Sourcing through Alibaba
December 7, 2018
The e-commerce age is in full swing thanks to the development of the Internet, which provides numerous options to source products, for a broader range of buyers.
Alibaba is a platform where buyers and sellers from all over the world (but still predominantly from China) meet. It is one the greatest success stories of China and it channels billions of dollars of orders per year. On Alibaba, one can find suppliers for a mind-boggling variety of goods. You can also get prompt responses, quotes, and even samples. So, is sourcing from Alibaba the end-all solution for importers?
As usual, the answer is: It depends.
We previously wrote a blog about finding a sourcing agent on Upwork (See: China Sourcing: Upwork vs. Sourcing Agency) that points to the fact that there is a need for on-site support in China. And yet, buying from, or more precisely, through, Alibaba suggests there is no such need. How does this make sense?
Alibaba was established in China in 1999 and is currently the world’s leading business-to-business ecommerce company. Their recent phenomenal growth is also attributed to their entry into the business-to-clients arena. Their base is in China but they have international offices in Japan, Korea, Europe, and the U.S. Their business has been dramatically growing—with over 552 million active users. To demonstrate their magnitude, during a one-day promotion on November 11, 2018 (“Singles Day”), they did over $30 billion in business.
So, what does Alibaba do? Most importers are aware of Alibaba but for those who are not familiar with it, we will be doing a comparison between Ebay and Alibaba to help increase understanding.
Ebay is an American multinational consumer-to-consumer corporation. The company manages eBay.com, an online auction and shopping website in which people and businesses can buy and sell varieties of finished goods worldwide.
On the other hand, Alibaba is like an online yellow page and their main function is connecting foreign companies with Chinese manufactures. In other words, they specialize in and facilitate trade between buyers and sellers. Therefore, Alibaba seems to be a better fit for businesses that would like to source products from China and re-sell them in their own countries.
Regardless of the sourcing platform used, there are always advantages and disadvantages.
The advantages of Alibaba are:
- Users can contact buyers and sellers worldwide on Alibaba. That means there are unlimited opportunities for users to source products.
- It is free to sign up for a membership.
- Members can use online sourcing tools, send inquiries direct to suppliers, and post wanted advertisements. They are all free of charge.
- Minimum Order Quantities (MOQ) can be as low as 1 unit.
- It can be a good source of generic products, direct to the end-user.
- Shipment from the Chinese factory to the end-user is not very expensive
However, current and future users should be aware of Alibaba’s disadvantages as well, including:
- Fraudulent companies, brokers, and agents are also on Alibaba, and it is hard to know whom to trust. Some users lose money by making payments but never receiving products.
- If an importer can find products and get quotes on Alibaba, so can their customers.
- It is difficult (and sometimes impossible) to customize products on this platform. i.e. You can buy what they have, but you cannot order to your specifications.
- There are few remedies for users if the product received turns out not to be what was expected or when they become victim to fraudulent sellers, and it can be very difficult to recoup lost payments (see above point).
- Prices are higher than what you can get by dealing directly with manufacturers.
- Lack of transparency is a problem faced by companies listed on Alibaba. It only lists limited and brief descriptions.
- Many users get tons of spam.
Alibaba is a great way to get information, and a good place to start looking for manufacturers in China. However, it is hard to judge if the manufacturers are trustworthy or to determine if they will provide what users expect. In addition, users should be aware of the myriad difficulties and challenges when sourcing from China. Cultural differences and language barriers remain huge obstacles, even when using Alibaba.
In conclusion, Alibaba can be a good source of products for the individual who does not mind taking risks or waiting for delivery in order to“get a good deal”on generic products. But it is not a good solution for businesses whose success depends on delivering unique or branded products at a competitive cost. For those, it is still best to use a professional full-service sourcing provider to help manage the supply chain. (See: FAQ: What is the difference between CPG and vendors on B2B websites such as Alibaba?)
By Arisa Akasaka and Jocelyn Trigueros
Sources: Examiner, ecommercebytes, comparison of Ebay.com and Alibaba, startupnation.com, economist, and alibaba.com