What risks can you take when importing with Alibaba? In this article the complete guide to buy safely
Alibaba is the reference trade portal for all those who are preparing to import from China and, more generally, from Asia. Although Alibaba.com over the years has become an essential resource, there are still those who struggle to trust the Chinese portal.
When buying from Alibaba, there are two main risks:
- Running into quality issues
- Being a victim of fraud
Nowadays, it is much more common to lose the initial investment due to a quality issue than to receive a container full of garbage (instead of the goods ordered) or to run into fraud during payments. Despite this, strategies to prevent quality problems are often underestimated – or ignored – by importers.
In the first part of this article, we will focus on analyzing the root causes of these problems, while in the second part, we will expose the best strategies for selecting a reliable supplier (in order to prevent any quality problems upstream).
Do you want to import to Europe or the United States? Then read here!
If you import into countries or markets that have fairly strict safety regulations, such as the European Union or the United States, you should ensure that your products comply with these regulations, such as:
- Regulations on the restriction of prohibited substances (e.g. AZO colours, lead, camdium or formaldehyde)
- Electrical Safety Regulations
- Regulations on the effectiveness of electrical components
- Regulations concerning the packaging of products
- Regulations concerning the labelling of products (e.g. CE marking)
What relationship is there between such regulations and Alibaba.com, you may be wondering?
The problem is that only a minority (say 2-5%, in most industries) of the suppliers on Alibaba.com are able to make products that comply with these regulations.
If you choose a “random” supplier, perhaps based on pricing alone, chances are you’ll end up with a load of non-compliant products. And importing non-compliant products is illegal.
Note that the responsibility for ensuring compliance always lies with the importer; Chinese suppliers are not required to comply with any European or American regulations.
What is a quality issue?
Let’s start by listing the possible quality problems that you may encounter:
- Materials or components of the lowest quality (e.g. a stock of watches with a zinc alloy case instead of stainless steel)
- Incorrect product colors or sizes (e.g. a stock of T-shirts size XXL instead of M)
- Product functionality issues (e.g. a hair dryer that only spits cold air)
- Damaged products (e.g. a stock of shattered porcelain)
- Products that do not comply with the required certification standards (e.g. CE, RoHS or FCC) and will therefore be seized by customs officers upon arrival in Europe
Avoiding a quality problem is tricky because the only way to do this is to select the right supplier during the early stages of the import process.
What are the main causes of a quality problem?
There are two main reasons that can cause a quality problem:
A misunderstanding between the supplier and the importer
This is probably the most common reason why companies importing from China face a financial loss. The problem is that often the importer fails to clearly communicate product specifications such as:
- Materials and components
- Colors and graphic design
- The required certification standards
- The dimensions of the product
The vaguer the product specifications are, the less likely it is that the supplier will meet the quality standards you hope to achieve. The reality is that you can’t expect to get a stainless steel watch if you forget to specify the materials.
The good news is that even a product as simple as a wristwatch can be broken down into a list of basic materials and components to be communicated to the supplier.
The supplier intentionally uses substandard materials and components
This problem can be considered similar to the previous one in that the cause can usually be traced back to a list of product specifications that is not detailed enough. An incomplete list of specifications will in fact give the supplier the opportunity to use substandard materials and components in order to increase its profit margin.
Chinese suppliers have several reasons to take advantage of inexperienced importers (even if this way of behaving effectively cancels the possibility of carrying out a long-term collaboration):
- A very low profit margin (around 2-4%)
- The awareness that many importers do not know their product as well as they should. The supplier can therefore use this situation to its advantage as the importer cannot claim any compensation if the list of specifications is not clear from the outset
- The awareness that it is still difficult for a small to medium importer to claim compensation through the Chinese legal system (suing a Chinese company in Europe does not make too much sense from a legal point of view)
A clear and detailed list of specifications will force the supplier to think twice before trying to sell you a substandard product. How to make such a list of specifications?
When you don’t know the details of the product you intend to import, the challenge is often to define the list of product specifications. We recommend that you:
- Take advantage of the information contained in the profile pages of manufacturing companies and products on Alibaba.com
- Leverage information on your competitors’ websites
- Ask the supplier specific questions about your production capacity and use the answers to piece together the “puzzle” represented by the product specifications
- Request a sample of the product and “break it down” into materials and components
Case Study: Wristwatch
The quality of a product is given by the sum of the quality of materials and components. In this simple case study, I illustrate how it is possible to obtain two products of totally different quality depending on the specifications:
You can rest assured that a Chinese supplier will never choose to use a stainless steel case (much more expensive than a zinc alloy case) unless such a specification is explicitly requested by the importer. In fact, for the same selling price, by selling you watches with a zinc alloy case, the supplier will make a much greater profit margin. And it doesn’t matter if doing so will lose the customer.
Still not convinced of the usefulness of an exhaustive product specification list?
I want to give you another reason to think again. When an importer sends a request for a quote that is too vague, the supplier is much more likely to ignore it. In fact, suppliers know from experience that those who come with vague or incomplete requests are unlikely to turn out to be a “serious” importer willing to close the deal.
How to select a good supplier on Alibaba in order to minimize quality issues?
One of the biggest benefits of Alibaba.com is the amount of data contained in the portal which, if used correctly, can help you discard “bad” suppliers. Before we can proceed with the selection, however, we must define what is meant by “good” supplier:
- A supplier who has the ability to manufacture your product in accordance with the required specifications and quality standards
- A supplier who can guarantee the certification standards (CE, RoHS, FCC, etc.) required in the country where you intend to import the goods
- A supplier who, at the same time, can offer you a competitive price
Many importers bother to check only the third point, sometimes totally neglecting the first two points. But what’s the point of negotiating the price with a supplier who then doesn’t have the production capacity necessary to make your product or can’t guarantee the certification standards without which your product would be illegal in Europe?
If you enter the name of the product you are interested in in the search bar of the Alibaba.com site, you will probably see thousands of suppliers offering similar products appear. However, most will not be able to guarantee your requests and many will try to rip you off. There are four main factors that define a “good” provider:
Alibaba is reliable but…
… only if you act pro-actively to avoid, or at least minimize, the risk of fraud. If you wait for the goods to arrive in the importing country before worrying about any eventual events, it is too late to act.
The most important precaution is to prepare an exhaustive list of product specifications. Without this list, you will be exposing yourself to misunderstandings and manipulations of all sorts (see example of the watch with a zinc alloy case instead of stainless steel).
Here is a list of the main points to keep in mind to prevent quality issues when deciding to select a supplier on Alibaba.com:
- Send a detailed specification list to the supplier
- Select the supplier based on their skills rather than the price they claim they can guarantee you (consider that they may also lie to you in order to secure the customer and then increase the price at the last moment)
- Leverage data available on Alibaba.com to determine product specifications and select vendor
Disclaimer
This article is provided for informational purposes only. Neither the author nor any of the companies and/or service providers mentioned in the text guarantee that the information is accurate, complete, current, suitable or valid. This article represents the views only of the author and has not been endorsed by any of the companies and/or service providers mentioned in the text.
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