Its important to conduct proper due diligence when conducting a transaction, most especially online. Fraud is an inherent risk in any business dealings, either trading online or offline.
One needs to do due diligence when dealing with manufacturers and suppliers on Alibaba and other similar trade portals. one of the challenges to overcome will be the diversity in cultural perceptions and language barrier.I know how difficult it can be when negotiating and communicating with suppliers on Alibaba.
There are lot of things to better your chances of having a good experience with the Chinese people, but it requires some energy. I have decided to share some tips with you based on my personal experiences and researches.
Things to Note when searching for suppliers online…
1. Many so called “Manufacturers” are actually Middlemen Sellers. Have it at the back of your mind that you won’t be dealing with the actual manufacturers most times.
2. Everything is negotiable with the Chinese. Always try to get a fair deal and not a good deal. Negotiate in such a way that both parties would walk away saying, “That’s Fair”. If you try to squeeze the supplier’s margin, you tend to starting out a partnership with one side feeling slighted.
This has been one of the major reasons people get scammed. The supplier couldn’t ship the product profitably, so they disappear.
3. If you ask 20 suppliers if they can make a product according to your specifications, they will all say yes. The truth is, maybe one of them can actually do that. But never take their words for it. Always ask for samples and references.
4. For every one product available on the Alibaba platform, there are tons of suppliers selling the same product. Always search around and get a few prices and samples, then compare to get the best.
5. Always remember that the Minimum Order Quantity (MOQ) on Alibaba is negotiable. Although, you may have to pay more for a lower MOQ. you need to decide what is more important: Limiting your risk by reducing your inventory or buying the product cheaply. The result of your product testing will surely help you decide.
Now, Here are the things you need to do:
Carry out a research on the product you intend buying. Check out the market selling price, the varying levels of quality of the product, common substitutions etc. You have an adequate knowledge about the product before proceeding into negotiation with Chinese suppliers.
While sourcing for supplier, it was suggested using Google translate to convert the product name to Chinese and using the Chinese term to search Alibaba or other Chinese trade portals.
Chinese List price is always cheaper compared to the English list price. For example, the English list price for a football jersey was $15, whereas the Chinese listing was $7. Always Conduct an extensive research!
Be Clear as much as Possible in Your Communication
The greatest challenge of buying from Chinese Manufacturers/Suppliers remains Language. The language barrier is very real. Chinese speaks little or not English at all.
They frequently use translation programs to translate, and in most cases mis-translate e-mails. This can make the negotiation process a little frustrating.
When searching for a supplier, keep your initial email contact clear and straightforward.
Tell the supplier the exact product are seeking, your expectations in terms of quality, pricing details, cost of sample unit and including shipping to your address.
Here is a sample of simple email to send to suppliers and which I use most often:
“Hi (You can put his/her name here if you see it on their page)
I am interested in finding a supplier for (Insert product)
I have several questions:
1. What is your price per unit?
2. What is your minimum order quantity (MOQ)
3. What available colors do you have?
4. What forms of payment do you accept?
Contact many suppliers and request for samples. At times, I get 5-10 samples before choosing one. sure it will cost me money but its probably one of the most important decisions you will make in the business.
Be Ready to Walk Away
As with any business negotiations, always be ready to take a walk. If the price isn’t fair enough, walk away. From my experience, Alibaba suppliers would follow-up relentlessly, they will send an email with a better price few days later.
TIPS FOR CHOOSING AND RESEARCHING A SUPPLIER ON ALIBABA
1. Do they have GOLD Member status?
2. Check the suppliers company info. Do they have Telephone, website and valid email address?
3. Does their email address match the comoany name? Would you trust a supplier communicating with a hotmail or Chinese equivalent email address?
4. Although, this really isn’t an option for many people, try to visit manufacturer’s factory and tour of the factory floor.
If you can’t do that, at least pretend that you are considering coming and ask if you can set up a time to come by. If they say no, it might be a red flag.
5. Invoices should be clear, written in English and specify all clauses and guarantees. Does all the information on the invoice match the previous information you know and have collected about the company?
6. Check/search the forums on Alibaba: has anyone else been scammed? Is the manufacturer’s name mentioned at all?
7. What are the payment terms? Does the manufacturer accept Escrow? Escrow is the best way to pay suppliers on Alibaba. Safer than any other means.
Completing all these steps and point can help you have a good business experience and avoid being scammed. Remember, there is no replacement for common sense. If something feels weird, walk away. If a deal seems too good to be true, it probably is.
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