It can be quite a challenge to start looking for your suppliers on Alibaba. You want to make sure to choose wisely and know what things to look for. This article will go into detail about the intricate, yet straightforward process of finding your suppliers on Alibaba.
Types of suppliers
There are three types of suppliers: wholesaler, factory, and trading company.
Let’s cover the first type, wholesalers.
As a rule of thumb, wholesalers are the type you would want to avoid. They are simply intermediaries, whether an individual or an actual company. Why should you avoid them?
Wholesalers typically operate by taking advantage of sellers and businesses. Especially those who are inexperienced. And those who don’t know how to use Alibaba or other online commerce platforms.
Wholesalers do not add any value to the supply chain. To put it simply, they are making a profit based on the fact that you weren’t able to differentiate between them and a real factory.
With the wholesalers out of the way, there are two other types of suppliers to cover: factories and trading companies.
Trading companies vs Factory
Now, there is a piece of common advice, saying that you should avoid trading companies.
However, it is extremely hard to find true factories.
How do a trading company and a factory differ? The answer is easy. A real factory would have long assembling lines and machines and workers. Versus a trading company, where you would see people work at desks in an office space.
As a matter of fact, most factories in China are a mix of the two. They might import certain components, or source them from other factories. They might not manufacture certain parts themselves. Actually, companies rarely get raw materials and assemble every part of the end product from scratch. Most of them import or source from other factories. Therefore, pure factories aren’t necessarily what you are looking for.
At the same time, if you are talking about a pure trading company, this is something you may encounter. You can imagine an office is a tall office building. It might have a bunch of people in front of computers and with their headsets on, talking over the phone or Skype. And they don’t have any type of factory floor, no workers, no machines. Now, that’s a pure trading company.
Trading companies aren’t necessarily bad or something to avoid. They may add a lot of value. They may have employees that speak great English.
And that can help you with your requirements and help you customize the product you are sourcing and get you the best prices. If it is a big trading company, it may obtain a much better price from the factories that they work with. Compared with the price you would be told as a foreigner.
Some trading companies also work with factories that don’t have export licenses. So the reality is if you want to skip the trading company and go work with a factory directly, you might not be able to. Because the factory might not have an export license.
So for all these reasons you don’t need to avoid a trading company. However, your first attempt should be to find a real factory. Because that factory might have their own salespeople who speak English. And only if you can’t find such a factory can you settle for a trading company.
Is Alibaba “good” or “bad”?
Now, is Alibaba good or bad for sourcing?
The answer is, it depends on where you are in your journey.
If you look for ease and speed and comfort. If you don’t want to create a complicated system just to source a product, then using Alibaba is probably the best option for you.
However, if you already have good prices and want to start optimizing them – it’s a different story. Let’s say you want to get a 5 or 10 % discount, compared to what you are currently sourcing your products for. On a big scale, that would make a huge difference in your revenue and profitability.
So let’s say you want to scale your operations. And your current supplier from Alibaba can no longer handle production on the level that you need them to. In this case, you might want to move off Alibaba.
To put it simply, Alibaba isn’t inherently good or bad.
It is an excellent place to start your sourcing from. And depending on where you are in your journey with your product, brand, and business, it might actually be the best option.
The real value of using Alibaba
Why is Alibaba valuable to you? Because Alibaba is big.
It’s much by far larger than any other alternatives combined. It is at least a very good starting point for your sourcing needs.
However, the best suppliers aren’t on Alibaba. Those with the highest quality standards. The most advanced production capabilities, those who work with the biggest companies. They don’t need to be on Alibaba.
They might still be present there. But they are probably busy enough that they have great buyers. Huge manufacturers might get them by interacting with other big companies. They don’t need to waste time with small businesses or Amazon sellers. And they don’t want to spend money to be on Alibaba.
There are a lot of great manufacturers/ factories that are not on Alibaba. But there are small low production, low-quality factories that need your business. They are desperate to find buyers through Alibaba. For this reason, Alibaba might not be the ideal place to source from.
If you do wanna use Alibaba and you’ve found great suppliers on it. Keep in mind that your competitors can access the same suppliers as well. You might have found your suppliers through trade shows or reverse engineering. And just as you found them, your competitors may find them too.
The fact that you can identify with the true market price is amazing. You can send a message to 30 suppliers at the same time, you can see all the prices. By eliminating the extremes, you will find a true market price.
Then, even if you go to different places, starting on Alibaba will help you tremendously with the negotiation process.
To better explain this, let’s look at the wrong process that most sellers take on Alibaba. And that is to settle for the lowest price. After a brief product description. Your goal is to get the lowest price.
You negotiate to get the lowest price possible. Let’s say your supplier comes back with $5, you say no. Then they come back with $4. You say no. And then they come with $3 and you finally agree. PICTURE. So, in the end, you choose the supplier with the lowest price.
That’s the wrong process of negotiation.
Let’s compare that with the correct process. First, make a product specification sheet. You need to know exactly what the source is. Let’s say you want to make a show. Now, what material, what color, what thread, what manufacturing process do you want to use.
Prices should be pretty close from supplier to supplier.
Let’s say you put together a good product sheet and message 20 suppliers. You should get around the same price. If it is much higher, you might be dealing with a trading company or a wholesaler. On the other hand, if you obtain a quote at a much lower price, that usually correlates with lower quality. Also, it might occur that a supplier didn’t read the product specifications correctly. The manufacturer might have an inexperienced salesperson, who is trying to sell at the lowest price possible.
Another case is, you forgot to mention one type of material to use, your prices are going to be very different.
You can eliminate higher prices that come from intermediaries. Then you can eliminate lower prices. You will need to find out the reason for the low price. Is the manufacturer not being responsible? Or if it’s from you forgetting to add some elements into your product specification? In this case, you will need to message other manufacturers and correct your mistakes.
After the elimination process, you will be left with 10-15 similar prices. Those will show you the true market price. And any negotiation is useless if the supplier is quoting a different product.
If you tell them you want a shoe, and don’t specify what kind of shoe. That’s not good. You will not find the true market price. And there is no point in negotiating the price. Cause you don’t know what you are negotiating for.
The most important part of the negotiations is creating a clear product specifications sheet. And skip suppliers who ignore it.
Final point, even if you end up finding your supplier off Alibaba, you can find your true market price on Alibaba. You can easily access and communicate with so many suppliers. That is something you won’t be able to get so easily on other platforms. That is the best advantage of Alibaba.
Next, you will learn about the filters to use. When choosing your supplier among hundreds of choices on Alibaba, you should filter them through each one of the following filters.
It is important to identify the best way to search. A very specific keyword that might work well on Amazon, might not be the best way to find a specialized manufacturer on Alibaba.
In the majority of cases when looking for suppliers on Alibaba, they weren’t advertising. For example, you want to source a leather shoe. Instead of searching for “shoes”, you might want to look for “leather products” and that way find a manufacturer who specializes in leather shoes. That way you will find manufacturers who can provide better quality and those who your competition can’t find as easily.
Instead of just searching for the exact product you are sourcing, search for the material, the industry, or the specialization of the factory.
Trade Assurance is a free service offered by Alibaba.com that’s designed to help create trust between buyers and suppliers.
Remember to use the basic checkbook filters provided by Alibaba. Those are the verified supplier checkbooks. And the trade assurance used to be a bit different. For example, if you last used Alibaba a while ago, there was “Gold Supplier”. Now, it is Verified Supplier and Trade assurance.
To learn more about different types of suppliers visit this link: https://fuwu.alibaba.com/gps/buyer.htm. This is to help you remove the chances of getting scammed. To get a Verified status the company needs to get verifications from a third unbiased party. Make sure not only to check those boxes. But also take a look at the photos taken by the agency that performed the verification of the supplier.
Those photos can reveal whether it’s a big factory, a small factory, or even a trading company. Of course, you would want to conduct your own factory auditing. But still, this is a nice shortcut to check how legit your supplier is.
The name of the company tells you if they are a factory or a trading company and what they actually manufacture. The factory name consists of multiple parts:
- The city or province where they are located
- The actual name, which can be anything they want
- The industry or the type of products they manufacture. If they do not manufacture, they might have “trading”, “import” or “export” in the place of this part. If they have something generic there, like “toys”, it doesn’t necessarily mean they are a trading company. It may mean that this company simply sources from other companies who deal with that product type.
- The type of company they are. For example, an LLC (Limited Liability Company).
You should definitely give your preference to companies that have been on the platform for at least 6 years. They are most probably legit.
On the other hand, companies that have only been on Alibaba for 1 or 2 years should be avoided. They are much more likely to be scams.
History of Export
When you search for your supplier, specify that you are only interested in ones that have exported goods to certain parts of the world before. You can check the West Europe or North America checkbox. Those companies have worked with the highest quality standards before.
Certain companies specialize in selling to Africa or Eastern Europe. Or certain parts of Asia or the Middle East. However, those regions tend to have much lower import standards.
There are four cool things you can get from knowing about the address of your supplier.
- Look at the address of all the suppliers you are interested in. That way, you may find a common region where most of the companies are located. Then do a quick Google search to find which regions or cities of China specialize in your type of product. Those regions may have a cheap source of raw material or lots of skilled workers. If you find a company that is not in the region, that might be a trading company, or it might have higher prices.
- You can see if the company is close to other factories you work with. As a rule of thumb, if you source multiple products from China, you should transfer all of them in the same container and save a lot on shipping. Therefore, you usually want to source from the same regions in China.
- You can also check if the companies are located close to the transportation port or more inland. That way, you will know how much the transportation costs are going to be.
4. Look at the actual address and see if your potential supplier is located in the industrial zone or an office building. That way you can find out if it is a factory or a trading company.
The last filter describes how long the company has been in the market. Is it a specialist or a trend rider? As you check out the supplier and their home page, look at the products they advertise or show.
If all the products look to be around the same theme or made out of the same material, they are likely a factory. You should show preference towards this kind of supplier.
If they are advertising a mix of different things or current trends on their Alibaba page, they might be a trading company. You should avoid this company then.
After applying all these filters, you should be able to eliminate companies that aren’t the right fit for you.
So how to search for suppliers applying all the filters mentioned earlier? In this example, every filter is going to be applied as if in search of actual real suppliers of leather shoes. Let’s get started!
- Keywords make a big difference in how many potential suppliers will show up in your search. So, you should look for broader, more general terms when searching for them. Don’t forget to check the “suppliers” and not “products.” You don’t care about searching for products but instead want to find specific suppliers, right?
Unfortunately, you will see fewer suppliers when you look for “leather shoes” as it is a pretty narrow search margin.
On the other hand, the search for “leather products” will reveal a lot more suppliers who specialize in leather products. It is worth your time to message those suppliers and ask about leather shoes and whether they make them. Those factories that specialize in leather products might want to take on the opportunity and make leather shoes with you.
That way, you are going to find hidden gems that your competitors have not landed a hand on yet.
2. Why do you need to look at companies that are in “verified Suppliers” or “Trade Assurance” categories? Are all those the best types of suppliers? Probably not all of them! You might have eliminated some great suppliers this way.
If you want to deal with a great factory that is interested in obtaining you as a customer, you want to look at those that are willing to spend a bit of money to get those checkboxes. The companies that are willing to get those checked are ready to be flexible for you and stand out from the crowd to get your attention.
3. When you check the Verified Supplier status, you can also see which agency verified the company. It is also important to take your time and explore the pictures taken by that agency. You want to look at the office pictures, entrance pictures, and factory floor pictures.
You would especially want to take a close look at the factory floor. If you see enough workers on the floor, that is a good sign. Keep in mind that in the picture taken you are only seeing the employees that were working on that shift when the pictures took place. If in the pictures it says that the factory floor is “associate’s factory floor”, you might be dealing with a trading company. That is not a bad sign, but rather something to note.
You might also want to notice if the factory floor has lots of machines on it. That indicates whether the work gets done manually or by machines.
4. The name of a company describes a lot of different aspects of it.
“Leather” specialization is an amazing choice if you were to look for companies that are more likely to supply “Leather products”.
If the specialization of the company includes “Industrial” or “Trading” then most probably not it is a trading company. On the other hand, if it has something more specific, like “webbing” or “garment accessory” then it is more likely to be a factory.
5. As for the age of the company, it is typically better to deal with the ones that have been on the market for at least 6 years. Sometimes, you may also go for the ones that have been out there for 4-5 years as well. However, it is advised not to go for those operating for less than that. Companies that have only been working for 1-2 years are much more likely to be a scam.
6. You should definitely check the top three markets of the company. Companies that mainly export to Eastern Europe or Africa tend to provide lower quality standards of products.
7. The address is also something to look through.
You want to google whether the region the company is located at specializes in your type of products. For checking that out you can use the following website: https://www.berkeleysg.com/china-manufacturing-distribution-map/.
According to the map provided on the website, Zhejiang Province is not one of the main manufacturers of leather. You might want to look through a couple of other suppliers and see if any of them are located in the same region.
You can also check whether this particular factory is located close to ports. That is easy to check if you google the town and check its location on Google Maps. Our company then has a perfect location.
8. Look at the products they manufacture. See if any products seem out of place. The products should look to be around the same category and be cohesive with the company. That is how you know that the company is legit and makes great products.
You should now be ready to look for your own suppliers. Here are a couple of final notes.
Definitely don’t look for the cheapest products. That is a big mistake when looking for suppliers. The response rate also doesn’t necessarily mean anything. A high one might mean that the company just sends automatic bot replies. Or that it has a lot of people working in the office instead of the factory floor.
So don’t try to source based on response rate or price of products.
But you might want to see the different certifications the company has. Some of the good ones to notice are ISO9001, BSCI and ISO14001. If the company doesn’t have the certifications it’s not a bad sign. The company might be totally able to obtain it but doesn’t want to spend any costs for the sale of a certification. Anyway, it is another thing to look at and maybe talk about with the company representative.
Congratulations! You are now well equipped for choosing your own suppliers and knowing which things to look for when searching for them.