In 2014, the online business Alibaba made international news after its $21.8 billion initial public offering (IPO), which was the largest ever at the time (though it's since been dethroned by Saudi Aramco's $25.6 billion IPO in 2019). But more recently, the company has been in the headlines for its foray into the AI world and its yo-yo-ing stock prices. The news has left many wondering: Is Alibaba legit?
If you've been scratching your head, read on to learn everything you need to know about the Chinese trading company, like who it caters to and how people are making money on it via drop shipping.
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What Is Alibaba?
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Alibaba is a Chinese business-to-business (B2B) marketplace, which means both its buyers and sellers are businesses, not consumers. (So, if you're looking to the website for a single pair of flip-flops, you'll want to turn elsewhere.) It's part of the Alibaba Group, which was founded in 1999 by Jack Ma; other businesses under the label include Taobao, Tmall, Alipay, and AliExpress.
Most of the sellers on Alibaba are manufacturers and wholesalers that sell bulk raw materials and manufactured goods. The majority of buyers are virtual and brick-and-mortar retailers. For example, your local jewelry shop might make a bulk order on Alibaba for earring stoppers to sell online or in its store. Or, a restaurant might place a bulk order for small toys to include with its kids' meals.
The company has a presence in more than 190 countries and sells more than 5,900 categories of products, from home and garden to toys and hobby items to gifts and crafts. About 17 percent of its traffic comes from the U.S., 13 comes from China, 3.3 comes from Canada, 3 from the U.K., and 3 percent comes from Australia, per Similar Web.
According to eCommerce DB, Alibaba Group made 142.3 billion in 2022 and has increased its revenue by almost one-quarter of its initial value each year. In other words: This company hasn't slowed down a bit since its extraordinary IPO.
Again, you won't be shopping on Alibaba for personal purchases—so file it in a separate category in your mind from typical online shops. "Unlike Amazon and eBay, whose main customer focus is direct-to-consumer, Alibaba operates as a business-to-business platform for businesses around the world who want to connect with Mainland China suppliers," says Jeanel Alvarado, retail expert and founder of Retailboss. "These businesses are looking to source products in bulk on Alibaba.com."
However, you needn't look far for spots you can shop for yourself. "If customers are looking to buy one item at a time, Alibaba also operates retail websites AliExpress.com and Taobao.com," says Alvarado.
How Does Alibaba Work?
Think of Alibaba as a cross between Costco and Etsy—you buy wholesale items via different vendors who sell on the site.
"Purchases are in bulk, meaning you have to meet minimum order quantities (MOQ) to make an order, and depending on the vendor, it could start at a MOQ of as low as 5 units, to as high as 500 units," says Alvarado. "As with most bulk order websites, the more you purchase, the better the price of each unit or discount on the total order."
To shop on Alibaba, you'll need to make a free account that includes your company name, region, email address, and phone number; then choose whether you plan to buy, sell, or do both. After that, you'll be all set to shop—and you'll probably notice that the Alibaba interface looks quite similar to other online giants like Amazon and Temu.
Use the search bar or narrow down the categories to see the items available. For a more precise search, you can even drop a photo of the item you're looking for into the search bar. You'll be able to sort your results with a range of filters, like MOQ, supplier country, and Alibaba supplier verification status (more on that later!).
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Why Is Alibaba So Cheap?
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The prices on Alibaba are shockingly affordable—think $2 for winter gloves, 50-cent false eyelashes, and $4 for non-stick frying pans. Because it streamlines the supply chain through its B2B model, sellers can offer their goods at a much lower price by cutting out the middleman. Vendors also need to be wary of each other—if one shop is selling a similar good for a cheaper price, its competitors may need to alter theirs to stay afloat.
Then, there are regional benefits. Many Alibaba suppliers are located in regions like China, where manufacturing costs are lower than in other countries. Finally, the option to only sell bulk allows manufacturers to cut costs and offers savings for sellers since they know each sale is of a large enough quantity to justify the effort.
How Do You Dropship With Alibaba?
Dropshipping is the process of creating an online store but using a fulfillment partner to ship your products. That way, you don't need space to hold inventory. Many drop shippers use Alibaba, which has a Dropified integration to make the process easy. All you need to do is integrate the program and choose Alibaba products for your storefront; Dropified will alert your fulfillment partner when an order is placed and needs to be filled. Here are more steps.
Connect to the Store
First, make an Alibaba account and set yourself on "buyer" mode, since you'll be sourcing items to sell. Create an online storefront using a site like Shopify or Squarespace and integrate your site with Dropifed on Alibaba.
Examine Product Listings
Now for the fun part: Decide what to sell! When searching Alibaba's products, pay close attention to the MOQ. If the MOQ is on the high side, your order will likely be more expensive (though you may save in the long term). You can pay for your products in a range of ways, including credit card, wire transfer, Apple Pay, and online bank payment.
Request a Quote
In addition to searching the marketplace, you can also post a Request for Quotation. To do that, you describe what you're looking for and vendors reach out to you with pricing and product options.
Negotiate Your Terms
<a href=https://www.shutterstock.com/image-photo/chiang-mai-thailand-mar-182018-man-1049914307 target="_blank">Shutterstock / Nopparat Khokthong</a>
Once you find an item you're interested in via a site search or by requesting a quote, you can either negotiate your deal or buy the product right away. To negotiate, click "contact supplier" to start an instant message with the seller. You can go back and forth on issues like samples, MOQ, price, and other customizations until you reach an agreement that works for both of you.
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Is Alibaba a Safe Website?
"Yes, Alibaba is a legit site," says Alvarado. However, depending on your quality standards, you may be dissatisfied with the products you get. You'll also want to ensure you use safe payment methods in case anything goes awry with your order.
To protect shoppers, the Alibaba Trade Assurance program provides buyers with "secure ways to pay, protect against unforeseen circumstances such as product or shipping issues, and mediate between buyers and suppliers to resolve any issues related to the purchase," it wrote on its website. In other words, if something happens to your order, there is, in theory, an easy way to get your money back.
Another way Alibaba upholds its standards is with Verified Sellers. For the site to consider you a reliable supplier, you must agree to be inspected by a third-party business to ensure your listings are accurate and that you have the facilities necessary to manufacture the products you've promised to deliver.
Things to Look Out For When Using Alibaba
Alibaba has an F-rating from the Better Business Bureau (BBB), which exists to show the degree of confidence in which a business is operating in good faith. An F is the lowest rating. Some common complaints include:
Payment Goes Through But the Product Doesn’t Ship: Several complaints on the BBB involved orders where the items never shipped—but the buyer was charged. "I placed an order with Alibaba after two months item never arrived reported to Alibaba been told to check with logistics did that too reported still no refund of any kind," wrote one customer. Reviewers noted that customer service in these instances was often unhelpful.
High Shipping Fees: An order's shipping fee depends on the shipping method and product size and weight. You should verify these with the seller before making a purchase.
Low-Quality Products: Many of the complaints on the BBB call out poor quality, which is especially alarming given the bulk size (and therefore price!) of most orders. "They sent us a different color and 100% had huge manufacturing defects. Each blanket was 100% unsellable and not even possible to use," wrote one reviewer on the BBB. "Each person at Alibaba and Vendor acknowledged the HUGE mistakes made by the vendor, but here we are in December still stuck holding inventory of the unsellable item and they won't send new blankets without further payments."
Counterfeit Products: In Feb. 2022, the Office of the United States Trade Representative (USTR) designated Alibaba brand AliExpress a "market that reportedly facilitates substantial trademark counterfeiting," per CNN. Alibaba allows users to report counterfeits, but that's not to say much progress has been made in the push against infringement.
What Are The Safest Payment Methods to Use on Alibaba?
Alipay
According to Checkout.com, Alipay is operated by Ant Group, which is a subsidiary of Alibaba Group. It's extremely popular in China, where it launched in 2004. The platform allows users to make payments; you can link your bank account, credit card, and other payment methods.
Paypal
Paypal is another system that allows you to link your bank account, credit, or debit card. Use it to make secure payments on online shopping sites, including Alibaba.
Escrow Service
An escrow service is when a neutral third party holds funds before they are transferred from one party to another, according to Investopedia. It's often used as a way to make secure online transactions for expensive items. The Alibaba Trade Assurance is its own on-site escrow service.
Credit Cards
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Using a credit card is helpful because you can dispute the charge should your order never arrive or arrive in unsatisfactory condition.
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Tips for Shopping on Alibaba
Avoid Buying Brand-Name Products
The site is riddled with counterfeits, and anything name-brand is likely a scam. Instead of what you're looking to source, you'll probably wind up with a knockoff that looks similar to the brand-name product (or not!) with a much lower level of quality and workmanship, per WebRetailer.
Filter Out Non-Verifiable Shoppers
Alibaba works with third-party inspection companies who visit suppliers to assess their products, processes, and production capabilities to acquire a "Verified Supplier" status. Use Alibaba's filter tool to find these suppliers. When searching, tick the "verified" icon. Now, you'll only see products created by verified sellers.
In general, it's best to stick to Verified Gold Suppliers, who have a paid account with Alibaba and have been verified by the site as a registered business. That's not to say everyone with gold supplier status is completely trustworthy, but the longer they've maintained this status, the more likely it is they're legit. Other credentials to look out for include "Assessed Alibaba Supplier search" and Trade Assurance Supplier."
Check the Supplier's Reviews and Ratings
Alibaba allows you to do your due diligence on suppliers. "I'd advise only purchasing from vendors who have good star ratings and reviews and have been on Alibaba for more than two years," says Alvarado. "All this information shows on each vendor profile."
Use Secure Payment Methods
Alibaba operates its own Secure Payment program through Alipay wherein payments are held until an order arrives and the buyer and seller have verified that the transaction is complete.
To use it, click Buy Now and complete the Secure Payment contract. Then, go to Order Management and click Pay Now; you can use any of the payment methods mentioned above. Once you're satisfied with your order, click Order Received. Or, click Open Dispute if there is an error.
Check the Shipping Options
"In the past, I've experienced that once you make the purchase, some Alibaba vendors don't have the U.S. or Canada shipping options that may be listed on their profile," says Alvarado. "So, it's always important to chat beforehand with the vendor and ensure everything can be arranged with accurate shipping prices before clicking Buy Now."
Hire an Inspection Company
Beyond shopping with Verified Suppliers, you can also add a third-party inspection service to your order. The inspector will visit the manufacturer and randomly check products against the order specifications to consider product conformity and quality issues.
To add the service, place a Trade Assurance order and select the Production Monitoring & Inspection Service. The inspection details will be confirmed with both you and the seller and an inspection report will be provided within 24 hours.
Conclusion
Overall, Alibaba is a B2B e-commerce platform that allows businesses to source products affordably. As with all e-commerce websites, there are risks involved that can be mitigated with research and the use of secure payment platforms. For more commerce news and advice, visit Best Life again soon.
This story has been updated to include additional entries, fact-checking, and copy-editing.
