Alibaba can be a fantastic source for finding cheap suppliers to import goods for resale. Whether you sell online in something like your own e-commerce store or offline in retail stores or flea markets, there are bound to be a slew of goods and suppliers that you can profit from. However, as with all things in life, there are a number of risks and things you need to be aware of before diving in. This is especially true if you’re used to purchasing from places like eBay and think that Alibaba will be similar. It is in fact a whole different ball game. So without further ado, here is the list:
1. Not Doing Your Homework
As mentioned in the opening paragraph, Alibaba is not eBay or AliExpress. The buyer will need to do far more research and work before making purchasing decisions. Alibaba is designed to connect buyers directly with sellers with the intent of making bulk purchases. It is not as simple as finding something you like, checking out and waiting for it to be delivered. You will have to put research into suppliers, products, potential markets and more.
2. Not Ensuring Your Capital & Supplier’s Required Minimum Orders Are A Happy Marriage
It’s no use going to all the trouble of researching products that will sell, finding suppliers, ordering samples, arranging freight, testing products and more only to realise you will not have adequate capital to fund future orders. Many suppliers will be happy to send a sample of one or a few products which they may do free or charge for. However if there minimum order for standard orders is 10,000 units and you can’t afford to order this many, there is no use wasting your and the supplier’s time in ordering a sample. Most products list the suppliers minimum order requirement along with other things such as estimated price per unit, production ability per month, payment methods accepted, etc as you can see from a screenshot paste below.
3. Not Having a Clear Freight Price Worked Out Before Making a Purchase Contract
Unlike eBay and AliExpress, freight is either the responsibility of the buyer to organise. Often the seller will have a company they use and be able to organise it for you. However you need to discuss this with them and have freight costs in writing, whether it’s being booked by the seller or you. The sample order is usually fairly simple since the seller will generally send through Chinese Post or a freight company without any hassle. It is when you are booking a large shipment that you may have to organise things on your end even if the seller is able to organise shipping. This is because the shipping they organise will simply be to your nearest port. It will then be your responsibility to have it collected and transported from there to your premises. Whatever option you and the seller decide to work out, just make sure it’s organised in writing with clear prices per unit or per shipment. Also ensure that you have terms in writing for situations that could possibly happen if things go wrong (eg. a shipment is late, goods are damaged upon arrival, etc).
4. Not Using Escrow or a Secure Payment Method
Unlike eBay, Alibaba sellers are not required to receive their payment through PayPal. This means many only accept payment through methods such as Western Union, Wire Transfer, etc. If you are making a large purchase or ordering from a supplier without who is fairly new or doesn’t have a lot of feedback, you are best to stick with ones that offer payment via PayPal or Alibaba’s own escrow service that offers buyer protection measures. The last thing you want is to possibly spend months hoping that your purchase arrives with no way of getting your funds back if it does not.
5. Buy Brand Name Products
Many newcomers get on Alibaba or even AliExpress and get excited when they see brand name products such as Nike, Apple, Disney, etc. The big companies have exclusivity contracts with their suppliers meaning that they cannot sell to others in bulk on a place such as Alibaba. Therefore if you do order these products it will mean at best you will receive a cheap knock off (that is illegal to sell since it violates the trademark of the owner). The worst is that they will send nothing at all and you have lost any money sent. Either way is a loss for you and it’s just not worth entertaining the thought from the start.
6. Buying “Current Trend” Products in Large Numbers
Keeping up with current trends and fashion can be a good way to turn a profit. However it can also be dangerous if you make bulk purchasing decision based on current fads or trends. It is one thing to import 5,000 notepads while it is something altogether different to import 5,000 rainbow style canvas shoes. The former will always have steady demand while the latter is based upon a current spike in demand which will soon die out. The danger is that Alibaba normally requires large purchases and often means waiting large amounts of time before they arrive via sea freight. The waiting period can be overcome through priority freight but this then drives up your cost per unit. These are considerations that need to be made and in many cases it is better to stick with products that have stood the test of time or are likely to be around in people’s lives for quite a while to come.
7. Failing to Take Fluctuating Exchange Rates Into Account
Alibaba prices are almost always quoted and negotiated in USD. For someone in Australia who is most likely selling in AUD, this means that there is a constant need to monitor exchange rates and update your sale price accordingly. Should you be in the situation where you are required to sell the goods at a fixed price for a long period of time, you would be best off quoting with the presumption of very low AUD. That way even if the AUD does drop to a historically low price compared to the greenback, you are still not losing money. Should the AUD instead rise or plateau at it’s current rate then profits will exceed projections.
8. Thinking You Can Easily Resell on eBay Without Doing Extensive Research
In days gone by, there were opportunities to buy in bulk and resell on eBay for profit. However this is less and less the case. A huge number of Chinese companies are selling direct to Australian and international customers through eBay and other venues. The Chinese Post costs very little for small, light items. Therefore they often sell items for a lower price delivered than it would cost you in postage alone. When you take into account the high cost of eBay’s fees, there is often no way to compete. There may well be the odd niche product that you can offer since many people would rather buy from an Australian with fast delivery. However it will require a good amount of research and could well be a short lived niche since competition is very fierce.
9. Failing To “Haggle”
The Chinese generally take haggling into account when quoting their prices. Therefore you will need to spend time negotiating back and forth with them if you wish to get the best price possible. If it is for a small amount of items on a one off basis then it may well not be worth your time. However if you are negotiating with a supplier who you hope to buy large amounts from on a regular basis then a few cents per unit can quickly add up over time. If the seller is providing a freight price for you then also be sure to ask if that is the best price they can do since they often overcharge on freight with the hope of adding to their bottom line.
David works at a grain export container packing company full-time while enjoying writing here in his spare time. Please leave a comment if you have any thoughts or questions.