Most online sellers are still wary of doing business overseas or having a supply business partner on the opposite side of the world. However, with the internet technology advancements today, sourcing products internationally has become easier.
If you are trying to source products from overseas, buying from Alibaba is the best choice. Alibaba, the largest retailer in the world, is bigger than Amazon and eBay combined. This Chinese company has one of the most comprehensive directories that connect suppliers with buyers from all over the world. Alibaba literally has millions of products from hundreds of thousands of suppliers, so there’s not much you won’t find on their platform.
In this article, you will be introduced to ways to source products from suppliers of your choice easily and effectively through Alibaba.com.
Here’s what you must bear in mind while sourcing products overseas:
Identify the best Suppliers
- Always opt for suppliers and not any middlemen.
- This is because suppliers can give you better rates than middlemen.
Request for samples
- Before placing an order for products, insist on a sample of the product first from the supplier.
- You will be charged for the shipping of the sample but it is important that you check the quality of the product firsthand before you bulk order the product.
Interact with Suppliers about their Business
1 – Getting to know about the suppliers is important in order to build a long time buyer-supplier relationship.
2 – Calling the suppliers before making the deal is the best choice. Make sure you either call or communicate through video calls.
3 – A Genuine supplier won’t hesitate to provide all the necessary information that you ask from him.
4 – You can also ask him to give you a tour of the factory through video calls.
5 – Additionally, you can search for his warehouse location through Google Maps.
6 – Ask if he has warehouses within your country;
- Often times, big suppliers have multiple warehouses in different countries to make product delivery around the world easy.
- So, you can always ask suppliers if they have warehouses in India as that will reduce the hassles of customs clearances and avoid many unnecessary taxes.
7 – While sending any queries to high-profile suppliers, keep it short and simple as they might not have much time to read and respond.
Be Careful & Cautious
The Internet can be a dangerous place if you do not know whom you are dealing with. This is why you must stay cautious when interacting with suppliers online.
1. Be sure to check if the supplier’s name and his company name are the same.
2. Also, check the supplier’s e-mail ID. A genuine supplier will have an e-mail ID of his own domain. Middlemen or small suppliers will try to close the transaction using local e-mail IDs like Gmail or Yahoo.
3. Avoid those suppliers who insist on payment a lot.
- If a supplier is forcing/insisting on making early payments then, it is better to avoid such suppliers, as they could be fake.
- Such Suppliers will want to deal one deal then disappear.
- A genuine supplier who does bulk orders on a daily basis will never insist for early payment.
4. Don’t believe in extremely low prices.
- Before buying the product make sure the product is genuine and that it works properly.
- Simultaneously, you can check on a couple of things like 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 always has to cover customs clearance and import duties charges.
The supplier usually will not take the responsibility for it and will not incur costs related to clearances.
Samples usually don’t incur import duties since they are for personal use and not for resale.
Whenever you order products in bulk, it will come on the radar of the customs departments and then they will check for (required) documents and payment details.
If the supply comes through DHL, UPS, etc. they will charge customs.
Reselling international products:
From China will require you to legally pay customs clearance or else your imports will be considered as illegal products.
Will need you to acquire an IEC code, (which happens to be fairly cheap to acquire). If you don’t have this code, then you can use middle agents who may import under their code and provide the service to you for a charge.
Things to consider when finalising a deal
MOQ (Minimum Order Quantity)
Double check MOQ with the supplier to make sure it is accurate. Keep in mind; minimum order quantity is almost always negotiable with overseas suppliers. If the MOQ is higher than what you can afford you can ask the supplier if he is willing to negotiate the MOQ. Make sure to give them an idea of what you can afford.
Negotiate product pricing
Never accept the first proposed offer. Everything is negotiable with suppliers from China. When negotiating with a supplier, your main priority is to decide a price that is agreeable to both the parties. Do not bring the product pricing too low as the supplier may lose interest in the deal.
Check on the time required to produce and deliver products based on the volumes you want to order.
- Depending on the order, ask the suppliers how much time production and delivery will take.
- Ask the suppliers regarding courier service. Local courier companies will take a month or so for delivery. Companies like Fedex or DHL might deliver within 12 to 15 days or even less.
Selecting a product to buy from Alibaba
Say you want to sell laptop tables. First, search for the same on any Indian marketplace, for example, Amazon.in. While selecting the product, check the following points:
- Product Reviews – Higher the reviews higher the product sales
- Offers – Select the best offer you can find i.e. the lowest price offer
- Check for Commission – Before you decide on the price, you need to know about the following information:
(For more details check out this Commission Fee Link [Seller Account Required]) Now, Search the same type of product as on Alibaba.com. Keep the following in mind.
Selecting a Supplier
- Ignore those suppliers for whom the transaction level is less than 1. Genuine suppliers usually have transaction levels of 2 or 3 (diamonds). You can also confirm by checking the number of transactions of the supplier.
- Secondly, suppliers having high response rates of 80% and above are always the best choice. Ignore suppliers with lower response rates even if they have higher transaction levels. They may not reply on time during the course of a transaction.
- Check supplier trade assurance an business years. Alibaba provides trade assurance to suppliers who pay their fees annually. These suppliers are known as Gold Suppliers. There are about 50-60,000 in India. Check for how long the supplier has been doing business too.
There are several methods of payment you may want to consider before settling on one to pay a supplier. Below are a couple of payment options available on Alibaba.com –
- PayPal is a popular and widely used payment method around the world.
- It’s a free payment method, which provides you with fast and flexible payment. This means you can pay using a credit card or even bank transfer.
- It generally provides pretty good buyer protection.
- Although it’s one of the popular options with buyers, it’s less popular in China and not widely accepted by suppliers in China.
- For each transfer made using PayPal, the buyer has to pay an additional fee.
- Like PayPal, Escrow service is free for buyers and provides flexible payment options.
- Formerly known as “Alibaba Escrow”, Escrow is a fairly safe mode of payment where the main benefit is to the buyer.
- The money is held in escrow with a 3rd party (Alibaba) and is paid to the supplier only after the buyer receives the product and is satisfied with the product delivery.
- The downside to this is that there are only a few suppliers on Alibaba that are qualified for Escrow.
- Full payment has to be made to Alibaba, which ties up cash flow.
- Additional buyer fees are charged for each transfer.
3. Upfront Telegraphic Transfer (TT)
- Its international trades oldest payment method.
- It is the best option for buyers with large orders, as they have to pay a fixed transfer fee depending on the bank.
- Buyer can negotiate with the supplier advance payments; i.e. half before production and the balance after receipt of the products. Thus, reducing risk and freeing up cash flow.
- The main issue with this payment method is that money transfer takes 4-7 days to be completed.
- The main risk for the buyer is losing the advance in case things go wrong and it is virtually impossible to get back your money.
4. Letter of Credit (LC)
- A letter of credit is probably the most formal and complex method of paying a supplier.
- It is generally only recommended for larger purchases.
- It is basically a bank document, which ensures that a supplier will receive the payment as long as certain agreed delivery conditions have been met.
- The issue with LCs is that it involves complex procedures and paperwork.
- It is not popular among small suppliers due to exorbitant bank charges.
5. Western Union
- Western Union should only be used when dealing with people you know very well, as there is no recourse if something goes wrong.
- It is a payment method that is not recommended when it comes to paying suppliers as it carries a high risk of getting scammed because it offers little protection.
Selecting a Price to Re-Sell the Products
Find out how much commission is charged for the products sourced from Alibaba. Select a competitive selling price and also make sure you consider your profits. When selecting the price:
Check the cost price (as displayed on Alibaba).
Add shipping charges that you will incur to acquire each product unit.
Don’t forget import duty applied.
Consider charges you will incur while selling, like: commission, shipping, service tax, packaging & any other expenses.
Check the output tax on selling price too.