Purchasing on Alibaba from A to Z

Whether you're just launching an online business or expanding your existing store, you’ll encounter two challenges:

1. How to find a product idea.
2. How to select reliable suppliers (how to source).

While generating ideas can be tough, sourcing suppliers is often even more daunting. It is a key business process for every retailer.

Typically, only large brands with high revenue and profits can handle the upfront costs of product development, design, and support. This enables them to offer customers top-notch products, competitive prices, and a wide selection.

For small businesses, the price barrier has historically limited market entry. However, Alibaba is changing the game.

If you follow e-commerce news, chances are you've heard of Alibaba. It's a huge Chinese company that acts as an online marketplace and directly connects suppliers with buyers (retailers) from all over the world, offering lots of goods at surprisingly affordable prices.

Unlike other online shops, Alibaba is like a huge store directory where you can find thousands of suppliers. They have millions of products, all coming straight from manufacturers. This means you can get things at wholesale prices, even if you're not a big company.

The good thing about Alibaba is that it levels the playing field for both established brands and small businesses, providing equal sourcing opportunities for all.

One of the toughest parts when starting your business with Alibaba is figuring out what to sell. How do you know which products will make money? Which ones are likely to fail? What's easy to ship from China? And perhaps most crucially, if lots of people are already selling those products, how do you make yours stand out?

These are the questions that every new seller wrestles with. But finding a profitable product niche on Alibaba isn't impossible. It involves a mix of research, analysis, and intuition. Here's a step-by-step guide to help you do it.

1. Identify your interests and expertise.

To begin, make a comprehensive list of your interests, hobbies, and areas of expertise. This step is important as it lays the foundation for your business journey. Your chances of success are significantly higher when you deal with a niche that corresponds to your passion and understanding.

2. Conduct market research to find a product to sell.

Do some research on products that sell well online. Use tools like Google Trends, Amazon Best Sellers, and social media platforms to identify trending products and niches. Look for products with consistent or growing demand.

Additionally, decide whether your business will build its own brand or if you'll resell original products on platforms like Amazon. This decision will shape your sourcing strategy, communication with suppliers, and branding approach.

3. Test your idea.

Now that you have an idea, it's important to assess its potential. The easiest way to do this is by gathering feedback from potential customers. Create a mini focus group consisting of friends, colleagues, online communities, and individuals who match your target audience. Ask them about their needs regarding the product, whether they've purchased similar items before, how much they've spent, and what improvements they want.

For example, you decide to sell rain suits for outdoor enthusiasts and hikers. You may get the following requirements based on your target customers' preferences:

1. Lightweight and flexible design.
2. Waterproof, windproof, and breathable materials.
3. Resistance to elements like sharp branches, mud, and rain.
4. Multiple waterproof pockets for storage.
5. Slim and well-fitted without unnecessary bulk.
6. Attractive and practical designs.
7. Tailored sizes to accommodate different body types.

Take careful note of each feature to ensure your product meets the demands of your target market.

4. Find the best way to source the product (Spoiler: Alibaba).

Search Alibaba for products within your identified niches. Analyze the competition by considering factors such as pricing, quality, branding, and customer reviews.

When sourcing, focus on the options that best meet the following criteria:

• Delivery should be straightforward.
• The product's unit price should allow for a healthy profit margin.
• Products must undergo testing and be reliable, ensuring high quality.
• The manufacturer should have the capacity to scale with your business.

You’ve conducted a thorough research and selected the niche and products you want to sell. Now, it’s time to work with Alibaba to find suppliers and goods. Since Alibaba is a huge online marketplace, there are many manufacturers offering similar products. So, how do you navigate this sea of options? What factors should you consider in your decision-making process?  Here is a step-by-step guide on how to source products on Alibaba for your successful business.

Step 1. Create your Alibaba account.

The first step to work with Alibaba is to create your buyer’s account. It's the easiest part of the entire product sourcing journey. Although Alibaba is based in China, it offers an English and other languages user interface for buyers worldwide.

Provide all the necessary information accurately. This typically includes your country or region, trading role, name, and email address. Once done, you gain access to thousands of suppliers and millions of products in various categories such as electronics, clothing, food, health & beauty, and industrial goods.

Step 2. Learn the nature of suppliers on Alibaba.

Once you’ve signed up on Alibaba and chosen your product, it's time to choose the supplier you want to collaborate with.

There are two main types of suppliers on Alibaba:

Factories: These are the production facilities that will manufacture the goods you order. Many factories have their own sales teams to communicate with customers directly.

Trading Companies: These are middlemen who buy directly from factories and then sell to you, often at higher prices to cover their profit margins. However, there are cases when trading companies are more beneficial. For example, if you're unable to find a factory that can produce the specific goods you need or if you plan to purchase a variety of items in small quantities, working with a trading company might be more convenient than dealing with multiple suppliers separately.

Both trading companies and factories have their advantages. The decision depends on factors such as your comfort level with your business partner, the relationship you maintain, product quality, and more. Usually, manufacturers offer the most competitive prices but often require full advance payment. Trading companies may sell goods at slightly higher prices but frequently offer more flexible payment terms and require lower Minimum Order Quantities (MOQs).

Step 3. Do a smart search on Alibaba.

The next step is to organize sourcing on Alibaba. To illustrate, suppose you're interested in selling rain suits for outdoor enthusiasts.

Start by entering "rain suits" into the search bar on Alibaba under the "products" category. Remember, the more specific your search, the better your results will be. For example, try searching for something like "waterproof rain suits for hikers" to find exactly what you're looking for.

Once you have your search results, you might wonder how to choose the best one. Here are a few strategies.

First, look for suppliers offering Trade Assurance, especially if this is your first time sourcing a product. This service allows you to pay through an escrow account upon receipt of your goods, protecting you against any seller defaults.

For more protection, select the Gold Suppliers option. These are the Alibaba’s premier suppliers, which means you're less likely to encounter issues with unreliable sellers or scammers.

If you're just starting out, look for manufacturers with a low Minimum Order Quantity (MOQ), such as 100 pieces. Starting small allows you to test the market without taking on too much risk. As your business grows, you can increase your order quantity to benefit from lower unit prices, typically offered at higher MOQs like 500 pieces and above.

Step 4. Short-list suppliers on Alibaba.

Once you've entered the specific requirements, you’ll get a list of suppliers that can suit your needs. When assessing each one, consider the following key factors:

• Price
• Minimum order quantity
• Time in operation on Alibaba
• Time in operation as a Gold supplier
• Supplier reputation and reviews

When evaluating a supplier's reputation and customer feedback, explore the following:

• How detailed and organized is the information provided on their page?
• Are there clear photos of the factory, along with comprehensive information about its location and history?
• Are product descriptions and images presented professionally?
• Is the quality control process and delivery times clearly outlined?

Taking these factors into account can help you short-list reliable factories and suppliers with confidence.

Step 5. Contact your supplier.

When you’ve short-listed a few suppliers that meet your requirements, such as low order quantities and being a Gold supplier, it's time to reach out to them for more information.

Here are some pro tips for better communication:

• Keep your message short and engaging.
• Introduce yourself and your business.
• Explain what you're interested in.
• Check the delivery time and cost of samples.

In short, the main goal of this step is to decide which suppliers meet your basic needs and which don't. Depending on your budget, you might want to use a few different suppliers for your product. Get in touch with 5-10 sellers and ask for a sample of the product.

Here are a few things to know about samples:

• Samples are important because you need to see and test the product and its quality before you start selling it or investing in inventory.
• Manufacturers will probably charge you for fast shipping with DHL, UPS, FedEx to send you samples quickly.
• Manufacturers might charge a fee for samples, but they usually refund it once you place an order.

Why do Alibaba suppliers charge for samples?

Alibaba suppliers usually charge for samples and shipping to make sure you're serious about doing business. Both you and the manufacturer want to build strong and trustworthy relationships.

If you're sourcing for the first time, select a low MOQ to test products before you go into full operation. This way, you can build trust with your manufacturers and establish the foundation for bigger orders in the future.

Most Alibaba suppliers reply within a day or two. Alibaba suppliers handle their relationships thoroughly. Since good ratings and reviews are important to them, they usually try to be polite to potential buyers and fulfill their obligations. If you notice a supplier being rude or not giving clear answers, it's better to find someone else. If you don't have a good talk with a supplier at the start, it's better not to waste time and money.

Finally, Alibaba suppliers get tons of emails every day, so it's important to let them know you're a reliable partner too. Respond to their emails promptly, be polite and specific in your requests.

Step 6. Get a sample.

Once you've reached out to the suppliers, they will respond to your inquiries. In some cases, they may suggest chatting via WeChat or Skype. If you have the time, it's beneficial to engage in these conversations. It’s a good opportunity to discuss any necessary modifications or enhancements to the product, negotiate pricing, and ensure mutual understanding between you and the supplier.

After confirming your request, the supplier will typically request a fee for the sample and shipping charges. This fee serves two purposes: it helps determine non-serious inquiries and covers the costs associated with express delivery.

Since you're responsible for paying for the samples, it's important to be selective in your sample requests to avoid excessive costs. However, maintaining selectivity is key. After all, you're seeking a supplier who can deliver a quality product that aligns with your target profitability per unit, as well as your quality and design standards. So, keep the balance.

If you've engaged with the supplier under Trade Assurance protection, you'll have the option to pay for the samples at this stage and confirm payment to the supplier once you receive the samples.

Depending on whether you intend to sell the product under your own brand or simply resell it, the following steps may vary. If you plan to resell the product, the process finishes here. However, if you aim to build your own brand, additional steps will be required.

Step 7 (Optional). Sourcing products on Alibaba under your own brand.

When sourcing products on Alibaba, you have the option to label them under your own brand through ODM and OEM. Let's explore both options.

What is ODM on Alibaba?

ODM means that you take a product that is already designed and developed and simply attach your label to it. With ODM, minimal changes to the product design are possible.

What is OEM on Alibaba?

OEM involves building something entirely new from scratch. In discussions with the manufacturer, if you have a specific design in mind to be printed on the product, you can provide the manufacturer with the design file, and for a small fee, they will print it on a sample for you.

Before placing a large order, especially if it's your first product, we recommend obtaining a sample to evaluate its quality and suitability.

Step 8. Test samples for quality.

Once you receive your sample, it's important to test it and ensure that it meets your standards. Here are some key things to consider:

• See whether the sample accurately resembles what was shown in the photograph
• Assess the overall quality of the product, including its durability and construction.
• Examine the packaging to determine if it meets your expectations or if adjustments are necessary.

Feel free to test the product as if you were a customer:

• Evaluate how it feels and functions.
• Determine if it effectively addresses the intended purpose and solves the targeted problem.
• Consider sharing the product with others for their feedback.
• If possible, organize a focus group with your target audience to gather valuable insights.

Finally, ensure that the pricing of the product aligns with your target profitability per unit. If the sample meets expectations but the cost per unit would result in unprofitable pricing, it may be necessary to explore other manufacturers and suppliers.

Step 9. Place your order.

Once you're satisfied with the sample and ready to proceed, it's time to contact the supplier and start the ordering process. Here's what you need to discuss:

• Unit price
• Quantity to be ordered
• Delivery time
• Delivery method
• Shipping address

The supplier will provide you with an order form, and you can proceed to place your order. Expect to receive your products within approximately 15-45 days, depending on factors such as order volume, factory capacity, and shipping logistics.

Keep in mind that certain times of the year, such as Chinese New Year, may lead to delays as many factories close for the holidays. Check the holiday schedule in China in advance. During quieter periods, you may receive your items ahead of schedule.

Once you receive your items, carefully inspect them to ensure they meet your expectations. This thorough check is essential for all your future orders as well.

If the quantity, design, and workmanship match the sample, you're ready to start selling. Take photos of your products and post them on your website, giving life to your brand with a tangible product.

Step 10. Gather ongoing feedback on your product.

After your product is launched, it's important to keep an eye on inventory levels. Assess whether your product maintains profitability and meets demand. If it is successful, consider placing a larger order with the supplier.

And finally, don't overlook the importance of gathering feedback from your customers to identify areas for improvement.

Once you have an account on Alibaba, you gain access to search for Chinese suppliers.

Unlike dropshipping, purchasing directly on Alibaba means you'll need to store the received goods. Whether you store them in your garage or a distribution center is entirely up to you.

Also, keep in mind that purchasing products through Alibaba typically means buying in batches, such as 12 pieces or more.

And remember to confirm that the products you purchase have a market demand, ensuring their viability for what you plan to sell.

Here are some pro tips for sourcing on Alibaba.

Unit Price: Alibaba enables suppliers to sell directly to retailers and prices are often lower compared to similar products elsewhere. This allows you to increase your profit margin. Keep in mind that suppliers often use the FOB price on Alibaba. This means that the seller covers shipping costs to the port, while you, as the buyer, are responsible for transportation expenses from the port to your warehouse.

Minimum Order Quantity (MOQ): This is the minimum number of products in one order accepted by the supplier. You can negotiate the MOQ with your supplier, especially if you encounter increased transportation costs once the product reaches the port.

Payment Methods: For most buyers, PayPal is a convenient payment method. An escrow account can also be a good option for both buyers and suppliers. You can find more details about available payment options on the Alibaba payments page.

As with any online platform, there's always the risk of encountering scammers and hackers. Alibaba consistently works to track down and eliminate those entities who pose as manufacturers or act as middlemen by listing prices and then purchasing from suppliers themselves.

Fortunately, there are several strategies buyers can use to avoid scams on Alibaba.

1. Select Escrow Account as a payment method.

Escrow Account holds your payment until you confirm that you have received the goods in the expected quality and quantity. While this method can safeguard against scammers, it may not entirely protect you from fake manufacturers. Nonetheless, it allows you to inspect the product before completing the payment and address any quality concerns, regardless of the supplier's preferences.

2. Contact the supplier.

Sourcing from overseas can be daunting for many small businesses. Once you've narrowed down your list of potential sellers, request their contact details and schedule a call. Services like Skype are ideal for starting communication and gaining initial insight into the individuals and operations behind the business.

3. Request a quote.

The Request for Quotation (RFQ) process is a straightforward way for buyers to communicate with suppliers. It allows you to assess the supplier's procedures and start negotiations. Simply reach out via email to inquire about Minimum Order Quantity (MOQ), production timelines, pricing, sample costs, and payment options.

4. Verify the supplier's credentials.

Similar to platforms like eBay and Amazon, Alibaba has a supplier verification system with different levels of verification. Before deciding to engage with a supplier, ensure to check their verification status.

Alibaba does its best to streamline the process for trademark owners to report counterfeit listings and have them removed. However, despite these efforts, not all manufacturers pay close attention to advertisements, and some brands may not search Alibaba.com regularly. As a result, many fake products continue to be listed."

To minimize the risk of importing and selling counterfeit goods, try to avoid sourcing branded products from Alibaba.com. This is especially crucial for luxury retailers. If you consider expansion within this niche, conduct thorough research on luxury brands to ensure their authenticity.

Alibaba offers practical tips to avoid scammers.

1. Be cautious if suppliers offer remarkably low prices and request payment through methods that are difficult to trace.

2. Pay close attention to every aspect of the transaction if the supplier's primary focus is on the payment process or they are eager to receive payment quickly. Legitimate suppliers are typically as cautious about scams as you are, and they will take additional measures to ensure a clear understanding of orders before discussing payment.

3. Verify negotiations verbally by contacting suppliers directly via phone or Skype.

4. Be careful if the company name matches the personal name of the supplier, or if they primarily use free email services like Yahoo or Hotmail.

5. If you are still uncertain about the legitimacy of the supplier, request a sample to evaluate whether the product meets your expectations before making larger orders.

On Alibaba, it's common to encounter a wide range of prices for the same product. Here are the main reasons:

1. The initial price quote may have been set during a period of higher production costs. As costs decreased, current listings reflect more accurate pricing.

2. The quality of products may differ.

3. Some sellers are trading companies rather than manufacturers and include their margins in the final price.

4. Sellers with higher prices may seek larger profit margins.

Many importers looking for suppliers on Alibaba assume that the cheapest option is due to the last factor mentioned.

Meanwhile, many products on Alibaba are replicated by multiple manufacturers and trading companies seeking to expand their business. Some may compromise on quality to maintain profit margins while offering lower prices.

The general advice is to exercise due diligence when sourcing products and requesting samples. Successful Alibaba buyers engage with more than 10 suppliers to make informed decisions and purchase from suppliers who offer a balance of competitive pricing and quality and are easy to communicate with.

We recommend contacting the supplier before making any payment. Simply send an email requesting a quote in order to negotiate the price listed on the product page and samples.

Here are some pertinent questions to include in your email correspondence:

• What is the minimum order quantity?
• What is the cost per unit and are there volume discounts available?
• What are the payment terms for new clients?
• How long does it take to produce the minimum order quantity?

Queries regarding the cost per unit should also inquire about the pricing of samples, which you can request to be sent to your address. If you don't receive a response, don't worry; move on to the next supplier.

Alibaba also offers suggestions for improving supplier response rates. Remember, Alibaba serves as a platform connecting suppliers and buyers worldwide and isn't accountable for suppliers who fail to respond to inquiries.

• Be detailed and specific in your requests to help suppliers better understand your requirements.
• Use instant messaging services for real-time communication with suppliers.
• Consider calling suppliers directly for immediate assistance.

Products from Chinese suppliers may take some time to reach you, depending on your location. In some cases, you may wait for up to six weeks.

Many orders are shipped to international buyers via sea freight due to its cost-effectiveness. If you're purchasing from an Asian manufacturer and reside in North America, it's likely your items will be transported by sea. Therefore, keep this in mind when planning your purchase.

If timing is a concern for you, consider opting for a manufacturer closer to your location. Not all suppliers on Alibaba are based in Asia. As the platform expands, it attracts more international sellers.

A trading company often acts as an intermediary between buyers and suppliers. While businesses generally prefer to purchase directly from manufacturers to reduce costs, trading companies often charge higher prices for products to generate their revenue.

However, trading companies offer the advantage of providing a wider range of products, allowing buyers to source from one supplier rather than multiple ones, as would be the case when dealing with manufacturers. They also typically offer lower MOQs, which can benefit your business, even if it means considering higher costs.

Here's a breakdown of the difference between a manufacturer and a trading company:

1. "Factory" means the manufacturer on Alibaba. Trading companies buy goods from factories and resell them to earn profits through price differences. Buyers typically get better deals when buying directly from the factory. However, some trading companies label themselves as factories, so be cautious. Generally, if a company offers a diverse range of products instead of specializing in one product category, it's likely a trading company.

2. If unsure about the supplier's status, request a copy of the factory license from the manufacturer. Eventually, samples will be requested for verification.

3. If you discover a reliable trading company that offers seamless product sourcing you may benefit, despite potentially higher costs. A reputable supplier who provides all or most of the required products may be worth the extra cost.

Yes, you can. If you're considering selling on Amazon, it's a good idea to collaborate with the manufacturer regarding the packaging requirements and other features. Many suppliers on Alibaba are professional and willing to help you succeed. Don't hesitate to ask questions, as many are responsive and eager to assist.