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How do I buy goods on Alibaba or from overseas manufacturers?

Buying direct online can be easy or it can be fiendishly difficult; be prepared

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How do I buy goods on Alibaba or from overseas manufacturers?

With volume direct-from-manufacture purchases, you become an importer, with all that this entails. Know the ropes before your plow ahead at full throttle.

Photo: Justin Sullivan / Getty Images

Amongst would-be and small eBay sellers, Alibaba and similar "manufacturer direct" marketplaces around the web often seem like the mythical golden goose. Here are thousands and thousands of manufacturers on the Pacific Rim and elsewhere, selling direct to Internet shoppers at below-wholesale prices.

Can it possibly be this easy to make money on eBay? Buy a thousand widgets from China for practically nothing, then turn around and sell them one-by-one to eBay shoppers at a massive markup. How can anyone lose? What's the catch?

It's Not About the "Catch"

While there's no "catch" per se, sourcing direct from manufacturer across international lines is a lot more complicated than many beginning eBay sellers imagine, as they quickly find out when they try to actually buy in volume this way.

  • Business to business is not the same as shopping eBay, even online. While sites like Alibaba look a lot like eBay, transactions on them don't always work like they do on eBay. In many cases it's not just a matter of clicking "Buy," paying by PayPal, and finding a box of a thousand manufacturer-direct widgets on your doorstep next Thursday—though it's possible for things to work this way at times.

  • Listings may be samples or ads rather than items. In many cases, the goods that you see on these websites are examples of what the manufacturer is capable of delivering, and the typical terms and costs under which this happens. Often, you'll need to specify a lot more detail to the manufacturer before they'll make things for you, or you'll find that their capabilities and product lines are much larger than what you've found 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 negotation about quantity, price, configuration, time to delivery, artwork/branding, and other details.

  • Manufacturer-direct may not be consumer-ready. Things taken for granted in the consumer space are often not a part of the deal in this space. A cosmetics order, for example, may include just the substances themselves, without cases, brushes, mirrors, branding, much less retail shelf packaging or any of the other things that typically go into a retail product. Electronics items may be bulk-packed, without cabling, manuals, or even casing (meaning that you could find yourself staring at a pile of assembled circuit boards and little more). Turning the raw materials into units that individual eBay consumers want and expect to buy may require much additional work and/or additional partners in a well-thought-out supply and logistics chain.

  • Payment methods and terms of sale will differ. Rather than whipping out your credit card, you may be looking at arranging for payment using international letters of credit on terms that split payments amongst phases (initial order, post-run, upon delivery, and so on). Don't assume that you can easily return any defective items in the batch; a small percentage of defective units or a small level of quality variation may be a part of the deal—when sourcing in the business to business space, you may find that it is effectively your customer service job to "eat" the bad apples as you sell your stock.

  • Minimum orders can be very large. Because these are often manufacturers doing production runs for orders, you may find that it's difficult to start with a "small" order of just a few hundred items; some listings may make clear that small or even single quantities are available, but others ask you to buy in quantities of 1,000, 10,000, or more—quantities that really aren't compatible with the just-starting-out stage in eBay selling.

  • Regulations apply. Buying in this space in many cases places you solidly into the "importer" category. Trade regulations will apply in ways that they effecitvely don't for the individual consumer, meaning significant risk to you and your business if you don't understand the laws surrounding import of the kinds of goods you're pursuing.

  • Communication is required; language is an issue. Because there are uncertainties and details to be negotiated in many cases, you may find that you need to communicate clearly and effectively in order to arrive at a deal that works for both parties. At the same time, many listings on websites like these are made by companies or representatives with minimal or idiosyncratic English skills. For large orders in particular, this means that you are unwise to risk time and dollars on a complex negotiation worked out in confusion and across a language barrier.

None of this is meant to suggest that there's anything illegitimate about much of the commerce in question—only that it operates on a different playing field from the one on which eBay operates.

There are, to be sure, some deals and sellers that can deliver in small quanitites, with consumer-ready goods, using conventional payment methods—but this shouldn't be assumed, and you should confirm the details in each case. In comparison to international trade in this space, eBay's market is very simple, predictable, and highly regulated.

How to Start

If you're interested in pursuing this kind of sourcing, you'll need to use some street smarts and common sense. While the range of opportunities and kinds of transactions are too broad to give a useful "step-by-step" style guide, there are some fundamentals that are easy to outline.

  • Have a basic knowledge of related regulations and costs. Do some basic research on importing the kinds of goods you're talking about. Google and local government offices are your friends here. You're a business planning to import goods of a certain kind, in a certain quantity. Form an idea of what's at stake, what laws you must comply with, and any regulatory or other similar costs involved before you begin.

  • Know when you're out of your league. If you don't understand a listing or the technical terms used in it, you probably don't understand either what is being sold or the terms under which it's being sold. Don't go by pictures, or by the half of the terminology that you do understand. Learn more, then come back.

  • Know your own limits. Have some idea of what you want, how much you're willing to buy at once, how much you want to pay, and what terms are acceptable to you in the context of your business model and market research. Don't bend later on; intead, move on. There's a reason you came up with these parameters.

  • Make professional contact. In every case, make contact with the seller or representative. Be brief and direct. If you know exactly what you're looking for, outline the needs and terms that you've decided on and ask (a) whether they can do this and (b) what else they will need you to do to make it happen. Alternatively, ask what the minimum order size and cost is, what typical terms are, and what else is needed to place an order. Don't tell long stories or describe your business to them; they don't care. Make clear what you want from them and make it easy for them to provide short, unambiguous answers.

  • Get a translator. At the first hint of a language gap, get a translator or native speaker—preferably one with experience in this kind of trade—to act as an intermediary for the negotiations and discussion of terms and details. Rely not only on their language skills, but on their intuition, experience, and cultural knowledge to help guide your decisions.

  • Do your due dilligence. The user agreements of many online marketplaces for import/export clearly suggest that you use their listings at your own risk. This is no accident; even when everyone is on the up-and-up, international trade in volume can be fraught. And not everyone is on the up-and-up. Check references and make extensive contact; don't just take the supplier's word for things, or rely on the ratings shown on the website.

  • Consider a trade agent. For orders of any size, consider taking on the services of a trade agent in the country of origin—one that can handle logistics and do inspections for you, advocating for your interests at every step along the way and helping you to avoid the speedbumps that are otherwise only known to veteran traders in this area.

  • Consult the experts. You may be an expert in widgets of the kind that you specialize in selling, but you're probably not an expert in international trade, regulations, customs, duties, and other related issues that can translate to real dollars and real headaches. Trade and customs attorneys, bankers, and industry consultants are resources here; think seriously about meeting with them for advice on deals of any significant size before they are finalized or any funds change hands.

Sourcing in the international business-to-business space can be a great opportunity and can yield long-term win-win relationships for all involved—but it's important to realize that if you plan to rely on this kind of sourcing for your business, there may be much more than "point, click, buy, re-sell" involved. Be smart and you can find great partnerships and deals; fail to think like a serious professional and you could end up in deeper water than you imagined, even if there's no "catch" involved.

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