This post is by Gary Huang, founder of 80/20 Sourcing and an online seller on Amazon, eBay and Shopify since 2004.
As a private label business owner or ecommerce store owner, when you want to source a product from China the first thing that comes to mind is buying from Alibaba, right? Not so fast…
Alibaba certainly is the largest online directory of suppliers. However I always say that Alibaba is like the yellow pages. And there are hundreds of thousands of suppliers on there. And there will be the good, the bad, and the ugly.
So how do you separate the scammers and trading companies from the straight-shooting direct factories?
I’ve been based in China since 2008 and have worked with hundreds of Chinese suppliers. Alibaba is one of the tools I’ve used to source reliable suppliers, so I’d like to share some of my do’s and don’ts and help you buy from Alibaba successfully.
With the vast crowd of suppliers on Alibaba, most of them will not be the right fit for you. They might be too expensive, their quality might be too low, they might be unresponsive, and so on. Your job is to find the right supplier, at the right price and the right quality level for your business.
I would guess that only 20% or less of the suppliers on Alibaba will be the right fit for you. Here’s how to find the right one.
So by now you might be thinking… when searching through Alibaba, how do you find the right suppliers?
- Step 1: Finding the right suppliers on Alibaba
- Step 2: Sending out an RFQ to Alibaba suppliers
- Step 3: Evaluating Alibaba suppliers in detail
- Buying from Alibaba: more do’s and don’ts
- Buying from Alibaba: do’s and don’ts roundup
Step 1: Finding the right suppliers on Alibaba
I prefer to work with private label manufacturers, and on Alibaba you can filter suppliers by:
- Trading Company
- Manufacturer/Trading Company
Manufacturer and Trading Company are self explanatory, but what does Manufacturer/Trading Company mean?
In this case it’s usually a factory that has an export license, so they can legally export your products to you. In China, by law you need an export license to ship products to the U.S. or anywhere else outside China. If the factory does not have an export license, then they need to work with a trading company that does. Manufacturer/Trading Company means the company manufactures the product and can export it themselves, so it’s an ideal situation if you want to work with the manufacturer directly.
Conversely, there are many trading companies or middle men that act as a agent between you and the factory. There are pros and cons to using them, but if you’re starting out I recommend you do it yourself first so you can learn the entire process. As you scale up then you can consider outsourcing this to a sourcing agent or trading company.
DO use the suppliers tab
When sifting through search results, I like to sort by supplier rather than product. This way there are fewer suppliers repeated in the search results, which is great since you only need to send one RFQ per supplier.
DO filter the search results
If there are thousands of suppliers in the search results, you can filter the results to quickly reduce them to a manageable number.
I use the following filters to narrow down the results to the key suppliers:
- Suppliers with 5 years or more as a Gold Supplier.
- Verified suppliers, meaning they have been checked on-site by a third-party inspection agency.
- Past export countries including the United States (or whichever country you are selling in).
DO look for the best product fit
When buying from Alibaba suppliers, the number one rule is to look for a product fit that is as close as possible to the product you want to source. This includes the material, the design, the look and feel, and anything else that’s specific to your product.
For example if you’re looking for glass baby bottles, then you shouldn’t consider plastic bottle manufacturers. Even though the shape may be similar, the materials are totally different. The whole production process and supply chain behind it will be different too.
Look for a supplier that offers a product as similar as possible to the product design you have in mind. Assuming you are looking for an “off-the shelf” product, rather than a custom design, this will help reduce the chances of:
- Being charged expensive tooling fees.
- Dealing with long development lead times.
- Mistakes due to the higher margin of error that comes with unfamiliar products.
Step 2: Sending out an RFQ to Alibaba suppliers
I prepare a well written “Request for Quotation” (or RFQ) email and cast a wide net, contacting up to 20 suppliers that offer the product I’m looking for. In this initial phase, I’m not really worried about catching the wrong suppliers – they will quickly show themselves at the evaluation stage. So I copy and paste the RFQ and send it to a large number of suppliers on Alibaba.
How do you write an RFQ? I’ve created an RFQ template that you can use and tweak when contacting suppliers.
DO use a spreadsheet to track suppliers
To keep things organized, I add the suppliers’ names, contact people, price quotations, and other product details to a Google Sheet. You can use Excel as well. This will come in handy later when you are sifting through dozens of replies.
DON’T expect to find the right supplier quickly
This can be a time consuming process. Don’t believe the get-rich-quick gurus. If it were easy, then everyone would be a seven-figure seller by now. Keep at it and be persistent when you face challenges.
Step 3: Evaluating Alibaba suppliers in detail
As the replies come in I plot them in my spreadsheet and can start to see trends:
- Which suppliers are the quickest to respond, and which never reply?
- Which suppliers are the most detail-oriented, and which are the most sloppy?
- Which suppliers are the cheapest, and which are the most expensive?
DO take time to evaluate shortlisted suppliers
All of these are clues to finding the right supplier for you. For the ones that tick the right boxes, I will go “deep diving” with them. I follow up and ask more detailed questions about their company, their product lines, their specifications, pricing, and more.
DO request product samples
After this deep diving, I look for the 20% that seem to be the right fit, and request samples from them. This helps judge not only their product quality but also their service, communication, and attention to detail.
If a supplier fumbles sending a sample to me, I will have second thoughts about placing an order. If they can’t even get a sample right, can I trust them with a full order of thousands of units with custom modifications? Probably not, unless I want to deal with a higher risk of headaches down the line.
Buying from Alibaba: more do’s and don’ts
DON’T focus only on price
Probably the most common rookie mistake I see is to focus on price first. Price can be negotiated later, and it is meaningless until you have a product fit and the supplier understands what you’re looking for. This is especially true when making product modifications. The price can go up or down depending on what you need, so the opening price won’t mean much.
Instead start by looking for supplier and product fit. Cast a wide net!
DON’T try to source a branded product
If you are try to source an Apple iPhone or a Louis Vuitton handbag from Alibaba this is a path to disaster. You will only find counterfeit knock-off products.
There’s zero chance of you buying from Alibaba genuine Apple or Louis Vuitton products, so you will either end up wiring money to a scammer or you will get a cheap knockoff that has been photoshopped to look like the real thing. Stay away!
DON’T put your faith in inexperienced suppliers
When I want to hire someone to do a job I look for someone with experience. I want someone who has operated for many years, and has been recommended by someone I trust. I don’t want to use someone who just started last week, with no track record and who might go out of business tomorrow.
The same principle applies to sourcing from Chinese suppliers. You want to find suppliers who have a lot of experience making your product.
One of the ways to find out how long they have been in business is to look at the number of years they have been a gold supplier on Alibaba. I feel more comfortable with an eight-year gold supplier than a one-year gold supplier.
Too little experience means that the product is new to them, and they’re more likely to make mistakes. They could charge you expensive tooling fees when another supplier has them readily available at no additional cost. They could be overpromising and not actually be able to make the product. This has happened many times in my years working with hundreds of Chinese suppliers.
DO choose the right communication channels
Now let’s look at how to communicate with suppliers to increase response rates, get quicker replies, and keep track of important information so you can easily reference it later.
The best ways to contact Chinese suppliers are:
- Alibaba’s messaging system
Alibaba’s messaging system
When starting a search on Alibaba I prefer to use their messaging platform to contact suppliers. This is the quickest and most direct way to contact suppliers initially. This also lets the suppliers know that you found them from Alibaba versus at the Canton Fair, etc.
When sending an RFQ to many suppliers, I use a tool such as TextExpander to quickly insert the RFQ into Alibaba’s interface. Alibaba’s platform may restrict you from copying and pasting so this shortcut saves a ton of time!
After I develop a rapport with suppliers that are a good fit, I prefer to take it to email by giving the supplier my email address. I don’t give out my email before the supplier makes my shortlist.
This is easier to monitor, as I’m checking email more often than Alibaba messaging. Also I know that any supplier who emails me is a shortlisted one and I should pay more attention to them.
Email is also great for capturing important documents from the supplier such as price quotes and invoices. It makes it easy to find them in the future in case of any misunderstandings.
If I want to get the absolute quickest reply from a supplier, I use WeChat.
WeChat is great for quick questions and answers, sharing pictures and videos, and making free calls. I find that suppliers normally give a quicker response over WeChat than email. Response rates are much higher too, and WeChat has a handy translate feature that can help overcome the language barrier.
Why don’t I skip email entirely and just use WeChat? On the downside, it is harder to keep track of important documents. If you lose your phone or try to port your WeChat files to a new device, you might run into trouble. I know many people who have lost valuable information and files this way.
So I mainly use WeChat for quick and casual conversations, and not for important documents that need to be tracked later. Those are better on email.
Buying from Alibaba: do’s and don’ts roundup
- DO use the suppliers tab
- DO filter the search results
- DO look for the best product fit
- DO use a spreadsheet to track suppliers
- DON’T expect to find the right supplier quickly
- DO take time to evaluate shortlisted suppliers
- DO request product samples
- DON’T focus only on price
- DON’T try to source a branded product
- DON’T put your faith in inexperienced suppliers
- DO choose the right communication channels
Want to learn more about sourcing products for your private label business? I have a free sourcing pack with Alibaba tips and an RFQ template at 80/20 Sourcing.
This post was by Gary Huang, founder of 80/20 Sourcing and an online seller on Amazon, eBay and Shopify since 2004.