There are two initial things you need in order to start an online business:
A product idea
If you already have your product idea, the next step is finding the perfect supplier.
Thanks to Alibaba, it’s easy as pie to find a wholesale supplier overseas. The problem, however, lies in finding a trustworthy supplier.
Why should you use Alibaba?
First of all, why Alibaba? Why not some other online supplier directory?
Well, the number one reason is that you can get almost anything for a fraction of the cost of what you could get it for elsewhere.
Think of Alibaba as the Amazon version of Asian wholesale products. They have it all.
Jewelry for less than $0.10 per piece, designer-quality clothing for a few dollars, electronics for half of what you can get them for in the U.S. etc.
Pros of using Alibaba
Here’s why you should use AliBaba:
Lower manufacturing costs.
High number of suppliers to choose from.
Organized categories to find products fast.
But the fourth and most important advantage Alibaba has to offer is the networking benefits.
Alibaba has an ever-expanding network of users/suppliers catering to various products and services. Which means you’re always going to have new stuff to choose from and new suppliers to build relationships with.
Plus, Alibaba has an incredible relationship with the Chinese government (who, as you may already know, is the gatekeeper of the economy).
At the same time, there are always risk involved when dealing with wholesale suppliers. In order to weed out the good from the bad, you’ll have to do a bit of digging.
How to research Alibaba suppliers correctly
To avoid the drawbacks of the platform, you need to do some research on your suppliers before you buy. We suggest starting by filtering your initial search to weed out some of the bad candidates.
Make use of all available filters to narrow down your suppliers search
There are a few different types of suppliers you’ll run into…
Let’s go over the differences with each supplier, so you have a better understanding of who (and what) you want.
A manufacturer is a company that produces items for use or resale. The majority of AliBaba suppliers are manufacturers.
Because manufacturers are the direct creators of the products, they can offer very low prices on items. However, their minimum order quantities (the minimum number of products you can buy in one shipment) are often very high.
Usually, manufacturers sell direct to suppliers such as light and bulk wholesalers and liquidators (since they can afford to buy in bulk and hold lots of inventory).
Therefore, most retailers find that manufacturers are unreachable (in terms of product sourcing). Keep in mind that some smaller manufacturers will work direct with retailers. It never hurts to ask!
When you buy products from a wholesaler, you don’t have to buy in bulk.
Wholesalers are able to house a lot of products for you which means, you’re getting products at a discounted price.
In other words, the more you buy, the better the price!
A manufacturer is able to pass on better prices to a wholesaler because they typically buy in bulk and have the storage space to house the goods until they’re sold.
Of course that's the benefit of wholesale. The downsides are just needing lots of capital and storage space!
Using a dropship resource means there is no volume purchasing. Instead, you’re buying one product at a time.
When you compare this with wholesale suppliers (where products are purchased up front), a drop shipping model means you’re not paying for the products until they’re sold.
The downside of drop shipping is the price. Because you don’t buy in bulk, you can’t get the best price for the product. With wholesale suppliers, you can.
There are a few other downsides, like not being able to brand yourself and potentially long shipping times. But this is an issue no matter what supplier you use, since AliBaba suppliers are all in Asia, so even bulk purchases will have long shipping times.
But it also means no holding of inventory, no shipping or packing, and in some cases no need for customer service! (For example, FBA (fulfilled by Amazon) will take over support for you.)
Agents can be quite tricky at first, because they’re nothing like wholesalers, dropshippers, or manufacturers.
Rather, they play the role as the middleman. They bring customers and clients together and, sometimes, do it for free.
To give you an example of what we mean, imagine Company X (maybe you) as an import/export agent, AliExpress is a manufacturer, and Amazon is a department store looking for goods that AliExpress sells.
In this scenario, Company X would act as the middleman between AliExpress and Amazon. X would see that Amazon is interested in acquiring goods that AliExpress owns, and works hard to bring the buyer and seller together.
Notice how eBay would not be taking title to the goods and would not provide the services that a distributor would perform.
There are two types of agents to look for (if you choose to take this route)...
Traditional import/export agents. An export agent works in the country where the product is produced. An import agent is based in the country where the product will be sold, in which case, represents the buyers.
Brokers. A broker is an independent agent who brings buyers and sellers together (as explained in our scenario above). A broker differs from the traditional import/export agent because they don’t usually represent a company. Instead, they’re hired to bring together one-of-a-kind or nonrecurring deals.
Now that you know which type of supplier you’d like to work one-on-one with, it’s time to discuss how to filter out the bad suppliers.
Look for specific supplier types
On AliBaba you’ll be dealing mainly with manufacturers. But if you want to avoid the scams and general low-quality suppliers, AliBaba provides some supplier filters you’ll want to use.
Trade Assurance Suppliers
Trade Assurance is a free service offered by Alibaba that’s designed to help create trust between buyers and suppliers.
Trade assurance means you’re covered if…
The products you ordered aren’t shipped on time
Your products don’t meet the quality standards
If either of these happen to you, AliBaba will pay for the goods and you’ll get a full refund. So using Trade Assurance is a fantastic way to avoid scams!
So how do you use this feature?
When searching for products/companies through Alibaba, check off the button that says “Trade Assurance.”
The next suppliers to be on the lookout for, are...
“Gold” is a premium membership for suppliers on Alibaba. Suppliers who pay the fee ($10,000 USD) are provided with comprehensive ways to promote their products which, in turn, maximizes product exposure and increases their ROI.
Because gold suppliers have to pay such a large amount each year, it basically weeds out scammers who are only after your money. What scammer would pay that much money?
This does not mean, however, that you’ll be paired with a reliable supplier, or one who supplies top-notch materials. You could still get someone who doesn’t respond to you, or someone who supplies cheap products.
To find a gold supplier on Alibaba, check off the box that says “Gold Suppliers.”
Not only has this wholesaler been a gold supplier for three years, they’re also a trade assurance supplier!
Which means, you’re protected when you order from them and you’ll rest easy knowing they’ve been in business with Alibaba for three years as a gold supplier!
Finally, you have...
Assessed Alibaba suppliers may be the very best suppliers to do business with.
Why? These suppliers are all…
China Gold Suppliers
Hong Kong Gold Suppliers
Taiwan Gold Suppliers
… who have been inspected onsite by a third-party inspection company.
They offer all the information for Alibaba’s Factory Audits, including…
Verified Main Products.
To deal with assessed suppliers, simply check off the “Assessed Supplier” button, and skim through the suppliers and products available.
Supplier Outreach Template
The first step in learning how to choose a supplier on Alibaba is to develop templates. You will use these for your initial communication with each manufacturer. This is beneficial for a number of reasons:
It minimizes back-and-forth.
There is standard information that we need to get regardless of the product.
Staying consistent allows you to more easily compare manufacturers and gauge their communication skills (the language barrier can at times be an issue).
Here is one template that I’ve used in the past with success. Please feel free to copy/paste and use this!
Alibaba Supplier Outreach Template
My name is [insert your name], Director of Purchasing for Fake, Inc. I am interested in purchasing [insert detailed product description], and shipping it to the United States.
I am talking with multiple potential suppliers. As I review my options, I was hoping you could help with the following questions:
What is the MOQ?
Can you provide the EXW price per unit at the MOQ?
What is the FOB price per unit at the MOQ, and for what ports do you offer FOB terms
What is the FOB price per unit at 2x the MOQ?
Can you please provide the lead-time in days?
How is the product packaged? Do you offer custom packaging
What is the size, weight, and number of cartons at the MOQ?
Do you offer product customizations? What is the typical cost of customizations?
What is the cost of adding a custom label to the product?
Do you offer free samples?
Thank you for your time.
Use simple and direct language with clear instructions.
Note that I am in contact with many suppliers to create competitive leverage.
In my template, I pretend to be a Director of Purchasing. Everybody likes to sign as the CEO, but you might as well sign it “I’m in my living room and I’m not wearing pants.” You want these people to take you seriously and avoid being taken advantage of.
Be sure to describe the product you want in detail, otherwise you’ll probably get a bunch of quotes for things you don’t care about. You may have to modify this from supplier to supplier of the same product idea, if each has a slightly different offering.
The Outreach Template: Question by Question
Now let’s tackle each question in the template:
MOQ = Minimum Order Quantity. This is the smallest number of units the supplier will allow you to purchase. For your first Amazon product, you probably want to start with as few units as possible to test the waters.
EXW = Ex Works. This is a shipping arrangement where YOU are responsible for getting the product from their warehouse to the port in China. As such, this is the lowest price point because it is the ‘true’ manufacturing cost. I ask for the price at the MOQ because there are usually quantity discounts over a certain threshold.
FOB = Freight On Board. This is another shipping arrangement, but in this one the supplier is responsible for getting the product to the port. The FOB price includes the transportation fees. This arrangement is highly recommended. Figuring out local transport in China is not easy and the manufacturer often has low-rate agreements with local companies, so they can get it done for much cheaper than you.
This question is a bit of a red herring, in that we will most likely not be ordering 2x the MOQ. But, if the supplier answers this question in a way that makes sense, it means that they speak English pretty well.
Lead Time – This is the time that it takes for the manufacturer to complete an order.
Packaging will be important for two reasons:
You may want to use custom packaging as a powerful marketing tool. It is a differentiator, a way to build your brand, and increases customer engagement. More about this in the Marketing chapter.
Amazon may have product prep requirements based on your packaging. I’ll cover this in detail in the Shipping chapter.
Cartons – Each of your products will likely be in a polybag, shrink wrapped, or a small box. When you place an order, your supplier will place a number of units of your product inside a larger box called a carton. This terminology is important because it is how you will communicate your shipment details to your freight forwarder. For example, my first shipment was of 400 products contained in 100 cartons that were 16x11x8 inches and weighed 21 pounds each.
Customizations – You likely won’t get a straight answer to this question up front, but understanding their capabilities is of utmost importance as you consider product differentiation ideas. You should modify this question in order to scope out the cost of your specific differentiation idea.
Custom Label – An optional marketing tool at your disposal is to print your brand name or logo directly onto your product or packaging. It is a relatively common practice among private labelers and a good way to increase credibility with your customers and differentiate from your competition. However, it can drastically drive up your manufacturing cost, so be careful.
Samples – In most cases, companies will offer samples for free, or will just make you pay the shipping cost ($15-50 in our experience).
Search, Negotiate, and Order Samples
The first step is to type your product name into the Search bar. The results can be organized by Products or Suppliers.
Scroll through and open 10 suppliers (in a new tab) that have high quality images and a relatively low price point, and send them your Outreach Template.
Be aware that the results will be made up primarily of two types of companies: Trading Companies and Manufacturers.
Trading Companies do not manufacture the items themselves and just act as a middle-man between suppliers and importers. They typically charge a premium, so avoid these companies and opt for the original equipment manufacturer (OEM) instead.
Click Contact Supplier to send them your template.
Repeat this process for each of your top product ideas. Most will respond within 1 day, but remember that these are most likely Chinese businesses, so you’ll usually need to wait until at least 8pm EST for a response.
Assess Each Supplier Carefully
As the replies start to roll in, make a mental assessment of the communication skills and professionalism of each supplier. If the language barrier is too steep, they aren’t worth your time. You will need them to carry out some very specific instructions in order to ensure your product is prepared correctly and eligible to be listed on Amazon, and you can’t take the risk that something will get lost in translation.
Generally, the suppliers who actually answer the majority of your questions will be the front runners (believe it or not, many of your template’s questions will be ignored).
As you go back and forth with your potential suppliers, keep in mind that everything on Alibaba is negotiable.
I recommend that you get creative with your tactics. The result could just be a minimized manufacturing cost.
Here are some tips and strategies:
Don’t immediately accept the first price you are quoted. Offer an alternative price and be prepared to haggle.
Tell them you only have a budget of $X. Miraculously, the next quote happens to come in juuust under budget.
Tell them that if this order goes well, you’ll be a long-term partner making repeat orders in the future. Use that as leverage to ask for a quantity discount on your first order, even though you’ll only be ordering the MOQ.
Use simple, direct language.
Be polite and complimentary whenever you can.
Pay Attention to Differentiation Capabilities
If you are making modifications to product features as a means for differentiation, then product sampling becomes doubly important.
Don’t be afraid to go back and forth with your supplier a few times until they get your product right. Remember – differentiation is the most effective strategy for capturing market share from existing Amazon sellers!
It’s well worth waiting an extra week to see a revised sample from your manufacturer before placing an order.
Alibaba is a wholesale marketplace where you can buy products in bulk, affordably. It’s arguably the biggest eCommerce website in the world!
With Alibaba you can buy a single item if you negotiate with a supplier and they agree to sell you one item. However, the real benefit of Alibaba is the ability to work directly with a manufacturer. You’re able to get high volume discounts and create your own custom products from scratch using your own designs.
Now, some people are confused when it comes to Alibaba and AliExpress so we thought we would break down the difference between the two below.
Alibaba Vs. Aliexpress
The difference between Alibaba and Aliexpress depends on what you’re looking for. With Alibaba you’re dealing with manufacturers selling products in large quantities but with Aliexpress you have branded products that you can purchase in single quantities for a slightly higher price.
Aliexpress is the retail to Alibaba’s wholesale. Business owners like to use Aliexpress to test products before placing larger orders on Alibaba.
You can dropship any of the products from AliExpress. So, you there’s no need to carry inventory, buy products in bulk, making it a low-risk business.
Manufacturer’s can ship products to your customers for you on your behalf, at a lower cost than traditional international shipping.
Products can be bought individually, so you can buy the exact number you need.
AliExpress is best for new entrepreneurs who are interested in: testing a new niche, experimenting with a range of products, low-risk businesses, and running a passive income business.
We wrote a huge guide on buying products from Aliexpress. You can check that out here.
Greater selection of products to choose from, in a broader range of niches
Create your own custom products from scratch using your own designs
Lowest wholesale cost per product
Alibaba is best for experienced entrepreneurs who: want to sell their own custom products, have the lowest prices, want to have a competitive advantage, and have an existing audience keeping their risk low.
Aliexpress vs. Alibaba vs Alibaba Wholesale
Like we mentioned above, you have 3 options when buying products on Alibaba. The option you choose will depend how far along in the process you are. The best price will always come from Alibaba. However, if you want smaller quantities then either Alibaba wholesale or Aliexpress are better options.
Make a decision based on the goals you have. If you’re just starting out and want to test products with a small order then Aliexpress is for you. But if you want to start placing larger orders then Alibaba wholesale is the better option.
Once you have established yourself and you want to maximize your profit move over to Alibaba and place the biggest orders you can. Each platform is designed to meet you where you are in your business journey.
3 Tips for Safely Buying from Alibaba
#1. Validate with AliExpress First
Before you go and make your bulk order on Alibaba, you need to make sure your niche and product are validated.
If you decided to create a yoga store, you might try dropshipping some products that you were interested in selling first.
Alibaba is best for experienced entrepreneurs who’ve already validated their products.
If you’re experimenting with Alibaba on your first try, you could be putting your business at risk, unnecessarily.
#2. Look for Reputable Suppliers
If you’re looking to have the lowest risk buying on Alibaba, you’ll want to check off all the boxes under Supplier Types.
Trade Assurance: packages arrive on time and products are checked before shipment.
Gold Suppliers: are pre-qualified, they need to pay a costly fee to attain this status which keeps scammers away.
Assessed Supplier: the supplier was inspected by a third-party and includes a downloadable report.
While checking off these three boxes won’t protect you completely, you’ll be in a better position than if you were to randomly choose suppliers with no assurance.
You’ll also want to go over their ratings and reviews to determine their quality, performance and reliability.
#3. Don’t Buy Brand Name Products… Ever
Nike, Disney, and Nintendo require licenses to sell their products.
Unfortunately, while Alibaba often sells knock-offs of their products, selling licensed products can result in legal action.
There’s no exception to this rule. So don’t sell branded products.