Alibaba is one of the best platforms to find suppliers for your ecommerce business. But is Alibaba legit and safe to buy from?
The short answer is yes! But you must understand how to use Alibaba correctly and do your own due diligence in order to find a quality supplier without getting ripped off.
In other words, you can’t just haphazardly perform supplier searches on Alibaba and expect to get good results.
In this step by step guide, you’ll learn how to avoid Alibaba scams, middlemen and outright fraud on the platform!
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What Is Alibaba And How Does It Work?
First off, there’s a common misconception that Alibaba is an ecommerce storefront that sells physical products online. But in actuality, Alibaba does not sell a single thing!
Instead, Alibaba is a supplier directory where you can find factories to build your products. In fact, you should think of Alibaba as a matchmaking service as opposed to an online marketplace.
Overall, most business owners use Alibaba to…
- Find Factories – When you build your own products, you almost always get the lowest price. By working with manufacturers, you can be involved in how your product is made, built, and shipped.
- Create A Private Label Brand – Most suppliers on Alibaba allow you to place your private label brand on any product that is produced.
- Create Custom Designed Products – You can create your own custom products that you design and fabricate.
Is Alibaba Legit And Safe?
Finding suppliers and sourcing products to sell on Alibaba is very safe. In fact, Alibaba has many safety measures in place that allow you to thoroughly research every supplier along with an escrow service that eliminates fraud.
However, you must take advantage of the resources that Alibaba provides in order to ensure a safe and legit transaction.
If you ever decide to conduct your own private transactions outside of Alibaba, you do so at your own risk.
Remember, Alibaba is just an online directory of suppliers and it is your responsibility to perform your own due diligence.
By following this step by step guide and taking advantage of Alibaba’s secure payment features, you will never get ripped off.
Step 1 – Filter Out The Non Verified Suppliers
Because Alibaba is such an enormous directory, there will always be low quality suppliers on the platform.
Some suppliers are just middlemen who don’t provide any value and simply sell you marked up products.
Some suppliers cut corners and specialize in producing cheap quality junk.
In order to avoid the middlemen and the poor quality factories, Alibaba allows you to filter out the low quality companies right off the bat.
Once you perform a search on Alibaba, make sure you have the following 3 boxes checked off.
Here’s what these check boxes mean.
Alibaba Verified Supplier
Verified suppliers pay a significant premium to Alibaba in order to be pre-qualified. And this fee is high enough to weed out most non-serious companies.
Here’s a point by point table of what Alibaba checks for every “verified” supplier. All of these checks are made by an independent 3rd party institution.
- Basic Profile – Alibaba checks the supplier’s business license and ownership status, their contact information and the factory’s location to make sure the supplier is legitimate.
- Company Overview – Alibaba checks whether the business is a trading company vs a manufacturer. They also inspect the premises with video that you can see on the company’s profile page on Alibaba.
- R&D Capabilities – Alibaba makes a note of how many R&D staff the factory employs and whether they offer design services.
- Production Capabilities – Alibaba checks the production capacity of the factory and the machines and automation they employ.
- Quality Control – Alibaba checks the factory’s quality management systems, quality control processes and testing capabilities.
Overall, Alibaba performs a comprehensive list of checks that pretty much weeds out most smaller middlemen.
A supplier with the “trade assurance” designation means that your order is protected from fraud when you make a purchase using Alibaba’s Trade Assurance program.
In the event that the product quality or the delivery date is different than what you and the supplier agreed upon, Alibaba will mediate the dispute and ensure that you are satisfied.
If a resolution can not be reached, Alibaba will refund you your money.
The Trade Assurance program is what makes Alibaba 100% legit and safe to buy from. I’ve had students in my course receive full refunds through Trade Assurance when the merchandise they received from a factory was not as expected.
Less Than 1 Hour Response Time
This checkbox is self explanatory, but you should expect a reasonably fast response time from every supplier you contact.
If a factory responds within an hour, it’s an indication that they have a dedicated customer support team to help you in case something goes wrong.
Overall, there’s no guarantee of total quality, but if you look for suppliers with ALL THREE of these boxes checked, you are more likely to find one that takes quality very seriously.
Step 2 – Check The Supplier’s Reviews And Ratings
Every “verified supplier” has a complete company profile on the Alibaba website.
Here’s what I look for in a potential supplier.
- Year Established – Has the company been doing business for at least 5 years?
- Main Markets – Does the company typically export products to your country?
- On Time Delivery Rate – Does the company have a history of on time shipments?
- Number Of Employees – Does the company have a decent sized staff?
- Facility images – Does the company have a legit facility to manufacture your goods?
- Business Type – Is the supplier a manufacturer or a trading company? Manufacturers will generally offer lower pricing and higher minimum order quantities.
Within a few minutes, you can quickly assess whether the factory is legitimate.
Step 3 – Use Alibaba Trade Assurance
Once you’ve finalized your first bulk order, make sure you indicate to your supplier that you would like to pay using Alibaba Trade Assurance.
As mentioned earlier, Trade Assurance is the safest way to buy products from Alibaba suppliers and it’s 100% free.
Trade Assurance ensures that your order is protected from outright fraud. Alibaba will guarantee your money back if you are not satisfied with your order or if the supplier did not follow the agreed upon terms.
Alibaba’s Trade Assurance works! I’ve had several students get their entire order refunded when their products didn’t meet their specifications.
The mediation process can take a while but it’s extremely effective.
Meanwhile with Trade Assurance, the supplier is incentivized to deliver quality products because bad shipments affect their credit rating and their standing in the Alibaba directory.
How To Pay With Trade Assurance
In order to pay using Trade Assurance, you must use a supplier that supports it. This is why checking the “Trade Assurance” box is essential during your research.
Once you’re ready to order, follow these directions to pay.
Note: All trade assurance orders must be placed directly on the Alibaba website. Otherwise, there’s no protection.
Click on the “Orders” button and select “Order With Trade Assurance”
Then, fill out the form with as much information as possible regarding your order and the agreed upon terms.
Note: The product details area of the form is a place where you will work with your vendor to document the terms of your agreement.
Finally, enter in your payment information to place your order.
The Safest Payment Method For Alibaba
When you pay by Alibaba Trade Assurance, your order is 100% protected. If you don’t receive your products or if the supplier does not deliver as promised, Alibaba will open up a dispute with your supplier on your behalf.
From there, Alibaba will help you mediate with your supplier to reach an agreement on what to do next. If no agreement can be reached, you’ll simply get your money back.
While Trade Assurance is safe and effective, the mediation process can take some time. For example, your money could get tied up for several months until a resolution is reached.
As a result, if you want the ability to dispute a charge (outside of Alibaba), the safest way to pay for your Trade Assurance order is via Paypal or credit card.
Again, paying by Paypal or credit card is not explicitly necessary with Trade Assurance but it will provide you with an extra layer of protection for your payment.
Step 4 – Hire An Inspection Company
With Alibaba Trade Assurance, your hard earned cash is protected but what about your time?
When you are shipped poor quality products, it can take months to go through the entire manufacturing process again and receive another shipment.
While Trade Assurance protects you from monetary loss, delays in manufacturing can also hurt your ecommerce business, especially if you are trying to get your products in time for the holiday season.
In order to ensure a high quality shipment on your first try, you should hire an inspection service to inspect your products as they come straight off the assembly line.
Inspection services like QIMA will send a representative directly to your factory in China and perform a detailed inspection of your products right off the line and at the end of the manufacturing build.
The cost of your inspection will vary depending on how thorough of an inspection you need, but in general, a typical inspection will run you $200-300.
For just $200-$300, you can fix your production issues immediately. By finding manufacturing flaws directly on the line, you can quickly make adjustments without losing time.
For most bulk purchases on Alibaba, the cost of your inspection will be a single digit percentage of your overall total which makes hiring an inspector a no brainer.
Alibaba Scams To Watch Out For
If you follow all of the steps outlined above, you will save both money and time on your first bulk order with minimal risk of loss.
Overall, Alibaba is 100% legit and safe, but there are some cases where you can be tricked into paying higher prices for your products than they are worth.
The following scenarios aren’t outright scams but they are evil tactics that a supplier might pull on you during the negotiation process.
After all, Trade Assurance and inspections can only protect you after an agreement has been made, not before.
Supplier Increases The Price After You’ve Come To An Agreement
The “sudden price increase” tactic is one that I see all the time. The supplier quotes you a low price to get you in the door and make a commitment to place an order.
Often times, you’ll spend a good amount of time going back and forth with samples until you’ve refined the exact product you want to buy.
Then, once you are ready to place a bulk order, the supplier surprises you with a price increase. In most cases, they’ll mention the rising cost of materials or high labor costs and ask you to pay more.
The only way to combat this practice is to work with multiple suppliers at the same time. If one supplier tries to screw you, you have a back up just in case.
If you have the means, never put all of your eggs in one basket.
Supplier Tries To Sell You Name Brand Products
Some Alibaba suppliers will claim to be the original manufacturers for popular brands that you may recognize like Disney or Nike.
“These products fell off the truck!”
I can say this with 99.9999% confidence. Any name brand that a supplier claims to have for sale will be 100% fake.
Suppliers that work with Disney, Nike or any popular brand would not dare violate the terms of their agreement
Samples And Your Final Products Have A Large Difference In Quality
When you ask for a sample from a supplier, the product quality is usually great because they want your business.
But once they have you hooked, they may ship you lesser quality products when you place your first bulk order.
The only way to combat this practice is to hire a 3rd party inspection service like QIMA and document every aspect of your product on a quality control checklist.
Trade assurance can help in this situation too but ONLY if your product specifications are extremely detailed and well documented.
By hiring an inspector to examine your products as they are made, you can spot low quality products immediately and take action with minimal losses in time and money.
Supplier Promises Certifications That Don’t Comply
Some products like toys and electronics must comply with your country’s regulations and certifications. But sometimes, suppliers will claim to have performed their own independent testing to avoid you the expense.
Never trust the certifications that any supplier provides. You must do your own due diligence!
Ask your customs agent to help you look over your certification documents or contact the test lab directly to double check.
If you want to be 100% safe, you should perform your own lab testing and certifications.
Supplier Agrees To A Lower Price And Then Cuts Corners On Quality
Again, this situation can be 100% mitigated with the use of an inspection service like Qima.
Trade assurance can protect you from monetary loss as well but only if the expected product quality is well documented.
For example, one time we negotiated a 10% discount on our handkerchief order thinking that we got a great deal. But when our products arrived, every handkerchief was super thin.
Because we didn’t hire an inspector nor did we specify the thickness of the product explicitly, we were out of luck.
Fortunately, our supplier was willing to compromise with us to fix the order but in theory, they didn’t have to do anything.
My Alibaba Safety Checklist
Alibaba is 100% legit and safe to use as long as you follow a certain set of guidelines and perform your own due diligence.
Here’s a summary of best practices that I personally use before placing an order on Alibaba.
- Document And Save Everything – Be as specific as possible with your product specifications and write everything down on paper. Make sure you save any and all correspondence with your supplier just in case a dispute arises.
- Use Trade Assurance – Do not conduct your monetary transactions outside of Alibaba for your first order. Use Trade Assurance and pay by Paypal if possible to provide an extra layer of payment protection. Once you trust your supplier, you can forgo Trade Assurance to save money.
- Hire An Inspector – Don’t be cheap and pay the $200-300. It’s an insurance policy that will pay for itself. From a psychological perspective, your supplier will manufacture better quality products knowing that an inspection will be conducted.
- Have A Backup – Never depend on a single supplier for your goods. Otherwise, you’ll have limited negotiation power.
- Trust No One – Do not believe anything a supplier says regarding certifications or product authenticity. Do your own research.
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Steve Chou is a highly recognized influencer in the ecommerce space and has taught thousands of students how to effectively sell physical products online over at ProfitableOnlineStore.com.
His blog, MyWifeQuitHerJob.com, has been featured in Forbes, Inc, The New York Times, Entrepreneur and MSNBC.
He's also a contributing author for BigCommerce, Klaviyo, ManyChat, Printful, Privy, CXL, Ecommerce Fuel, GlockApps, Privy, Social Media Examiner, Web Designer Depot, Sumo and other leading business publications.
In addition, he runs a popular ecommerce podcast, My Wife Quit Her Job, which is a top 25 marketing show on all of Apple Podcasts.
To stay up to date with all of the latest ecommerce trends, Steve runs a 7 figure ecommerce store, BumblebeeLinens.com, with his wife and puts on an annual ecommerce conference called The Sellers Summit.
Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses.