Buying Goods on Alibaba or From Overseas Manufacturers

Alibaba and similar marketplaces are tempting for small businesses and eBay sellers. The sites offer access to thousands of manufacturers on the Pacific Rim and beyond, selling direct to shoppers at below-wholesale prices.

Sourcing direct from manufacturers across international waters is a lot more complicated than many beginning eBay sellers imagine. You'll quickly find this out when trying to buy in volume this way, but you can spare yourself the harsh learning experience by going into the process with some knowledge. Here are a few key quirks, tips, and tricks to keep in mind as you shop on Alibaba.

B2B Isn't Like Consumer Shopping

Shopping business-to-business (B2B) is not the same as the average online shopping a consumer does on sites like Amazon and eBay. While sites like Alibaba look a lot like eBay, transactions don't always work the same. Listings may be samples or ads rather than items directly for sale. In many cases, the goods that you see on these websites are simply examples of what the manufacturer is capable of delivering.

Rather than just clicking "buy," shoppers on Alibaba need to specify a lot more detail to the manufacturer before they'll begin their manufacturing process. That isn't necessarily a downside to shopping on Alibaba. You'll often find that a manufacturer's capabilities and product lines are much more extensive than what you see in the listing. Sometimes you'll need to work with their designers or other partners to finalize an order. In other cases, there will be a negotiation about quantity, price, configuration, timeline, artwork, branding, and other details.

Products May Not Be "Consumer-Ready"

Buyers need to be aware that this is not your regular consumer space, and the products may not arrive ready to be sold to customers. A cosmetics order, for example, may include just the substances themselves, without cases, brushes, mirrors, branding, packaging, or any of the other things that shoppers typically associate with a retail product. Electronics items may be packaged in bulk—no cabling, manuals, or even casing. You could find yourself essentially staring at a pile of assembled circuit boards.

Turning the raw materials into units that individual consumers want and expect to buy may require additional work. Understand what additional work will be necessary before you place an order.

Payment Methods and Terms Vary

Rather than using standard methods of payment like your credit card, you may find yourself using international letters of credit. These letters of credit use banks or other third parties to validate and split up payments by phases (initial order, post-run, delivery, etc.). It's also common to set up a wire transfer through your bank.

Return policies vary, but any attempt to return product overseas can be a daunting task. It is safe to assume that a small percentage of faulty units may be part of the deal. When sourcing merchandise in the international B2B space, you may find that a higher percentage of defective items is part of the trade-off for the low cost of these bulk product orders.

Minimum Order Quantities Are Common

Manufacturers on Alibaba and similar sites usually process orders as production runs. They customize their production line to fit an order's need, then continually produce units until that order is filled.

That's why you may find that it's difficult to start with a "small" order of just a few hundred items. Some listings may clearly state that small or even single quantities are available, but others may require you to buy in quantities of 1,000 or more. Those order minimums aren't always compatible with eBay sellers and small businesses that are just getting started.

Pay Attention to Import Regulations

Participating in this space can make you feel like you're in the business of importing, and in a way, you are. The most successful business owners who deal with overseas manufacturers understand how trade regulations and import laws apply to their business.

It may be difficult to keep up with import laws at times. Both security measures and political leadership can change, sometimes rapidly so. Here are some basic tips to for beginning importers:

• Know what kind of license is required for importing your merchandise.
• Direct any questions to the U.S. Customs office at your product's port of entry (the exact place where your product will enter the country).
• Hire a customs broker if you find the process too complicated.
• Be prepared to receive a bill if your shipment is examined by U.S. Customs.

Communication Is Key 

Deals with manufacturers overseas come with uncertainties and details that need to be hammered out. Clear and effective communication is key to striking a deal that leaves both parties satisfied.

At the first hint of a language barrier, get a translator or native speaker—preferably one with experience in this kind of trade. A good translator offers not only language skills, but intuition, experience, and cultural knowledge as well. Use their full range of skills to help guide your decisions and secure a deal.

As with any aspect of business and negotiation, you have to know when your knowledge is falling short. Once you hit that point, get help. If you don't understand a listing or the technical terms used in it, you won't fully understand what you're buying, and you're more likely to be disappointed by the product. Some of the biggest mistakes in this process stem from misunderstandings and an overreliance on a listing's pictures.

Do Your Due Diligence

The user agreements of many online marketplaces for importers/exporters suggest that you use their listings at your own risk. This isn't an arbitrary warning; even when each party is conducting their business ethically, international trade in volume can be tricky. Check references and make extensive contact with them. Don't just take the supplier's word for things or rely on the ratings shown on the website.

Consider going through a trade agent. No matter the size of your order, a trade agent in the country of origin can handle logistics, do inspections on your behalf, and advocate for your interests in general.

Sourcing in the international business-to-business space can offer opportunities for long-term, profitable relationships for all parties. Be smart, do your due diligence, and you can find great partnerships and deals.