Gold Supplier or have an onsite check done, and they would not be assessed by a third party. First, it’s quite an investment for the supplier promoting his service (Alibaba doesn’t pay anything), and second, if this third party arrives at the address to check the factory they won’t find anything but three guys sitting in a small office selling items from the real factory at higher prices.

Alibaba unfortunately has hundreds of middlemen and scammers that pose as manufacturers. Many of these “manufacturers” are not manufacturers at all, rather middlemen that pose as such, marking up the price and increasing the level of miscommunication between you and the actual manufacturer while providing little, if any real value.

With these filters you can pretty much eliminate middlemen, trading companies, scammers, and so on. Unfortunately, you will also eliminate real factories that are either new to Alibaba or do not make the effort of going through all stages of verification. If your search did not conclude anything in the first step, then you can perhaps extend the list again by unchecking “on- site check” or “assessed supplier” and looking through your options with Gold Suppliers first.

Moving on, through filtering I now “only” have 165,000 products to choose from. I naturally look at the first one and a few others that interest me in terms of design/color, etc.

This supplier uses nice photos, provides crucial details and specifications, and even test reports at the end.

The second supplier also uses nice photos, a clear description, and a clean look.

So what do I look for now and how do I go on?

A) The price

One of the first things you’ll look at is the price. For this listing we can see a price of $30-60 USD FOB. FOB stands for Free On Board and means that the seller will pay all involved costs that get the product to the nearest port. This would be the most viable way to ship goods from Asia. The buyer pays the

cost of actually transporting the goods across the ocean to the final destination. The price here is not really relevant as it is most likely just a place holder.

B) Minimum Order Quantity (MOQ)

We look at the minimum order quantity. The minimum order quantity (MOQ) is the smallest order the manufacturer is willing to accept to start production. However, it’s important to note that this is almost always negotiable. In
our example, the minimum order is nine units. I highly doubt that this is the MOQ. In this case it usually means that they have stock and you can buy from nine pieces. But for mass production (and cheaper prices) they probably have a MOQ of 100 pieces or more.

C) Payment Options

There are several common methods of payment, and each have their pros and cons for both the buyer and the seller. The longer you work with a supplier the easier it will be to deal with payments. If you have an established business relationship you could ask that the next order should be paid 100% on delivery (TT). He can always say no, but if he agrees this gives you financial liquidity.

Let’s take a look at the most common payment options and the associated risk level to you as the buyer:

1. TT (Telegraphic Bank Transfer)

Risk Level For Buyer: Risky
With a bank transfer, the supplier will receive payment before production starts. Very important: if you agree to this payment, NEVER pay more than 30% upfront. Seventy percent will be paid upon inspection and shipment release. This payment method bears a high level of risk to the buyer and generally is not recommended when dealing with an unknown supplier. There is little that can be done to get your money back if something goes wrong.

2. Letter of Credit (L/C)

Risk Level For Buyer: Relatively Safe
A letter of credit is safe for both parties. However a letter of credit is rather complicated to issue through a bank, costs quite a lot of money, and is generally only recommended for larger purchases ($20,000 and above).

3. Western Union

Risk Level For Buyer: Very Risky
Western Union generally should only be used when dealing with people you know very well. There is no guarantee if something goes wrong.

4. PayPal

Risk Level For Buyer: Fairly Safe
PayPal is a popular payment method for buyers as it presents a much lower risk, ease of use, and generally pretty good buyer protection. Although it’s a

popular option with buyers, it’s less popular with suppliers due to difficulties in withdrawing money, high tax rates, and potential charge backs from less than honest buyers.

5. Escrow

Risk Level For Buyer: Safe
When using an escrow service, the buyer’s money is held by a third party and is only paid to the supplier after the buyer confirms satisfactory delivery of their order. Escrow is a fairly safe payment method for buying and selling online because it protects both the buyer and supplier.
You can read about common payment methods on Alibaba on the Alibaba Safe Buying page.

http://www.alibaba.com/help/safety_security/class/buying/pay_ship/ 002.html

Generally, when you are just starting, you’ll probably want to look for or negotiate with suppliers to either accept PayPal or some type of escrow service to give you the highest level of protection.

The next step would be to start communicating with the supplier.

D) Contacting Suppliers

Now that you understand how to better protect yourself when doing a transaction on the other side of the globe, it’s time to contact some suppliers.

Introduce yourself to each supplier professionally. When I first contact a supplier it usually looks like this.

You can copy this section or look under supporting documents for a blank supplier introduction form (http://importdojo.com/docs/supporting_docs.zip ) and use it for your first contact:

Dear…,

My name is ….. and I am the ….(Manager/President/Buyer etc.) of …. Limited/Inc.

We are a (fill in your company’s business, e.g., Importer/Buying Office/Whole seller/Online shop) and are operating in (fill in your country).
You can also check out our website under: www. …..

I am writing to you today to inquire about the product I saw on your website/catalogue/exhibition.

The model number is….

Could you please give me the following information: You can fill in the details in the attached quotation format or send me your quotation in the first step.

Unit price based on …. Pieces
Minimum Order Quantity
Available certification (CE, RoHS, FCC, GS, etc.) Production lead time
Available colors
Payment terms

I would then evaluate and get back to you as soon as possible. If you have any questions please don’t hesitate to contact me.

Thanks and best regards,

E) TIPS WHEN CONTACTING SUPPLIERS:
Do this step with multiple suppliers, because it’s never good when you start

to rely on just one supplier.

Don’t let the suppliers on Alibaba know this is your first import. If they know you are new, they usually try to take you for as much as possible on the first order and assume you will not be back.

For easier reference and keeping track of your offers and suppliers I recommend making yourself a folder on your desktop. Name it “Alibaba” or “Sourcing” or anything that you can relate to easily. Create subfolders for each supplier. In each subfolder create folders such as: “quotation,” “supplier profile,” “certificates,” and so on.

Within this course we will provide simple offer sheets and supplier profile forms that you can include in your email when sending to the supplier for the first time.

Also, I have found that some suppliers don’t read your full email. So point out the model number that you are interested in and ask them to quote specifically.
Sometimes you will receive a simple email back with a PDF catalogue asking which item you are interested in. It can be exasperating but that’s the way it is sometimes. Politely reply back that you are “looking for a specific quote on model number…”

You don’t necessarily have to use these forms for contacting the supplier for the first time. Many will actually not fill it in because it obviously takes time to do so.

HOWEVER, I recommend if you have narrowed down your suppliers you should ask them to fill it in for your records. Keeping clean records is crucial to your follow-up.

F) Ask questions and follow up

As you begin narrowing down suppliers make sure to ask a lot of questions about their business and their products:

Ask for a copy of their business license and company and factory standards (for example ISO-9001)

Ask which laboratories/third party companies they work with. If they only work with Chinese test or inspection companies be cautious.

Ask for photos of the factory or company presentation (PDF/PowerPoint) and sample products.

Feel free to ask for whatever makes you feel more comfortable doing business with them. Ask who their customers are and where they are located. If they don’t have any customers in your country be careful, as they might have no experience dealing with your country’s regulations and standards. Ask about them. If they already work with a competitor of yours or with an industry similar to yours it’s a good sign that they can fulfill your requirements.

Send a vendor profile so they can fill in their details. They should cover production capability, how many workers/staff/engineers, main customers, certifications, company turnover, etc. (we provide a blank format here: http://importdojo.com/docs/supporting_docs.zip

G) Get samples

It should go without saying that before you invest any significant amount of money into inventory you need to get samples to check and verify quality. We explain the sample process in Chapter 10.

H). Sounds fishy!

Finally, if something is too good to be true, it usually is. Be aware of prices, suspicious payments, or communication that doesn’t seem right. It’s never too late to simply cease communication and look for another supplier.

Tip: When asking your questions and formatting your emails to suppliers it’s best to work with paragraphs or bullet lists of requests so that it is easy for them to understand your requirements and needs. Make the supplier answer each of your “bullet-questions.”

I) Requesting a quotation

Requesting a quotation/price, also referred to as a RFQ (request for quote) is a relatively simple process. However, taking a few extra minutes to plan your email can make a significant difference in the number and quality of replies you receive.

Here again is a simple form for a RFQ:

Dear…,

My name is ….. and I am the ….(Manager/President/Buyer etc.) of …. Limited/Inc.

We are a (fill in your company’s business, e.g., Importer/Buying Office/Whole seller/Online shop) and are operating in (fill in your country).
You can also check out our website under: www. …..

I am writing to you today to inquire about the product I saw on your website/catalogue/exhibition.

The model number is….

Could you please give me the following information: You can fill in the details in the attached quotation format or send me your quotation in the first step.

Unit price based on …. Pieces
Minimum Order Quantity
Available certification (CE, RoHS, FCC, GS, etc.) Production lead time
Available colors
Payment terms

I would then evaluate and get back to you as soon as possible. If you have any questions please don’t hesitate to contact me.

Thanks and best regards

J) Negotiating

Once you have begun conversations with multiple suppliers and have a good idea about their prices, MOQ’s, and payment terms, you can begin negotiating with them.

Here are some tips on negotiating:

It is a given that once you place your order you negotiate the price, whether you are below the supplier’s MOQ or not.

Use the price that you were originally quoted and decrease it by 20%. Give this target price to the factory and let them know you would like to order with your (20% reduced) price. In most cases, the supplier will not agree to your new target price but he may reduce it by another 5%.

In 80% of cases he will give you a further reduction on his original quoted price, unless your quantity is really very low.

Also, mention to him that this will be the first trial order and that if it is successful larger orders will follow.

K) Weighing Your Options

Once you’ve narrowed it down to a select few suppliers, you’ll want to weigh all your options. Bear in mind it’s not always about the price and MOQ. It’s also a gut feeling that you should get when communicating with a supplier. Did he reply eagerly and quickly? Did he follow up in detail or just send fragments to your questions? If you have the feeling it’s difficult now to communicate, imagine how it would be to work with him once the order is placed. Make sure you eliminate the suppliers with the least potential and the most issues now!

Conclusion for ALIBABA

Sourcing a reliable supplier for your product from Alibaba can be a great experience. Following the above steps and tips should get you working with a reliable and good supplier. Don’t just settle on your first supplier or only one supplier. Keep your options open and order multiple quotations and perhaps samples.

GLOBALSOURCES

Global Sources is very similar to Alibaba. It’s just a bit smaller and less known.

Sometimes when I don’t find a product on Alibaba I go to Global Sources, or vice versa. What I like about Global Sources is that their customer follow up is usually better than Alibaba’s. I guess that’s because they are located in Hong

Kong, while Alibaba is based in Hangzhou (China), so their customer support is usually in a better English.

Start by registering and creating a profile as a buyer. It’s the same process you followed with Alibaba.

Once you have completed your registration you can start looking for products and suppliers.

Once you have input your product search you will see suppliers and products. On the right they have a nice tool that is similar to those in Alibaba. You can see if the supplier has been verified, which customers he has, does he exhibit, and so on.

You can also filter by “manufacturer,” “locations,” and much more. Again, it’s very similar to Alibaba.

Check out all their features such as Magazines, Tradeshows, Marketplace and more. There is a LOT of free information on there. I personally really love their e-magazines. There are a lot of suppliers in there with great photos, contact information, and much more. This is only available as a registered user though.

Start your product search as under Section 1 on Alibaba in the previous chapter.

Also check out my blog post & video screencast I made for Alibaba here:

http://importdojo.com/alibaba-hacks/

 

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