Buying Goods on Alibaba or From Overseas Manufacturers

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

Woman shopping on laptop
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Among would-be and small eBay sellers, Alibaba and similar marketplaces are tempting. They offer thousands of manufacturers on the Pacific Rim and elsewhere, selling direct to Internet shoppers at below-wholesale prices.

But sourcing direct from manufacturers 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.

Buying Goods on Alibaba

Business to business is not the same as shopping eBay, even online. While sites like Alibaba look a lot like eBay, transactions don't always work like they do on eBay. 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 a negotiation about quantity, price, configuration, time to delivery, artwork/branding, and other details.

Here are some other issues to be aware of when considering buying from online marketplaces like Alibaba.

Products 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 more additional work.

Payment methods and terms may vary

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). Or you may have to set up a wire transfer with your bank.

You also shouldn'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 may be 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.

Know what import regulations apply

Buying in this space in many cases places you solidly into the importer category. Know what trade regulations will apply to you and your business because it can be potentially risky to both if you don't understand import laws.

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.

Communication is key 

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.  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.

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.

But as with any new situation, 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

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" guide, there are some fundamentals that are easy to outline.

Make Professional Contact

In every case, make contact with the seller or representative. 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. Make clear what you want from them and make it easy for them to provide short, unambiguous answers.

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.

Do Your Due Diligence

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 tricky. 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 going through 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.

None of this is meant to suggest that there's anything illegitimate about much of the commerce in question, only that it has rules you'll need to be familiar with, rules that vary markedly from eBay's selling rules.

Sourcing in the international business-to-business space can be a great opportunity and can yield long-term win-win relationships for all involved. Be smart and you can find great partnerships and deals.