Alibaba is Really Reliable for Your Sourcing Demand?

POSTED ON 1st February, 2019

We have all heard of the e-commerce giant Alibaba and how it had a very small and insignificant start back in 1999 but grew up to become one of the biggest portals with massive orders flowing in every minute.

Of course, it is important to have some understanding of the working model of Alibaba to gauge. The possible problems and pitfalls and why buyers are complaining about it. So, let us first get into important details regarding the specifics of Alibaba.

Relation With China’s Foreign Trade

There is no denying the fact that Alibaba surely is one of the most active platforms in China. While its prolific presence can felt all over the world. We believe that it has acted as a befitting avenue which has helped international foreign buyers establish the best of cooperative business relationship with the different traders based in China.

It is owing to the presence of Alibaba that too many foreign companies have managed to become a part of China’s foreign trade. The fact that Alibaba operates on a massive scale infers that you are going to find nearly every kind of Chinese manufactured products listed here.

So, while Alibaba offers access to a wide multitude of Chinese sellers and companies. There are definitely some major pitfalls which we cannot ignore. As most of the dealers are fluent in Chinese and Mandarin, international sellers and buyers find it hard to establish the right communication link.

Even the website, though operational on such a huge scale, doesn’t have good English written. Due to which paints a poor picture to international sellers and buyers. That being said though; if you can dodge the communication barrier. The whole process of using the site and even promoting your product is definitely easy.

Let us see some of the other problems which have been making it hard for buyers to extract full use of this platform.

The Membership Dilemma

Since the last five years, Alibaba has made no move to increase its membership. The member count of the Alibaba international station has remained fixated at 100,000. While this is without a doubt a huge number. There is no denying the fact that when we compare it with the number of foreign trade enterprises which are present in China. The most populated country of the world. The number seems to be pretty less.

So, for the portal to flourish even among international buyers and sellers. It should make some modification to its member count and see if they can raise the number. This being said, there may be reasons for the fixated member count.

As Alibaba operates on a massive scale, there are a lot of details that have to be processed in the database. Not having a delimiting member count may turn out to be detrimental for the whole portal in totality and it could even lead to performance issues with the system. This is surely not the kind of scenario anyone desires.

So, it is unsure as to whether the decision to have no more than 100,000 members seems to be good or bad. Regardless, it doesn’t change the fact that it sure acts as a delimiter for traders who want to make the most of associating with the foreign trade enterprises in China.

 

The Constant Changes To Drive More Profits

As the member count is fixed. Alibaba needed to come up with great rules and ways by which they could make ample profits. Since they are not adding more members to their system, they devised another scheme to ensure that the company kept growing in their profits.

This is the reason Alibaba makes it a point to change their rules bi-annually. They mostly change their rules as a means of making the members buy different packages.

It has been seen that the distribution of members among different groups is so done and managed that if members end up buying more packages, it helps them get more traffic. This, in turn, leads to increased sales which correspond to greater profits. Similarly, those members who do not follow up with the different packages end up receiving very little or no traffic and thus they might get no orders which makes them face massive losses.

Model Designed To make Profits

Hence, the model of the platform has been designed to extract profit by forcing members to buy several packages. This has led to phenomenal growth and profit for the Alibaba platform but it is the members who end up being the victim.

This is even harder on the international buyers as it takes some time to get used to all these policies and they may end up losing a substantial amount of sales and profits in turn. Of course, this policy of making a profit doesn’t sit well with too many sellers and they end up getting harassed and looking for alternatives.

When members end up facing losses. They may make use of drastic measures so as to push sales and it is the end customers and buyers who end up suffering owing to it. So, Alibaba definitely needs to come up with better ways to push their profit numbers while taking control of their members’ needs and requirements as well.

The Top Booth Members

If you take a close look at Alibaba, you will find that the top booth is without a doubt one of their most important products. There is a top booth position for every industry and there is just one member who can buy this top booth. The price for the position is surely higher and the only condition which is present for purchasing the top booth is that the price has to be high.

This is seriously a major flaw in the operation because buying the top booth position is not influenced whatsoever by the operation situation or anything else. It is not even a representation of the leading position in the concerned industry.

However, once you have managed to gain the top booth position. You will support by most of the traffic coming in at Alibaba. This is why a lot of top international buyers contact the top booth members. They want to inquire more about the kind of benefits their top booth position helps them attain and they found that things weren’t as rosy as it looked on the outside.

Despite having paid a premium for the position. The top booth position doesn’t really place them as the leader board in the industry vertical they were operating in. This confused the sellers more and they wondered what rules and dynamics Alibaba truly operated on.

The Credit Guarantee Loophole

While we cannot discredit the fact that Alibaba remains one of the biggest e-commerce giants in today’s times, there is absolutely no doubt about the fact that there are endless complaints about the site too. Too many buyers have specifically complained of the poor delivery time and sometimes the products don’t even seem to have gone through a proper quality check as well.

So, if buyers place an order and they don’t really get what they are looking for or even of the delivery time is way past what was promised. The buyers definitely want their hard earned money returned back. Isn’t it? However, Alibaba claims to make use of the credit guarantee rather than sticking to the international protocol of the letter of credit.

Let us observe the details of how Alibaba controls the online attractions to have a clear picture of why the credit guarantee is a baffling issue.

Important Point to Win Buyer Trust

Alibaba has been so designed that it merely controls the different steps which are a part of the online transaction. However, it does not pay emphasis on the interests of the buyer. The need is therefore felt to make Alibaba a buyer-centric platform. Most of the top e-commerce stores in order to win the trust of the buyers make use of things like

  • Verifying seller’s identity
  • Matching the supply capacity limits
  • Checking the demand-supply curve
  • Having a quality control team on board
  • Having reliable dispatch and selling the team for trusted sellers

However, Alibaba doesn’t truly engage in all of the above and this is why a lot of sellers end up creating massive delays in the order delivery. As there is an absence of a thorough quality control segment. The products delivered are often not of the best quality either. So, in such cases when buyers end up filing a dispute or ask for a return, Alibaba simply judges on the basis of the information submitted by both the buyer and the seller.

It is inherent by now that mostly it is the members whose interest are protected by Alibaba. It is the members from whom the site gains the revenues. The members of Alibaba are the ones who are the direct contributors to the growth of the portal. The platform never intends to damage the interest of the members. This has led to resentment among buyers as they feel that their interests are not even taken into consideration when it comes to Alibaba.

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Sure enough, the rates are lucrative and the kind of products which one can find here is whopping. The absence of a sound system to keep their interest in check. The order delivery time and the quality aspect is beginning to hurt.

The Problem Of Counterfeit Products

While most buyers want to pay a ridiculously low amount and grab the most of offers and discounts, they do not want to compromise with quality and desire to get the authentic product exclusively.

The problem with Alibaba is that unless you know how to spot the right seller and navigate through the different details, you may end up buying a fake product. So, if you want to buy a branded product which comes with a logo, it is important to ask the supplier to offer a letter of authorization from the owner of the brand. This is also important to make sure that you do not end up being guilty of buying stuff who may have been infringing on someone’s copyright.

There are tons of sellers who indulge in malpractices like selling counterfeit products. As we have mentioned before, there is no rigid and stringent quality check on the platform and Alibaba ends up protecting its members more than the buyers, so you might come across quite a lot of such cases.

Perhaps, this is why a lot of buyers end up being dissatisfied with the kind of ordeal they have to go through for the sake of ensuring that they are buying right and genuine products.

The Gold Supplier Trap

Like we mentioned before that Alibaba has a lot of different packages for the members to make its revenue, the gold supplier seems to be one among the many. A lot of buyers end up confusing the gold supplier tag for trusted sellers who won’t hoodwink buyers.

However, what one needs to understand that this tag is by no means an indication of the trustworthiness of a seller. Yes, there is a little amount of protection when buyers choose sellers who have this badge but in the end, it merely a paid service offered by Alibaba.

The best way to make sure that you are choosing a trusted seller is to ensure that you see the old reviews and how long the seller has associated with Alibaba. This is likely to give you a much better head start.

The Dilemma With Trade Assurance

In order to win the vote of confidence of buyers, Alibaba does have something called trade assurance. It’s one such service offered by Alibaba which was designed to give customers the idea that they can have their money back if they are not satisfied with the product.

The trade assurance is like an escrow wherein the money held until you confirm that the products received adhere to the quality standards. However, the trick here is that the decision ultimately in the hands of Alibaba. When the users claim that the product isn’t of the best quality and Alibaba declines to accept it, your money would be directed to the supplier and there is nothing you can do about it. This too is another reason as to why buyers are getting skeptical of using this biggest e-commerce platform.

Factories And Trading Companies

When as a buyer you are looking to get the best sourcing from China for your products, you will find that there are mainly two broad categories of options that you have. You can choose to buy from either of the following.

  • Factories
  • Trading companies

Now, the factories are the ones who actually manufacture the products directly. As Alibaba is mainly a wholesale platform, they are also ready to deal with the user directly and tailor-make the products base on your specifications. Mostly, it is seen that the factories end up being an even more economical option because you are eliminating the possibilities of middlemen here.

No matter, which part of the world you are located in, all you have to do is get in contact with the right factories that deal in the product of your choice and you could have the item shipped to you.

Trading Companies

The next option is trading companies. These are mostly like the middlemen who are in direct touch with the factories. They end up selling you the products made by factories at a profit price of course.

The real dilemma for sellers is that a lot of trading companies pose as factories and they can easily hoodwink you. Not only does it add to the cost, but at the same time, it has the potential to lead to commutation gap as well. The fact that a greater part of China sourcing agents are not very fluent in English can make matters even more complex.

This is why as a buyer, it is important to, first of all, understand the specific details of the things to discuss with the factories or the trading companies so that should you end up in a dispute, you have your points covered.

Ideally, a bit which we would like to add here is that if you are looking to separate factories from trading companies, you should try and opt for those who specialize in a certain selected category of products. This is because most of the factories on Alibaba are the ones that deal in massive quantity. So, they are not too likely to branch out into multiple products. Having a narrowed list of a specific type of product is much more likely to be a factory. However, this is not a foolproof way of checking things.

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The Shipping Charges

For those who are new to Alibaba, it is important to understand the terminologies well. It is easy to confuse and end up placing the wrong orders. So, as a buyer, it is your responsibility to first understand the details of the terminology well and then proceed with your purchasing needs.

Let us talk about some of the terms every buyer needs to be thorough with.

  • The MIQ or the minimum order quantity: As Alibaba is a wholesale site, a lot of products come with a minimum quantity which you will have to order. Mostly, if you cannot meet this number, the supplier might not interested in making a production for you.

The trick here is to always contact the supplier and see if there is a possibility for negotiation. Given the stiff competition and the presence of too many suppliers offering the same product, it might be easier than it looks.

OEM

OEM: This stands for the original equipment manufacturing. If you are looking for Alibaba sourcing agent who could help you develop your own line of products because there is also the option for private labeling as well; you might need to know what OEM actually is. There is an OEM factory to whom you could send the details of your requirements, specifications and how you perceive the certain products to be. You would have a lot of customization option and a great say in the development process. Of course, once again, you should thorough and clear with what you need and when starting the manufacturing process, it always advised to ask for a sample before placing a bulk order.

ODM

ODM: This stands for original design manufacturing. These units give you product ideas. This is best for those who do not have the complete idea of the product and are looking for suggestions. Here, the factory would chip in details of the product ideas and you can definitely add your inputs but they will suggest the final options and you can then decide to place an order.

  • Trade assurance: As we have mentioned before, it is like security at Alibaba as the money held in escrow until you confirm that the product has received and in the right quality. However, once again, we want you to have a thorough sales agreement which outlines all possible points of dispute and the right actions accordingly. The absence of a detailed agreement could hurt the buyer terribly because Alibaba has designed to support the members of the platform.
  • The gold supplier: As we have discussed earlier, it is a paid service by Alibaba. Mostly, when you are looking to find the best sourcing from China, we recommend opting for gold suppliers because you know that these are the factories who are trying hard to sell their products and they are the ones who are serious about the business. But, be cautious as it is not a foolproof way to find genuine sellers.

FOB

  • FOB: As a buyer, this is by far one of the most important things you should know. This stands for free on board or freight on board. As Alibaba delivers a lot of products using different transportation channels, this terms means that the cost only includes the charges of delivering the goods to the nearest port. However, as a buyer, you would have to bear the shipping and other fees of getting the goods to your country. In a lot of cases, this could mean a great deal of money which means that you should thoroughly inquire about it beforehand.

This is one of the major bottlenecks for buyers looking to get goods from Alibaba. Sometimes, custom and duty charges can be staggering. This becomes an even bigger problem when all you want is a sample to check the quality and decide whether or not to place a bulk order.

So, those buyers who do not learn these dynamics and jump on selling and buying of stuff on Alibaba are the ones who are likely to face a lot of problems on this platform.

Alibaba has designed to safe and legitimate but given the massiveness on which it operates and the amount and kind of products which one finds on the platform, there bound to a few bottlenecks.

With more and more e-commerce companies jumping on the bandwagon, buyers are eyeing plenty of options. Still, nothing defeats the fact that Alibaba is the one-stop portal for nearly all kinds of products.

The China Factor

We’re all aware of how China known to build the purchasing empire on the principle of price erosion. Almost all kinds of products in China sold at jaw-dropping prices and the presence of too many inferior quality products makes it questionable too.

However, with the market becoming increasingly price competitive, one left with no option but to look for portals that cheaper. Alibaba offers exactly that. Being one of the biggest wholesale e-commerce giants, it has tons of sellers offering incredible deals. This often ends up confusing the users too.

The Unreliable Deliveries

One of the biggest problems is for buyers who buy in bulk and then sell the stuff to their customers. When buying products from Alibaba, the delivery time can often be questionable.

This can be a huge hindrance if the demand shoots the roof and you end up exhausting your supply because the next set of order might take a significant amount of time to arrive. A lot of buyers who work as re-sellers have been facing this problem. The buyers need to align the order way in advance to ensure that they can handle the problem. However, those who deal with products that may have to customize and modified from time to time face even worse issues.

The Conclusion

In the end, we do realize that several buyers want either some major changes in the way Alibaba operates or are even looking for a new platform wherein they could buy and set up their business.

However, one cannot change the fact that Alibaba continues to prosper despite the glitches and the members of the site are all too busy with the endless orders that they often receive.

The only possible solution is that buyers need to spend more time to understand how to handle the different options, spot the best sellers, enter into the right agreement, have a detailed contract, choose the genuine sellers, maybe negotiate as needed and then stick to the right kind of payment terms.

Alibaba is the kind of platform where even the buyers need to be at the top of their game to ensure that they get a fair deal out of it. For those who are always looking to buy goods for cheap, they definitely in for a profitable run.

Owing to the large scale manufacturing of good and the cheap sourcing from China. Alibaba is definitely able to offer incredibly jaw-dropping prices for a lot of products. We believe that this platform will continue to remain the best choice for wholesale buyers and re-sellers who are looking to carve a business of their own.

Yes, there are suppliers who want to work directly with you but beware of the endless scams which have happened in the past.

As a buyer, if you are able to do your bit and be thorough at your end, you might be able to make the most out of the Alibaba platform. For a platform so big and dealing in endless products, you cannot help but have a few loopholes.

Final Verdict

If one takes a look at the growth of Alibaba, it speaks its own success story. Yes, with the growing changes and the increasing popularity of the e-commerce channel, new portals may come up and it remains to see as to what the future holds for Alibaba.

However, for those looking for the best China sourcing agent, Alibaba is likely to remain the undisputed king for a long time to come. One can take a look at the detailed tips and tricks for buyers to spot the best ways of securing the right deals.

Knowing the suppliers to trust, entering into the right discussion, having a great quality control team, analyzing the cost, checking the custom and duties beforehand and having a streamlined network of regular and timely orders might just help wholesale buyers in eliminating the possibilities of troubles. Setting up and running a business is no easy task and when buyers are willing to put in a little extra effort, they might be able to cut down their production cost significantly by choosing the best of factories and trading companies at Alibaba. There is no denying the fact that it is very hard to get prices lower than what you would find on Alibaba.

Revenue

With net revenue of USD 39.898 billion in 2018 and a total asset of USD 114.326 billion, the company is definitely doing something right after all.

When Alibaba market cap stood at a whopping USD 352.28 billion on 19th December 2018, the company ended up breaking into the top 10 most valuable and biggest companies of the world. So, the growth of this platform hasn’t stopped and buyers should learn the best ways to optimize the most out of it because it surely has helped set a lot of online business afloat.

As of 2018, Alibaba continues to have the 9th highest global brand value and is only the send Asian company to break the 500 billion USD valuation mark. So, the statistics are surely in favor of this e-commerce conglomerate.

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