Notionet

If you are thinking of starting a retail business whether online or offline, Alibaba might be your number one option for sourcing products.

What is Alibaba?

Alibaba is a chinese based online store hosting major manufacturers and suppliers who sell products in bulk at a wholesale price.

The B2B marketplace was founded by Jack Ma and operating like any other store I.e. Amazon and ebay, you can order products in whichever amount and have them shipped to your address.

Now, the first time you visit Alibaba, you will get excited by their low prices. A headphone that sells at $20 in a local electronics shop is selling at $0.50 on Alibaba but there is more to that than what you might think and that is why i would like to take you through the whole process of buying products from Alibaba.

Sourcing products

One thing to keep in mind is that Ali deals with wholesalers and you are starting a small business. Why are you on Alibaba in the first place?Because you want to enjoy the economy of scales. That is Buy a product at wholesale price and sell it at a retail price to your clients.

Now, the problem is ” small business” might mean something different on Alibaba. A business buying goods worth $5000 is considered a small business on Ali. This is not small to someone who aims to sell a maximum of 50 pieces a day. That’s why Alibaba created Aliexpress for those who aim to buy just a few products. Like 1 to 50 pieces.

So for you to buy that headphone at $0.50/piece, you might need to buy 1000 pieces. That amounts to $500 not including the shipping fee and a 25% tax of the total cost depending on your country.

If you do your math, you will realise that you will be buying a single headphone at around $5. Not bad because you can sell it at a competitive price of $10/piece. That is good profit but for that you need $250 capital for just the headphones.

$250 is not a small amount assuming that you will not be selling only headphones and that you are just establishing your small business. So what does this mean? As a startup, you can’t sell any product plus you have to consider the shipping fees for each product mostly because the shipping fee and tax combined end up higher than the product price itself.

1. The right product to sell

You are a business. All you want is profit, right? To do that you have to avoid overcharging your products due to the cost incurred while shipping them. Else your competitors will take all your clients by selling the same product at an affordable price.

There is a way you can do it. You see, the heavier the product, the higher the shipping cost. The size matters too and can incur extra charges. So why not ship light and small products with high profit margins i.e:

a) Mobile phones

Most phones wont weigh more than 500gms but can cost up to $1000 per phone. Say you buy 10 xtigi smartphones at $40 and ship them at $5 each via epacket Then sell them at $55 each. Not much but you have earned yourself $100 profit from just 10 items with little to no hassle.

b) Laptops

Ever wonder why most online stores sell laptops? They know what they are doing. Its the same idea. Most laptops won’t weigh more than 5kgs and if there is one, maybe the older version of compaq. I have not heard of laptops that go for less than $150 so far.

Most laptop manufacturers sell the features not the size. A lenovo mini laptops sells at $600 in most safaricom shops in kenya. So shipping a 500 dollars laptop at only $30 via dhl to sell it at $590 is not a bad business.

c) Watches

 

Not any person will spare his time to go buy a watch  but the one who does, will be ready to pay handsome amount for it. This are sports people and other serious time keepers. They are small items but a rolex watch can cost up to $25000 while an average digital watch will go for $15 on Alibaba. So you don’t have  to worry much about shipping like 50 of this watches because its cheap and you can sell them at $25 each.

d) Sport shoes

On top of making most online stores colourful, sport shoes are one of the best items to ship. They are easy to package, not delicate, small in size and also light weight. Sport shoes manufacturers sell quality over the size. So, why not buy a shoe at $10 and sell them at only $20.

Caution!

When searching for products on Alibaba, beware of different product categories, prices and tags. Here am going to define different terms used to categories products basing on amount, sale,branding, size, and stock on Alibaba.

Samples

You might be buying a sample instead of the real product. Samples work like the original products but you can only order a few. The good thing is that samples are indicated as samples. Most are extremely underpriced like $0.01/piece. Just be careful enough to notice its a sample.

Ready to ship

If you look at products with a “ready to ship” tag, you will notice that they are highly priced than those that don’t. This class of product is for buyers who don’t need any product customization or don’t intend to make any enquiries.

MOQ

Moq stands for; minimum order quantity. Most suppliers will set the price of each piece/unit depending on the MOQ. The higher the Moq, the lower the price per piece. If a supplier sets his/her Moq to 1000 pieces, This simply means you can’t buy less than 1000 pieces from this supplier. Moqs vary with suppliers. Some will go to as low as 2pieces.

OEM

Oem stands for; original equipment manufacturer. Products with this sign doesn’t really mean the logo patched on them belong to their original manufacturers. You can also request your logo to be printed on the products you intend to buy.  Its free mostly if you buy  50 or more pieces of the same product.

 

 

2. The right shipping methods

As we have learned, shipping is a crucial part when it comes to shopping specific items on Alibaba. Ali is china based but ships internationally through carriers like Dhl, Epacket, EMS, UPS and Chinapost.

Each shipping method has its pros and cons So we will weigh them depending on the items we intend to ship, the amount we are willing to spend and also the time by which we want them delivered.

How to choose the right shipping method

First, there are a few things that affect the cost of shipments and also determine the carriers.

1. Size. Some carriers don’t ship big products mostly those that ship by mail i.e. epacket, EMS, chinapost and Ups
2. Value. High quality goods demand more security and care during shipment. This will incur extra charges and also demand a carrier that can offer that i.e. DHL
3. Weight. Shipping cost for heavy goods is higher.
4. Location. The price of shipping products from china to Kenya is expected to be higher than that of shipping to Russia ofcourse but it is not always about the distance. India neighbours china but due to inconveniences, shipping to india is expensive than shipping to USA. Some carriers also don’t ship to some countries.

Comparing carriers.

DHl, UPS, EMS, Epacket, Chinapost and Fedex are the most famous and highly used shipping carriers not only on Alibaba but all over the world. So we will look at their pricing and delivery times.

a) EMS

Ems stands for; express mail service. It is a global network connecting more than 180 postal operators. If your country offers or has postal services, high chances are you can use EMS to ship products to your country.

Ems has its limits when it comes to goods being shipped. A package can weigh up to 20kgs but should not exceed 31.5kgs. It should not exceed 105cm in length/width/height.

Ems is one of the most affordable options but also one of the slowest(up to 50days). It ships to the address given but rarely does door to door shipping mostly when it comes to heavy goods(20kg). To know more about Ems regulations,  click here

b) Epacket

Epacket was born out of the co-operation between the US and China postal services to enable easier and quicker deliveries. Being one of the fastest and affordable carriers, you can ship a product for less than $3 to the US within 30 days or less.

Epacket has its limitions as you can’t ship a package weighing more than 2kgs. The package should have a standard size of 154 squared cm and a length not exceeding 60cm.

This Simply means epacket is best for shipping small items. It is also yet to extend its services to some countries. Epacket offers door to door shipping but does not ship products with a value of more than $400.

c) DHL

It is one of the most popullar shipping cariers. Shipping can’t be complete without dhl.

Comparing all the above methods, i would say that dhl is the best. Depending on what you are shipping and where you are shipping, you can try better alternatives like EMS and Fedex.

Choosing a shipping agent

If you are planning to ship goods as heavy as 50kgs and above, its good that you look for a shipping agent.

Alibaba has many shipping agents offering different shipping methods to different countries. I would recommend you Search the  one that specifically ships to your country.

Also be quick to notice the pricing. Most will charge you $1 – $3/ kg only if you ship goods from 50kgs and above. If you are planning to ship 3kgs only, they will charge you around $60. That is $20/kg. Not good for your business.  So, if you are shipping anything less than 20kgs, its rather you use the suppliers method.

3. The right suppliers

Suppliers are those companies or individuals selling products on Alibaba. They can be manufacturers or resellers. The supplier you choose will determine all of the above things we have mentioned including whether you will receive the items you purchased or not.

Make sure you choose a verified supplier. This is Alibaba’s defination for a verified supplier;

“A Verified Supplier is a supplier for whom certain aspects of its company profile, management system, production capabilities, and product and process controls have been assessed, certified and/or inspected by independent third party institutions via online and offline means.”

Things to consider while selecting different suppliers

a) Pricing

Some suppliers are too expensive to the point that they look like retailers. Selling 50 pieces of low quality flash drives at $4/piece is too expensive. Because you are a startup, go for low Moq with low prices. 500 Moq at $1 is not that bad, right?

b) Location

The location of a supplier can affect the shipping fee. A supplier in Shen zhen  guang dong might charge differently from that in Guangxi.

The location will also determine the product  the supplier sells. Most electronics come from shen zhen. Its economical when you can buy multiple products from one supplier.

c) MOQ

A minimum of 10,000 pieces is too much for a startup. Even if they charge $0.50/piece of quality headphone, do you have that much capital as a startup? Because am assuming your maximum budget is $5000.

d) Shipping fees and methods

What if the suppliers shipping method does not apply in your country or its too slow or maybe too expensive. Some methods can take up to 60 days or cost you up to $460  to ship a single 10kg product. Its just good to be sure.

Sending enquiries

When looking for the right supplier you may want to contact them just to be sure of something. Alibaba gives you that option through their chatting system. For you to enquire or add any product to your wishlist, you need to log in to your Ali account. If you don’t have one, you can sign up using facebook. Its easy.

Caution!

As you chat with this suppliers, they will call you anything; dear, friend,  honey. Before you fall for their charm, just make sure you have paid for the right goods and through the right channel. Why? Because some will prompt you to add them in your Whatsapp or Wechat. If you conduct business through this channel, Alibaba will not only fail to track your order activity but will not be liable for any inconveniences

4. The right payment methods.

Please make sure all the payments are done through alibaba. There are many payment options but i would recommend paypal. Why? Because its fast and secure. It is also easy to create an account with paypal as it is free and used by most merchants to collect money. To know more about paypal and other online payment solutions, click here

About taxes

Depending on your country and the value of goods you will import, you might be charged an import duty tax. This varies from country to country but any item worth $20 dollars and above is prone to this taxes. So its good to be prepared.

Beware that Alibaba is not responsible for import duty tax. This is all about you and your country’s tax rates and regulations. But don’t mind, it is not a guarantee that you will be taxed for every good you import. The carrier you choose matters too. For example, there is a high chance you wont be taxed if you ship via DHL. Forwarders are famous for charging little to no tax, that is if you ship using a forwarder.

And that’s how to shop from alibaba for startups. Always remember that shopping does not have to end with a shipment. You can add products to your wish list and come back to them later. So take your time, contact different suppliers and close the deal when you are ready.