Is Alibaba Safe? What Every Online Retailer Needs to Know

“Is Alibaba safe?” Just like the Arabian legend, this gigantic online marketplace can take you on quite the adventure.

If you are a first time visitor to Alibaba, it can be quite a daunting experience. If you run an ecommerce store, you’ve probably heard stories of how people were scammed while buying inventory and you’re worried it will happen to you.

As in every marketplace, there are both good and bad suppliers, but if you do your homework, you don’t have to worry about them.

Take a look at the guide below to see how you can have a positive experience when buying from Alibaba.

Is Alibaba Safe?

Alibaba is the biggest ecommerce site in the world if you had to look at numbers alone. In fact, it is bigger than both Amazon and eBay combined and has hundreds of thousands of suppliers selling virtually everything under the sun. Such a large marketplace can’t survive if it is plagued with fraudulent suppliers.

Alibaba is a safe and reputable ecommerce platform. It has strict regulations that strive to keep all your transactions secure. Ultimately, though, Alibaba is a platform that connects buyers with suppliers. Hence, it is up to the buyer to perform due diligence before dealing with a supplier. In case of any fraudulent activity or misuse of services, Alibaba does intervene. However, it is advisable to do some research before making payments.

There are several ways you can do that. One of the best ways is to choose the safest payment option available to you – in most cases, this is PayPal. Even though PayPal is not officially supported by Alibaba, you can come to an agreement with your supplier to use this platform. However, we recommend choosing one of Alibaba’s accepted payment gateways instead as they can intervene on your behalf if payment problems arise.

Alibaba also offers Trade Assurance, which protects you in the event that your products don’t reach you. However, you will need to make sure that a supplier actually offers Trade Assurance.

Alibaba vs. AliExpress: What’s the Difference?

Alibaba and AliExpress are both part of the Alibaba Group. However, they both have different business models, payment options, and shipping conditions. Here are the main differences:

  • Sales Model

Alibaba is a business-to-business marketplace (B2B) for manufacturers, which means it does not cater to individual customers since the majority of the items are sold in bulk quantities. It’s not impossible to find individual products for sale. However, they tend to be higher-priced items such as refrigerators. Dropshippers also use this site regularly.

In contrast, AliExpress focuses on selling products to individual customers who require products for their personal use. AliExpress is also a retail and dropshipping site that connects Chinese businesses to international sellers and online retailers.

  • Product Type

Since Alibaba is a wholesale marketplace, it sells larger quantities of smaller items and smaller quantities of larger items. Orders usually have a minimum order quantity (MOQ), which is the number of items you need to buy to fill an order. The MOQ is often negotiable if you think the number of items required is too high. Because of economies of scale and there being no middleman, items are often sold at discounted prices.

AliExpress is a retail marketplace that sells items with higher margins, like electronics, clothing, jewelry, and personal care products. The prices of these items may be marginally higher when compared to Alibaba.

  • Supplier Rating

Alibaba has three types of supplier verifications. The staff at Alibaba make sure supplier company information is correct and that manufacturers have a physical facility. They also need to pass an Authentication & Verification (A&V) check to become “Gold Suppliers.” Additionally, third-party verification is also required for any product claims.

Even though you can rate a supplier, you do not have the option of rating individual products.

AliExpress, on the other hand, has a simpler supplier verification method. Vendor ratings are displayed as “Feedback Scores”, which include ratings on product quality, communication and speed of delivery. Some suppliers also offer a Buyer Protection Plan, which guarantees refunds for defective items or non-shipment.

  • Experience

Alibaba is best for experienced online retailers who want to sell their products at the lowest price, want customized products, and have existing buyers who keep coming back, keeping their risk low.

AliExpress is a better option for beginner entrepreneurs who want to test a new niche, experiment with different varieties of products, and want to keep their risk low.

  • Shipping Costs

Shipping with Alibaba is a complicated experience. Since most orders are in bulk, they arrive at seaports via boats. Your shipping cost may include “Free on Board”; however, you will need to pay for shipping from the port to your warehouse.

If you are ordering from Alibaba, you should give shipping insurance some thought, This covers your items until they reach the port. From there on out, the responsibility for damages is yours.

AliExpress shipping costs are simple and familiar. Many suppliers offer “free shipping” which means the cost is rolled into the products. Most items will come from China, so it may take weeks for them to reach you. To check out how long it takes, order a few items to test the processing, shipping, and delivery time.

  • Payment Methods

Since Alibaba focuses on the wholesale market, payment methods are optimized for large orders and international shipment. Therefore, payment methods such as wire transfers, letters of credit, telegraphic transfers, lines of credits, and eChecks are offered. Sometimes, you may also have the choice to pay with credit cards.

AliExpress is made for retailers and the individual shopper, so consumer-friendly options such as credit and debit card payments through a service called AliPay are offered.

How to Evaluate Alibaba Suppliers

When evaluating suppliers, you need to be aware of:

  • Low-quality products falsely advertised as high-quality or premium products
  • Middlemen who pose as manufacturers but sell their products for higher prices
  • Scammers who will take your payment but never deliver anything

Although Alibaba has taken measures to combat scammers, some often slip through the cracks.

One of the founders here (Ed) has made a video to show you the process we follow when looking for reputable suppliers.

To safeguard yourself from these, you need to perform due diligence:

Alibaba’s Verified Suppliers: Alibaba has a three-tier verification process, which can root out many unscrupulous people trying to take advantage of the system. Once verified, Alibaba will add its badges to these supplier profiles and their product listings.

In addition to these verifications, you can also hire independent third-party services that can visit factories in China and verify the legitimacy of your supplier. If you are running a gig worth hundreds of thousands of dollars, spending a few hundred dollars to verify a supplier in person isn’t a bad idea.

Gold Suppliers: Gold Suppliers are verified by Alibaba and are given an exclusive membership, which includes more exposure and other perks. You won’t go wrong doing business with these suppliers.

Since the Gold Supplier membership is expensive, it should mean you are protected from most of the scarier scammers. You should also check out how long a manufacturer has been a Gold Supplier – the longer, the better.

Assessed Supplier: This is a manufacturer that has paid a third-party service to verify the legitimacy of their business for them. These supplier profiles will also have extra details about the company and its performance. Additionally, this assessment is difficult to achieve, so if a supplier has been vetted as an Assessed Supplier, it is a good indication that they run a sound business.

Trade Assurance: Trade Assurance is a guarantee that if your product is not shipped in a satisfactory condition or not shipped at all, you will get your money back. If you tick the Trade Assurance box beneath the Supplier Types  menu, you will only be shown products from sellers that offer Trade Assurance.

Don’t Buy Branded Products: Brands like Disney, Marvel, and Nintendo require licenses and have strict rules regarding distribution. So, if a supplier claims they are selling authentic branded products, they are probably trying to scam you into buying a cheap knock-off. Even if the products are the real deal, it can result in legal action if you sell branded products without a license.

Transaction History: When you go to a supplier’s profile page, you will see a section called Transaction History. You can find out how many transactions that seller has processed. If there is a large number of transactions, it means the company has been in business for a while.

Alternatively, you can also check out the Transaction Level of a supplier. This is represented by orange diamonds and is a score awarded to the supplier for the number of transactions they’ve processed on Alibaba. The higher the score, the higher the number of transactions — which points to reliability.

Ask Google: Before considering a supplier, you can check their reputation online. Websites like Supplier Backlist are a good way to find out if a supplier might be dodgy. Some red flags include:

  • First product shipment turns out great, but the second one is of poor quality
  • Consistent complaints about defective or broken products
  • Poor working conditions in the factory
  • Supplier asking for advanced payments outside of Alibaba
  • Unrealistically low product pricing

Sample It: You should test out a few product samples before you buy thousands of units. Sometimes, items may look different online, so you should verify whether the product meets your criteria. Some suppliers will send you samples for free on request, but others will require you to pay for the unit. No matter how you get the sample, it is important that you evaluate the quality.

Too Good to be True: If a product looks too good to be true, it probably is. If a supplier is offering you a great-looking luxury product for an unrealistically low price, it is pretty fishy, and you should steer clear of them.

How to Start Selling Products Online

Once you have acquired your products from Alibaba, it is time to resell them on your ecommerce store. Here are some of the best platforms to use:

Shopify

Shopify allows you to build a customized online store for your brand. It is not free to sell on Shopify, but there are various payment plans, and the transaction fees are competitive when compared to other ecommerce platforms.

It also has over 100 payment gateways and you can use your credit card to get set up. Additionally, you can also install apps on Shopify that allow you to promote your products on Instagram, Etsy, Amazon, and eBay.

Here’s a step-by-step tutorial on how to set up a Shopify store:

Amazon

Amazon is the largest internet company in terms of revenue and one of the most popular places to sell products online. Retailers who set up shop on this ecommerce platform will have the benefit of Amazon marketing their products for them.

Amazon offers two selling plans: the Individual Plan and the Professional Plan. The Professional Plan is a monthly subscription plan that offers perks like the use of feeds, spreadsheets, and other inventory management tools, access to seller reports, customized shipping rates, top placement of product detail pages, and no transaction fees.

The Individual plan offers many of the same perks but requires you to pay Amazon a small fee every time you sell a product. You can scale up to the Professional Plan anytime you want.

Etsy

Etsy is perhaps the most popular marketplace for finding hand-crafted items. Sellers on Etsy take advantage of many benefits like customers looking for products not easily found on other online marketplaces. Sellers can also customize their items or join forces with other sellers to promote their products.

The platform has an “Etsy Wholesale” feature which connects you to wholesale companies who may be interested in selling your products in their stores. You have to pay a one-time fee and a small commission for every product sold.

The best part is that unlike other online platforms, Etsy does not have a subscription plan, but keeps its rates consistent for all types of sellers.

Before You Set Up Your Ecommerce Store

Now that your store is up and running, it is time to sell your products online. Here are some things to keep in mind:

  • Carry out thorough market research. Find out who your prospective buyers are so that you can target your promotional campaigns towards them.
  • Optimize your product titles, descriptions, and categories. Use the right keywords and stunning images, so that consumers will be attracted to your products.
  • Prepare to advertise. If you are serious about running an ecommerce store, you will need to put some advertising budget aside so that your ad pops up at the right time in front of the right audience.
  • Make sure you understand how your online marketplace works. Each platform has its own payment requirements, commissions, and transaction fees. Be sure you understand this to avoid any nasty surprises in the future.
  • Stay competitive. It’s necessary to adjust pricing time and again if you want to stay competitive. Even a variation of a few cents can help divert traffic from your competitor’s store to yours.
  • Ecommerce customers demand free and fast shipping. To ensure this, you will need to diversify your shipping strategy. Some sellers use programs like Amazon FBA, while others use a mix of USPS, UPS, and FedEx to deliver their orders. Whatever strategy you choose, you should provide delivery options and your carrier should have competitive pricing.
  • Don’t forget to remind your customer base about your store. Send email newsletters, add CTA buttons on your website or run a promotion on social media. Whatever you do, it should prompt your customers to buy from you.

Bottom Line

Finding a reliable supplier from Alibaba may be a bit tricky but it can be very rewarding in the long run. With some basic research and putting safeguards in place, getting your inventory from Alibaba is safe.

The best thing about Alibaba is that it gives you access to an unlimited number of suppliers. If you feel uncomfortable working with one supplier, there are plenty of other fish in the sea. You will have ample opportunity to walk away from disreputable suppliers.

You just need to use common sense and do business with suppliers that pass the necessary assessment checks to make this work.

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