Using Alibaba to Make Money Online

• • China is one big factory, Alibaba is the shopfront, inevitably you will always get people trying to act as an intermediatory, unnecessarily: These are the middle-men.
  • These guys will intercept everything you do, and although may help you along the way, they will put a smokescreen between you and your manufacturer, they will hold all the power and be able to charge what they want to you. 
  • Visiting the factory is always the starting point that I would recommend. It allows you to cut through the salesman talk and get straight to the point. You can do this in person, or have an independent team do this for you. I would advise the independent team, for a few hundred dollars/ pounds you can have peace of mind and a full report for your records. 
  • You don’t need to have someone there on the ground all the time. But to ensure that you have the best deal possible then you want to cut straight through and deal directly with the factory itself.

The other group of people you want to avoid like the plague are:

Scammers

• • The bottom feeders I like to call them.
  • These guys are the worst, and these are the horror stories you hear about. 
  • Like anywhere in the world you will get people taking advantage of the people just starting. 
  • You need to be aware of these people, they do exist, they are out there, and only through due-diligence and cross-checking, you can weed them out.

Let’s talk about… Quality

I could talk about quality for a while, and indeed we do discuss quality at length. When you find a supplier on Alibaba, there will always, always be a difference in what you (the buyer) and the supplier believe to be high, good, average and poor quality. There always will, because this assessment is subjective. Not objective. 

Do not underestimate quality understanding. If you are trying to build a brand, or even supply Amazon FBA products, then the quality has to be at the forefront of your supplier discussions.

How do you protect yourself from the above negatives when sourcing from Alibaba?

There is no one silver bullet. It’s about due diligence, experience and (unfortunate if travel is impacted) being there on the ground. It’s no secret that this process is fraught with danger. The biggest danger, in my opinion, is getting poor quality products in your customer’s hands. That brand damage is almost impossible to come back from.

So how do you protect your interests?

Supplier Verification

• • Alibaba offers a verification service in their system. This service is perfectly adequate if you want to get an understanding of the supplier, and indeed the suppliers have a rating system that allows you to gain only Alibaba approved suppliers.
  • This service is adequate, but as with everything in quality, the ‘quality’, unless objectively assessed through a truly independent auditing service is just that; open to interpretation.
  • You can also verify your supplier in person; there should be no reason why any facility wouldn’t let you visit. If there is any resistance to this, then this should be a red flag.
  • Use a 3rd party auditing service to verify your supplier. For the sake of a few hundred dollars, the risk is not worth it.

Get into the details.

Once you have sent out your RFQ (we will discuss this later)  and you are starting to narrow down your suppliers in detail. Start to ask detailed questions.

Is there a minimum order?

• • Minimum orders are important to know, as explained previously, but showing an interest in their details will allow you to ensure you understand what they have stated. 
  • Get into the detail with the MOQ.

Can you provide any previous customer testimonials?

• • It’s always a good idea to discuss with other companies to gauge the service that the prospective supplier is advertising.

Do you have liability Insurance, ISO accreditation, export documentation and business licences?

• • In all honesty, the answer will be some confusion, and you will get sent something that may resemble an insurance document but:
  • The more documents and information that you can build up around the prospective supplier, the better. Not only for peace of mind but in the event of any conflict further down the line. 
  • Also ask if they have any other documentation that they can provide, business licence, export licence, ISO accreditation etc. The more, the better.

What payment terms are offered?

• • Different suppliers work on different terms; you need to understand who pays for what at what point in the process.
  • FOB is the most popular, but if its Ex Works and the company does not have an export licence, you can be held holding the baby; and the export bill.

Under what conditions may prices change?

• • It’s important to have this written into any contractual agreement that you may make, but in the initial factory visits, it’s a good question to ask.
  • MOQ’s can also change, so its good to get something in writing when you have struck up a deal. Be very wary of suppliers who are not willing to sign into a contract.

When do I take ownership of the products?

• • Usually, factories use FOB, which means free on board. But ask, ask and ask again. You must understand when you will own the products. 

How do you handle communications with the customer?

• • It’s always a good idea to get an understand of the roles and responsibilities of factory key team members. 
  • Ask for the project owners We Chat. See if they can speak in your language, or a language you can understand. 
  • If not, you want to be thinking about getting someone who can help you out translating and assisting.
  • If you don’t have someone there on your side in the factory on a big order, things inevitably will go wrong. 
  • Don’t be afraid of hiring a third party to be on your side in facility overseeing your production. These guys will be there for you, keeping you updated and best of all, keeping your mind at ease with your investment.

How long have you been in business?

• • Get a good understanding of the company that you are dealing with, including any background information. 

What other products do you offer?

• • Please have a look at the other items that they produce. See what the quality is like of the current stock of products.
  • See what they have in stock, see if they have any other items that you could capitalize upon.

Get samples

Gaining samples is imperative in your strive to problem-free manufacturing; we talked before about objective and subjective quality. Samples are the best way to categorise quality objectively. 

Ask questions about the samples too:

How is the sample I am receiving different from the production model?

• • This is important…. In all industries, different production techniques are used for the prototype samples. It’s important to not only understand this but also understand what may differ from the samples to the production product.
  • Measure the samples, make sure things are aligned. 
  • Hold the supplier accountable for the sample in production.

Sample

Sign off the sample too- Ensure you agree upon the sample that production should adhere to. No manufacturer can work to the same measurement every single time. So agree upon a tolerance or variation of the critical areas and use real measurements to take them from the objective realm into the subjective assessment. 

The fun starts

So this is when the fun starts, you know what product you want, you know which questions you need to ask, you have a rough idea of quality and you know which suppliers you want to be contacting. 

Now is the time to produce your RFQ. 

RFQ what information should it hold?

An RFQ, or Request for Quotations, but is a process whereby you have an idea for a product (a new original idea or existing product), list down its specifications, material, size etc.… and provide the document to suppliers for them to respond with a quotation of piece price and lead time based upon the information provided in the document.

This (like anywhere) requires a certain amount of trust, and a fine balancing act (not giving too much of a good design away in an initial RFQ is imperative). An RFQ content depends very much upon the product being quoted for; it usually contains the specifications of the items/services to make sure all the suppliers are bidding on the same item/service. Logically, the more detailed the specifications, the more accurate the quote will be and comparable to the other suppliers, I would always recommend (if you are looking at sourcing original content) to have many RFQ’s to determine if the supplier is capable of manufacturing the requested items. There is no point in sourcing clothing from a steel pipe supplier! 

The core items to include in your RFQ are: 

• MOQ
• Request a pricing structure for samples 
• Production cost (and possibly a breakdown, including tooling costs)
• If applicable; who owns the tooling
• Lead time
• Payment terms
• Delivery terms

The suppliers must return the RFQ by a select date in usual circumstances. Its always a good idea to ensure a follow-up meeting is pencilled in to ensure the supplier has fully understood the RFQ and any particular nuances.