Have you been thinking about starting your own business (online or not)? If yes, then this one’s perfect for you as we are going to share essential information, not just about the Alibaba business model, which is ideal for those who are looking at expanding current business offerings, but also how you can safely buy from it to ensure your own business’s success.
The advent of technology and the internet has definitely changed a lot not just on how we live our day-to-day lives, but even across businesses and industries. It has absolutely influenced a lot of how things are in the present times.
In one way or another, for sure, you have already encountered Alibaba.com, or perhaps you have heard about it from family or friends or colleagues.
Alibaba is known as the largest Chinese e-commerce company and a leading platform for global wholesale trade. Over the years, the company continues to develop services, which the main purpose is to help businesses be able to do more, at the same time, discover new opportunities by bringing hundreds of millions of various products, which comprise 40 different major categories.
Alibaba has definitely established a strong stand in the e-commerce industry. Too strong it doesn’t show any sign of breakage or slowing down. In fact, as of the end of June 2020, according to Statista, Alibaba’s “annual active consumers on its online shopping properties in China reached 742 million,” which is an increase from 726 million during the first quarter of the year.
Given the company’s stability, credibility, and reputation, Alibaba is definitely one of the best platforms if you are looking at expanding your current business offerings.
With that said, here’s what we are going to specifically tackle to help you better know and understand Alibaba:
- What is Alibaba?
- What types of companies do Alibaba work with?
- What products does Alibaba offer?
- What is the minimum order quantity?
- What to look for on Alibaba’s product pages?
- How to safely buy from Alibaba?
- How do you know if Alibaba is right for you?
WHAT IS ALIBABA?
First of all, let’s talk about what Alibaba is all about. Knowing what the company is all about — for some people — makes it more comfortable for us to do business. It’s about knowing the company’s credibility and reliability, which is very important when you’re doing things online, right?
Anyway, according to Statista, Alibaba Group Holding Limited, or simply Alibaba is the leading online commerce provider in China. The company offers a broad spectrum of various e-commerce services like B2B, B2C, and C2C, as well as mobile payments, and logistics services.
Apart from that, Alibaba is also involved in cloud infrastructure services, and China’s biggest online video site called Youku Tudou.
Over the years, the company has grown and is now known as the leading e-commerce provider in Asia.
Alibaba is the parent company of nine major companies. Although originally based in China, it has further operations in over 200 countries and territories, which makes the company even bigger.
A little confused?
Technically speaking, Alibaba (Group) is the world’s largest retailer. More so, it is also one of the world’s largest internet as well as artificial intelligence companies, and on top of that, the group of companies is one of the biggest venture capital firms and investment corporations worldwide.
It’s hard to say that Alibaba is like eBay or Amazon, because technically, it’s pretty massive.
Alibaba (Group) is very huge that, in fact, it has been beating all U.S. retailers in terms of sales and profits since 2015.
Here’s the thing though — today, we are going to specifically talk about Alibaba.com, which is the Group’s business-to-business (B2B) selling platform — the largest across Asia (which we have already mentioned a while ago). Alibaba connects international online sellers with manufacturers as well as suppliers, which is actually what most online sellers enjoy as it provides low-cost products to sell online.
Thus, if you are looking at establishing your own online shop, Alibaba is definitely one of the best platforms to find a manufacturer or supplier that sells the product you want at a very affordable price.
To put things simply, Alibaba.com is the ideal place for people who are:
- looking at buying products in bulk
- looking into importing custom-designed products and/or packaging at an affordable cost
- selling price-sensitive products
Meanwhile, if you want to know more about the true Alibaba business model, here’s a good reference we found from Invest With Stanley:
WHAT TYPES OF COMPANIES DO ALIBABA WORK WITH?
In this section, we hope to make you understand what makes Alibaba different from eBay or Amazon.
Specifically speaking, Alibaba caters to two major types of companies. These are:
- Trading Companies (like wholesalers)
Now, let’s dig deeper into each type —
Generally, manufacturers manufacture products in-house. They use Alibaba to promote their company and their products.
Normally, manufacturers list very high minimum order quantities or MOQz, which makes it ideal for online sellers who are looking into bulk-buying products. Needless to say, bulk-buying is actually cheaper in terms of cost.
Unlike in other platforms, stocks are rarely held by manufacturers on Alibaba because those who want custom products and packaging will also opt to have their company logo’s stamped on the products and/or packaging. Precisely the reason MOQs are high.
So, if you are going to look for products and consider buying from Alibaba, it means you have to ensure you have enough budget for it. Definitely not the best choice if you’re looking at buying just a few products.
Apart from manufacturers, there are also trading companies that sell products via Alibaba.
Trading companies refer to companies that buy products from factories and re-sell these products in smaller quantities. Normally, these products are unbranded.
Unlike wholesalers in other countries like the United Kingdom, Chinese wholesales do not hold stock. They basically source products on demand.
Similar to manufacturers, MOQs can be high as well. However, it’s possible to negotiate.
So, there you have it. These two are basically what you will find if you go check Alibaba. It’s probably safe to say that if you do not intend to buy in bulk, better check other online marketplaces instead to not waste time and effort.
WHAT PRODUCTS DOES ALIBABA OFFER?
In terms of products sold at Alibaba.com, we got to say that they have a pretty huge variety of product options.
They have almost everything you need. However, the ones that have the biggest percentage would be electronics and apparel.
Alibaba basically caters to any product you can think of based on the following categories:
- Apparel, Textiles & Accessories
- Health & Beauty
- Jewelry, Bags & Shoes
- Auto & Transportation
- Home, Lights & Construction
- Gifts, Sports & Toys
- Machinery, Industrial Parts & Tools
- Agriculture & Food
- Electrical Equipment, Components & Telecom
- Packaging, Advertising & Office
- Metallurgy, Chemicals
Please note that each category does have sub-categories, which are pretty extensive as well.
WHAT IS THE MINIMUM ORDER QUANTITY?
Earlier, we mentioned that Alibaba is the perfect place to be if you are buying products in bulk. But what does bulk mean really?
Technically speaking, the minimum order quantity varies from one seller (by seller we mean manufacturers and trading companies) to another.
MOQs are usually advertised by the seller. So, all you need to do is check the advertised product’s MOQ.
WHAT TO LOOK FOR ON ALIBABA’S PRODUCT PAGES?
Before we proceed to the next section, which basically talks about some points you need to consider when shopping at Alibaba, here are some important things that you should look into when checking Alibaba’s product pages.
Product pages are consist of the following very important information:
- Unit Price – The product page displays the most important thing you need — the product’s unit price. Normally, unit price does not include shipping or transportation of the product. It’s basically the base price of the product.
- Minimum Order Quantity – As mentioned in the previous section, you will find the minimum order quantity of a particular product on the product page. Again, the MOQ depends on the seller. It could be as low as 500 units or more. Knowing the MOQ will help you gauge if the product you’re eyeing is within budget.
- Payment Options – Every supplier does have its own payment options. While having several payment options is a good thing, it also has its cons. Some of the most common payment options you will find on Alibaba are upfront TT (bank transfer), letter of credit, Western Union, PayPal, and Escrow. Although Alibaba per se is legit, you have to be very careful when dealing with sellers as scammers are still prevalent.
HOW TO SAFELY BUY FROM ALIBABA?
Doing transactions online can be a little tricky. While there are legit sellers, there are also scammers – and you do not want to deal with scammers, right?
Unfortunately, even with marketplaces like Alibaba, scammers still do exist. So, to ensure your safety when making transactions via Alibaba, in this section, we are going to share with you some tips on how to safely buy from Alibaba – and these are as follows:
- Research about the Supplier
- Verify Suppliers
- Ask a Lot of Questions and Follow up
- Get Samples
- Too Good To Be True
Research about the Supplier
One of the easiest way to check the authenticity of a supplier is to research about them online.
You can use tools like “whois lookup” to check if the supplier you are eyeing for is telling the truth about who they are. This tool allows you to find out who the registered domain holder of a supplier’s website is.
This sounds a little tricky for you?
Well, you can also use Google — and based on the search results, you may find customer reviews or other vital information to prove its authenticity.
When choosing a supplier, as much as possible, choose the ones that have reviews or those that have been in the business for years. It’s not saying that new suppliers are not credible, but let’s face it, older suppliers have already established credibility and reliability (which is precisely why they are still here to this day, right?).
Alibaba is not as huge and as popular as it is now if it has not implemented ways to ensure they have no or at least limit scammers.
One of the many ways that Alibaba does to ensure the authenticity of suppliers is its verification program.
Alibaba’s verification program includes several levels of verification. These levels include:
- A&V Check
- Onsite Check
- Supplier Assessment
To give you an idea, here’s what’s being checked to be able to get these verification badges:
- Business License
- Contact Information
All that’s under A&V Check plus the following:
- Business Type
- Company/Factory Location
- Ownership Status of the Premises
- Photos of Supplier’s Operations
- Certifications from Subsidiaries, Partners, and Contractors
All that’s under A&V Check and Onsite Check plus:
- Main Product Lines/Services
- Human Resources
- Production/Export Capacity
- International Trade Capabilities
- Product Quality
- Production Process Management
- R&D Abilities
- Company Development/Expansion Plans
- Production Flow
- Verified Main Products
- Verified Videos
Once you find any of these or all of these verification badges on a supplier, you are assured that you are doing business with a legit seller.
You will find these verification badges on product listing as well as on supplier profiles.
Additionally, there are also independent third party services located in Asia that visit factories on your behalf. You can take their services to verify if the supplier is indeed legit or not. This is particularly applicable to those who are investing lots of money on certain products.
The last thing you want is to send payment only to find out you were dealing with a scammer, right?
Ask a Lot of Questions and Follow up
Once you have narrowed your supplier options, make sure to allot time to ask questions about their products and the company.
It’s okay to ask questions. Don’t be shy or feel hesitant.
If it’s necessary, you may also ask for a copy of their business license, as well as their contact information.
Consider meeting up with the supplier via online meeting platforms. Also, ask for photos of the factory and sample products.
Again, feel free to ask for any information that will make you feel comfortable doing business with the supplier. Legit suppliers do understand this process and will be glad to provide you with everything you need just to prove that they are legit.
If you are going to invest a significant amount of money on a particular product/transaction, well, it is only right to ask for samples.
By asking for samples of the product you are interested in, you get to check, at the same time, verify the quality of the product.
Whether you are an online seller or not, you’d always want to ensure you are selling a good quality product, right?
That being said, feel free to contact the suppliers you are eyeing for and ask for samples to compare and check the quality of their products.
Again, do not feel hesitant. It is, after all, part of the process.
Too Good To Be True
The last but definitely not the least tip we give you is that, when a supplier promises the skies and stars on you, you better take a step back – anything that sounds too good to be true when it comes to business usually is.
Normally, bogus suppliers give you way too low prices that really make you giggle, and on the spot, choose them to supply you with the product you need. However, make sure to think twice before jumping in. Sometimes –or most of the time — when the price is given too low as compared to how much you are actually expecting it, that’s not true.
As a buyer, always be willing to walk away from the supplier once you feel there’s something that does not feel right. Follow your instinct or you might just end up regretting your decision of doing transactions with them.
Again, its online world – as much as Alibaba tries to limit their platform to legit suppliers only, there are just people who know how to get their way to fool others. So yeah, be very careful.
HOW DO YOU KNOW IF ALIBABA IS RIGHT FOR YOU?
So, there are a lot of online marketplaces where you can possibly find a supplier to supply you with the products you need for your online store, but why choose Alibaba? How do you know that it’s the right platform for you?
Again, as we have mentioned earlier, Alibaba is ideal for those who are looking at buying in bulk orders. Bulk orders are usually cheaper and save you a lot in terms of cost. However, it also means you need a very good amount to invest.
If you do not have the money though, then, Alibaba might not just be the right platform for you.
FINAL THOUGHTS ON ALIBABA BUSINESS MODEL
There you have it!
Basically, what we are trying to say here is that Alibaba is perfect for aspiring business owners or those who are in it already but are planning to expand. It’s one of those online marketplaces where you get to find direct manufacturers as well as trading companies that sell products at a very cheap price in bulk orders.
Do you think Alibaba is the right one for you?