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That said, the traffic on Alibaba.com goes almost exclusively to Gold Suppliers. In short, being part of the program is a basic necessity for suppliers in China, who want to be found by prospective buyers.
Can I assume that all Gold Suppliers are safe and reliable?
There’s quite a bit of confusion among small business owners regarding the meaning, and importance, of a Gold Supplier Membership. Let me explain:
a. Alibaba Gold Supplier is a membership program for suppliers, advertising on Alibaba.com. It’s not mandatory, but a Gold Supplier get’s more eyeballs than a Free Member (x20 times according to Alibaba Group). It’s also an important revenue stream for Alibaba.com.
b. Alibaba.com ensures that every Gold Supplier is a legally registered company, unlike Free Members who are not verified. As such, Alibaba.com provides extensive information about Gold Suppliers, that can be used during the supplier vetting process. Such information is not provided for Free Members.
c. The Alibaba Gold Supplier Badge is not related to the suppliers’ manufacturing capabilities, product quality or product compliance in any way.
And why should it be? Alibaba.com is open for all sorts of companies, be it high end solar panel manufacturers or startups working from a garage.
But why should I care about Gold Suppliers?
Unlike Free Members, all Gold Suppliers are verified by Alibaba.com. In short, Alibaba.com checks the supplier’s business license, and guarantees that all listed companies are registered businesses.
Alibaba.com could just have left it to verify suppliers, and not share anything else about the suppliers. Luckily, they are a lot more generous than that.
Alibaba shares extensive information about each listed Gold Supplier, that can be used to vet suppliers. In fact, the Alibaba Gold Supplier database is by far the largest verified databank for suppliers in China and other countries in Asia.
Yet, many startups and small businesses are aware of this – and even less aware of how they can use this data treasure trove to avoid unqualified suppliers and zoom in on those that truly matter.
How can I use the information provided by Alibaba.com to select a supplier?
For example, you can use the Registered Capital figure, to determine if the supplier is a proper manufacturer or trading company.
The Year of Registration will tell you if the supplier is a new company, registered just a few months ago, or a veteran that’s been around for decades.
You should not expect to make a final supplier selection exclusively based on the Gold Supplier information. That being said, the information can be used to filter a large amount of candidates down to a more manageable number.
In recent years, Alibaba suppliers also have the option to upload factory audit reports, product certificates and other documents that can be used to make an even more precise supplier selection. Globalsources.com has also implemented similar functionality.
Notice on registered capital (2017)
We have received several reports stating that the registered capital is no longer available in the TrustPass Profile. There is, however, an easy way to access this information:
While the Trade Assurance program is only available to Gold Suppliers, it’s a risk management and payment procedure rather than a membership.
Company Information Overview
Below follows an overview of the Gold Supplier information provided by Alibaba, and how you can use it to make a supplier selection, and manage your risks later on in the process.
The information provided in the TrustPass profile is verified by Alibaba.com.
Date of Issue
This is when the supplier’s business license was issued. However, it shouldn’t be confused with the year of establishment for a new business license can be issued for a variety of reasons, such as if the supplier changes address, business scope or legal representative.
Date of Expiry
This is when the current business license expires. Not a very important piece of information for most importers since a renewal is a simple process.
This is a strong indication of the size of the company. A large registered capital (more than RMB 10,000,000) indicates a fairly large manufacturer, while RMB 30,000 is a strong sign that it’s a one man operation.
A very small supplier can be a risky choice since they have very limited resources. In a situation where something would go down south during production they might not even afford to repair or remake a defective batch of products.
It’s more important than it might seem. Payment frauds are fairly common and it’s critical that you only transfer your money to a bank account whose beneficiary name is matching the supplier name on Alibaba.com.
Country / Territory
The Country where the company is legally registered.
Some companies register at a certain address, but operates from another. There are various reasons for this. You should always stay away from suppliers who subcontract orders to other suppliers.
It might not sound like a big deal, but these subcontractors tend be low end sweatshops who produce cheap and low quality items.
The longer a company has been established, the more likely it is to be a decent supplier. Bad suppliers don’t last very long and scammers need to register new companies on a frequent basis.
This is the person that should sign the Pro Forma Invoice and the Sales Agreement. A document that’s signed by a sales manager or any other employee is not valid.
Limited Liability Companies tend to be more stable than Sole Proprietorships. That’s all you need to know about the Legal Form of a supplier.
The Government entity that issued the supplier’s business license. This should be in the same city as the suppliers registered address.
The information in the trade capacity page is provided by the suppliers themselves. Hence, it may not be accurate, but can still be used to vet prospective suppliers.
A supplier with a high export percentage is always preferable in comparison to a supplier whose only focusing on the domestic market. However, European and American suppliers need to be careful here since not every supplier is targeting these markets.
Those who are mainly focusing on Africa, Southeast Asia, Latin America or Russia are fairly unlikely to manufacture products that are compliant with American and European product standards – both legal standards and the quality level expected by the customer.
A famous brand as a customer is always a good sign since these companies apply a very strict supplier selection process. Yet, It’s quite rare that Alibaba Gold Suppliers even publish their Main Customers, mainly out of fear from competition.
Total Annual Sales Volume
An indication of the suppliers size and scale of business
Suppliers who mainly focus on exports are more likely to deliver products of a higher quality. They are also more likely to be aware of certain product certification standards in Europe and America.
Accepted Delivery Terms
All suppliers accept EXW and FOB while most accepts CIF shipping. I recommend beginners to order CIF since it brings the cargo to the Port of Destination.
Accepted Payment Currency
USD is the only relevant currency for American, and also, European importers. Many suppliers are reluctant to receive EUR since it’s been fairly unstable in the last few years.
This is the most common Payment Type. L/C (Letter of Credit) is also widely accepted, but small orders (below US$30,000) are in general not accepted if you want to pay using an L/C.
I also recommend importers stay away from Western Union payments, since the money cannot be tracked.
Minimum Order Value
Completely irrelevant in my opinion since the suppliers tend to stick to the Minimum Order Quantity (MOQ) Requirement rather than a Minimum Order Value Requirement.
This is the place from where your cargo will be loaded and shipped. Should be in the same province as the where the supplier is legally registered.
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.
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Co-founder of Asiaimportal (HK) Limited and based in Hong Kong. He has been quoted in and contributed to Bloomberg, SCMP, Alibaba Insights, Globalsources.com, China Chief Executive, Quartz Magazine and more.
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