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You’ve heard the stories. Small businesses importing from China run into issues every day, and Alibaba is often (wrongly) blamed by buyers. But things are not always as simple as they may seem to be. In this article, we explain – and debunk – the three biggest myths and misconceptions about Alibaba.com, and its listed suppliers.
Myth #1: All Gold Suppliers are suitable for your product and quality requirements
We receive emails on a regular basis, from desperate importers that picked the wrong supplier online. Sometimes it regards payment frauds, but more often quality and compliance issues. This comes as a very unpleasant surprise for these importers, as they did their due diligence and picked a proper Gold Supplier.
For some reason, so many small business owners make the assumption that if they only limit their supplier selection to Gold Suppliers, everything else will just sort itself out. But things don’t simply sort themselves out in manufacturing. Let me explain:
Gold Supplier is a membership service offered by Alibaba.com. It’s also the supplier directory’s primary source of revenue. Not anyone can get listed as a Gold Supplier. First of all, you need to be able to pay the yearly membership fee, ranging between US$5,000 to US$10,000. The applicant must also be a legally registered entity. Alibaba also checks and verifies the applicant’s documents, such as the business license.
That’s a very good start. However, there are no requirements whatsoever when it comes to product quality and compliance with foreign product regulations (e.g. CPSIA and EN Directives). Think about it for a while – why should Alibaba.com exclude suppliers that are unable to provide documents proving previous compliance with European and American product standards? Yes, it would certainly make life a lot easier for business owners in the US and EU – but not so much for buyers in Thailand, Nigeria and Russia. These are also important markets, and often the primary countries for many Chinese manufacturers.
Then what about quality requirements? I mean, there should be some sort of minimum quality requirements set by Alibaba, right? The problem here is that there’s no universal definition of what good quality is. There’s no single ASTM or ISO standard specifying what “good quality” is. The concept of good quality can mean very different things in different markets, and even between individuals. It’s always up to the importer to clearly communicate quality requirements, which in turn are defined through product specifications (e.g. materials and design drafts).
That’s about it. A Gold Supplier is not much more than a registered company that paid a fee to get a digital badge added to their company page. Well, there’s one more thing to it. Remember what I said about Alibaba actually verifying the documentation of each supplier before they get listed? This is also where it gets really interesting.
Alibaba.com verifies plenty of company information, including its name, registered address, legal representative, entity type and registered capital. This is an incredible resource when sourcing suppliers in China, and other developing countries – where you normally don’t find publicly available company records. Through this information, you can determine if the supplier is a minor trader, or a leading manufacturer. However, this requires that you know how to interpret the data. If not, you are much better off handing the sourcing process over to a professional.
That said, without the verified Gold Supplier data provided by Alibaba.com, sourcing in China would be a whole lot more time consuming and risky. Indeed, it’s not much more than a first step of the process, but it’s a damn good one.
Myth #2: Only minor trading companies and agents are present on Alibaba, not the real manufacturers
A supplier search on Alibaba for LED bulb lights provides, as of now, 2,836 Suppliers – and 1,758,108 listed products. Many of these are indeed minor trading companies, rather than manufacturers. However, these are often easy to spot as they tend to offer a very wide range of, often entirely unrelated, products. They are also likely to set very low minimum order quantities, and not make any reference to compliance with US, EU or Australian product standards.
But among these almost 3,000 listed suppliers, there are also some of China’s finest manufacturers. They are indeed a minority, but they are present on Alibaba.com. For some reason, importers get upset when they find out that their sourcing agent is vetting suppliers, at least partly, listed on Alibaba.com. This is of course based on the assumption that if they were to buy from an Alibaba supplier, they might as well have done it themselves. But, as mention in the previous section about Gold Suppliers – if you don’t know how to interpret Chinese company information – you are not ready to make this supplier selection – be it on Alibaba.com or any other supplier website.
Trust me when I say that businesses, including those in China, are not trying to hide. There are no secret supplier networks where all the good ones are lurking. Chinese suppliers want business – they want to be found, and that’s why they get listed on Alibaba. That said, the “good ones”, if I can call them like that, are a minority of the total stock.
Myth #3: Alibaba suppliers are unreliable and cannot be trusted
What they say is true – there are scammers and suppliers shipping defective and damaged items. Indeed, many on Alibaba.com are not to be trusted. But believe it or not, in most cases the importer is to blame, rather than the supplier. Outright scams are actually not the most common reason so many importers are left holding the bag. The main reason spells quality issues.
Quality issues usually occur for two reasons. Firstly, because the importer picked the wrong supplier. One that was not able to properly manufacture the item to begin with (read minor traders offering rock bottom prices). Secondly, because the importer didn’t provide clear product specifications, including material standards, dimensions and other quality requirements.
If you make a random supplier selection on Alibaba, or worse, one that is entirely based on the pricing, you are very likely to end up with a supplier that is way below average. Trust me, you don’t want to deal with the average supplier either.
Then again, if you do manage to identify a highly sophisticated manufacturer, perhaps one of the leading suppliers in the industry, you must still provide your supplier with every single piece of information that defines the product, in technical terms. As said, there’s no universal definition of what “good quality” really is. Without specifications, you’re essentially forcing the supplier to fill in the gaps for you.
Not satisfied with them sending you a fresh batch of polyester shirts? Well, how the hell should they’ve known you wanted cotton? That’s an extreme case, but I’ve made my point. Nothing is too small or unimportant to be included in your product specification.
What about scams? I could hardly blame the importer for being defrauded? I say yes, and no. Payment frauds are rather common in China. Basically, the importer is mislead to make a payment to a bank account that is not operated by the actual supplier. Thus, the beneficiary name is not that of the supplier you are supposed to buy the products from. This is easily done by changing the name of the beneficiary on the Proforma Invoice.
In many cases, the importer assumes that “this is how works in China” and don’t give this, seemingly minor, detail another thought. Later on it turns out that the supplier didn’t receive the buyer’s payment, which is entirely true, as the importer paid to an unrelated company account.
These frauds are sometimes carried out by hackers, accessing the suppliers email account to secretly modify the payment details on the invoice. I have also seen cases where we’ve been almost one hundred percent sure that the scam was carried out by an employee of the supplier, perhaps even with the support of the legal representative.
Either way, dealing with suppliers in China is not an excuse to leave out common sense. Picture a supplier in your own country suddenly requesting you to make a payment to an offshore entity in the Bahamas. I’m quite sure you’d think twice before that transaction is settled.
So, back to the question. Are most Alibaba suppliers unreliable and waiting to fleece anyone that comes knocking on their door? Absolutely not.
Throughout my years in China, we’ve managed deals with hundreds of suppliers listed on Alibaba.com. Not once have one of our clients been forced to make a total loss.
But then again, this is the result of hard work and a strict due diligence and quality assurance process. Neglect these, and you are likely to find your wallet a lot lighter than it used to be. That is, however, as likely to happen on Alibaba.com as any other B2B online directory, or trade fair for that matter.
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.
Hey there, I’m Fredrik!
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