Is Alibaba.com safe for Small Businesses?

alibaba is safe

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Alibaba.com is the world’s largest B2B Portal where importers find products and suppliers in China. While Alibaba.com is a huge resource for finding suppliers and products, the safety of Alibaba.com has been questioned by business owners worldwide.When buying from Alibaba.com, there are two main risks: quality issues and frauds.

Based in the United States, Europe or Australia? Read this first!

Importers based on these countries must comply with both product safety standards and product labeling requirements. Product safety standards regulates various aspects of products, such as the following:

  • Substances (e.g. AZO colors, Lead, Cadmium and Formaldehyde)
  • Electrical safety
  • Electrical performance (e.g. charger efficiency)
  • Physical and mechanical (e.g. plush toy seams)
  • Product packaging
  • Labeling (e.g. CE mark printing on product unit)

So, how is this related to Alibaba.com? The issue for importers is that only a small minority (2 – 5% in most industries) of the suppliers listed on Alibaba.com are able to show previous compliance with these standards. If you choose a random supplier, without verifying previous compliance, you are very likely to end up importing non-compliant items. Importing non-compliant items is illegal and may result in a forced recall or a lawsuit.

Keep in mind that it’s YOUR responsibility to ensure compliance – Chinese manufacturers are not regulated by US, EU and Australian legislation. Before you get started, you must also determine which standard apply to your product, and then make your supplier selection based on this.

What is a Quality Issue?

You are much more likely to lose your money due to Quality Issues than receiving a container filled with brick stones. We’ll begin by explaining what a Quality Issue might look like:

  • Low Quality Materials
  • Low Quality Components
  • Incorrect color
  • Incorrect dimension
  • Cosmetic defect
  • Functional defect
  • Dirt and Damages
  • Noncompliance with certification standards (e.g. CE, RoHS and CPSIA)

Quality Issues are very hard to prevent since avoiding them requires that the importer selects the right supplier from the beginning and follows a Project Plan. There are two main reasons why Quality Issues occur:

1. Misunderstanding between the supplier and the importer

This is probably the most common reason why importers fail when buying from Alibaba.com suppliers. It’s common that importers fail to provide the supplier with clear product specifications such as the following:

  • Materials and Components
  • Colors and Graphical Design Files
  • Required Certification Standard (e.g. CE, RoHS and CPSIA)
  • Dimensions

The less you tell your supplier about your product, the less the supplier will know about your quality requirements. Even a fairly simple product, such as a Wristwatch, can be broken down into a large number of components and materials. Failing to specify a critical requirement forces the supplier to “fill in the gaps” and the result is often a complete disaster for the buyer.

2. The supplier cheats the importer by using substandard materials and components

This issue is similar to the 1st point since the root cause is almost always that the importer fails to provide the Alibaba supplier with a detailed list of product specifications. An unspecified product specification is an opportunity for the supplier to use cheap and substandard materials and components in order to raise the profit margins. Alibaba suppliers have plenty of reasons to cheat buyers, below we list a few of them:

  • Very low profit margins, often 2 – 3%
  • Aware of the fact that most small businesses importing from Alibaba.com are not product experts. This can be easily exploited since the importer cannot claim compensation when the product specifications were not clear to begin with
  • Aware of the fact that it’s very hard for foreign importers to claim compensation through the legal system

Clear product details will certainly make the supplier think twice before the scam you, the main problem is how you shall find all these product specifications. We suggest to review the product description on various Alibaba.com supplier pages and your competitors product descriptions.

Case Study – Wristwatch

A product is much more than its name, it’s the sum of its parts. In this Case Study we show how a simple wristwatch can be made in two completely different versions based on its product specifications:

alibaba is safe

You can be 100% certain that a wristwatch supplier would never deliver an expensive stainless steel watch case unless so is clearly specified by the importer. On the other hand it’s much more likely that the supplier “downgrades” the Watch Case and uses a cheap Zinc Alloy instead.

A Zinc alloy watch is not necessarily a bad product, but you certainly wouldn’t want to pay a premium price for this type of watch!

Selecting a supplier on Alibaba.com

The true benefit that’s offered by Alibaba.com is the amount of supplier data offered. If this data is used properly, then “bad suppliers” can be weeded out. Before we can spot bad suppliers we need to define what a good supplier is:

  • A supplier that is qualified to manufacture your products according to your product specifications and quality requirements
  • A supplier that is able to manufacture products that are compliant with the certification standard (I.E. CE, RoHS or FCC) in your country and/or market
  • A supplier that can offer a competitive price

Many importers are only concerned the last point, that is the low prices, while overlooking or not even seriously considering the first two points. It’s pointless to negotiate prices and order samples from an Alibaba supplier that is not qualified to deliver your products from the very beginning. Thus it’s critical to begin by confirming whether or not a supplier can comply with your product specifications and only then start comparing prices.

If you type in a product name you might find thousands of suppliers selling the same product. Most of these suppliers are not compliant with point 1.) and 2.) and plenty of scammers are out there. There are three main factors that set good suppliers apart from the bad:

buy on alibaba

Alibaba is safe, but…

.. Only if you are proactive and prevent issues before they happen. When your products are shipped from China it’s already too late. The first and most important step is drafting a list of product specifications. Without it you’re exposed to disastrous misunderstandings or receiving a product made of cheap and substandard components. Below we list a summary of the critical components for preventing misunderstandings and fraud;

  • Provide the supplier with clear product specifications
  • Select a supplier based on their competence rather than lowest price
  • Use the supplier data available at Alibaba.com when making your selection

Disclaimer

This article is provided only for informational purposes only and neither the author nor any companies and/or service providers mentioned in this text makes any representations as to the accuracy, completeness, currentness, suitability, or validity of any information in this article. This article only represents the views of the author and is not endorsed by any company and/or service provider mentioned in this text.