How to safety source products from Alibaba.com

                           How to safety source products from Alibaba.com

In order to start an online business, you need two things, a product idea and supply. If you already have your product idea, the next step is finding the perfect supplier. 

In our global village, it has never been easier to find a manufacturing or wholesaling partner halfway around the world, however sourcing your products from overseas can still seem like a dauting task for new online entrepreneurs. 

In today's post, I am going to look at how to effectively and safely source a supplier for your product idea using the popular business directory - Alibaba. I will introduce you to the pros and cons of going overseas and show you how to navigate this new terrain so you can lock onto the perfect supplier for your product idea and get started selling online.

What is alibaba?

If you have decided and are determined to source your supplier from overseas, there is a good chance you will be buying from Alibaba. by the numbers, Alibaba is the largest e-commerce company in the world  ( bigger than Amazon and Ebay combined) and It is also the most comprehensive directory that connects suppliers ( mostly from Asia) with buyers from all over the world.

 buying on Alibaba and using the directory is fairly straight forward to use and similar to other marketplaces like ebay. One of the first things you likely want to look at is the price.

For this listing we can see a price of $2 - $3 USD FOB.  FOB stands for free on Board and means that the seller will pay also costs associated with getting the product to the marine port ( the cheapest way to ship products from Asia) and the buyer pays the cost of actually transporting the goods across the ocean to the final destination.

Next, you will likely want to look at the minimum order quantity ( MOQ ). the minimum order quantity (MOQ) is smallest order the manufacturer is willing to accept. However, It is important to note that this is almost always negotiable.

In our example, the minimum order is 200 units. Multiplying that by the higher - end price of $3 per unit we can quickly see that we would be looking at a minimum order of approximately $600 USD + shipping from this particular supplier, for this particular product.

This is good to know for later when it comes to negotiating because it give you a good start point. After understanding price and MOQ, you will likely want to know how you can pay the supplier. 

There are several common methods of payment, each have their pros and cons for both the buyer and the seller.

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

1.UPFRONT IT ( Bank Transfer )

Risk level for buyer: Risky    -  with a bank transfer, the supplier will receive full payment before production starts. 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 if any recourse to get your money back if something goes wrong.

2.Letter of credit

Risk level for Buyer: Fairly Safe  - A letter of credit is fairly safe for both parties, however a letter of credit carries some complex procedures and is generally only recommended for larger purchases ( $20,000 and above).

3.Western Union

Risk level for buyer : Very Risky - A risky payment method for the buyer that is not recommended when it comes to paying suppliers if the payment is not protected by escrow. Western Union generally should only be used when dealing with people you know very well. there is no recourse 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 is popular option with buyers, it is 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: Fairly safe  - When using an Escrow service, the buyer's money is held by a 3rd 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 Escrow protects both the buyer and supplier.

Generally, when you are just starting, you will 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.

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