Alibaba: Pros and Cons

Pros and Cons of Using Alibaba Part 1

When it comes to sourcing manufacturing in China, Alibaba is a topic that comes up a lot. By some measures, it’s even bigger than Amazon. Two big questions to consider are:

      • is it a good place to go to find factories, source components, and communicate with manufacturers and (more importantly), 
      • can you trust it with your products?

    I’d say Alibaba is a good starting point if you don’t have networks or boots on the ground in China and you really have no other way to begin the process of finding and communicating with factories in China. However, it is certainly not the be-all and end-all of setting up manufacturing in China.

    Here are some pitfalls to look out for when using Alibaba:

        1. Many companies listed on Alibaba are not actually factories. As a result, you are often not actually dealing directly with manufacturers even though people using Alibaba expect to be dealing with factories. Although these companies will all pose as factories, many of them are trading companies – essentially, they’re middlemen (or, sometimes, something even worse).
          I have an article coming soon that covers how to identify whether you’re dealing with a factory, a trading company, or something else. For now, be aware that you are potentially not dealing directly with a manufacturer when contacting companies through Alibaba.

          1. Pricing on Alibaba is nearly meaningless. The pricing on Alibaba is really to hook you in. It gives you a very broad benchmark of what you may be looking to pay for a specific off-the-shelf item with no changes.

            However, if you want to create your own product, you’ll probably need to make a lot of changes, even if they appear minor. For example, you may not be happy with certain parts of a product because the quality isn’t what you’re after and the manufacturer will then have to upgrade certain aspects. If you take the ‘shelf’ prices and use them to calculate unit costs, etc., you’ll likely be a long way from the actual cost. By the end of it all, you’ll most likely end up paying a much higher price than what you thought. If it were me, I’d not really pay much attention to Alibaba’s shelf prices, especially if you’re manufacturing a unique product. Instead, you should start asking questions like:

            • What components are they selling?
            • Is it exactly what I’m looking for?
            • Can we start discussions around what I actually want?

          All up, I’d suggest Alibaba is okay if you’re looking for off-the-shelf, unchanged, ready to go products and if you want to place a one-time order. If you are going down this road, I’d encourage you to order through Alibaba rather than going outside their platform as this will help if you have anything to dispute, should something go wrong. Even then, you’ll want to be careful as quality can be an issue. 

          Instead, think of Alibaba as a starting point for identifying possible partners that will need to be investigated further. If you’re looking to set up your product in China, you need to put steps and processes in place to safeguard yourself. This is where a bespoke, individualised service like China Connect Manufacturing can help. We have the expertise and on the ground experience to investigate potential manufacturers and ensure you are protected.

          The Pros and Cons of Using Alibaba Part 2

          We’ll continue to answer the question, “Is Alibaba a good place to find factories, source components, and communicate with factories?”

          I talked about the pitfalls of using Alibaba which were:

          First, many companies listed on Alibaba are not actually factories, and second, the pricing on Alibaba is all but meaningless. Below are two further reasons to be cautious when sourcing through Alibaba.

          Reason 3: If factories don’t have licenses to export directly from their factory to overseas customers, a lot of them won’t be listed on Alibaba.

          Oftentimes, when you’re putting together your own product, you’ll be utilizing a lot of these unlicensed factories to manufacture and bring together componentry within China for final assembly at an ‘assembly’ factory. This assembly factory will likely then be the one that exports to your country or other overseas destination. It is these skilled and experienced unlicensed factories that you will miss out on if you solely source through Alibaba.

          Knowing that these factories exist but may not be showing up on Alibaba will give you the right mindset when using the platform because it will help you understand that it is only a starting point if you don’t have networks in China.

          Reason 4: Alibaba is clunky and can hinder communication.

          Alibaba is not easy to use, andit actually hinders communication with factories. So, the quicker you can get off Alibaba and onto platforms that Chinese factories prefer to use (for example, WeChat) the better.

          Alibaba will often have incentives in place to encourage you to stay on its platform, and the largest incentive is usually focused on safety.  This is typically centered around placing orders. Alibaba provides a dispute process if orders are not delivered as agreed. But this only works if you have conducted your communication and orders through the Alibaba platform. Such protection is useful and will help protect your orders.

          However, if you’re intending to set up your product manufacturing in China, especially for the long term, you should be establishing robust manufacturing steps and processes to safeguard yourself anyway. If you’re looking to just buy something off the shelf, a one-off order, then stay on the platform – it gives you the ability to dispute if something goes wrong. But, if you’re looking to make your own product, if it’s complex, and you want to set up manufacturing properly from scratch, and where you’re going to be sourcing different components from different factories, then Alibaba is not going to be of any use and you will want to establish clear processes and protections specific to you and your chosen manufacturers. As soon as you can take these discussions off Alibaba, the better and easier it is, and the quicker that process will be for you.

          So, we’ve walked through some of the pitfalls of relying on Alibaba:

            1. Many companies on Alibaba are middle-men, not factories
            2. Pricing is basically meaningless on Alibaba
            3. Many key factories won’t be listed on Alibaba, especially if they don’t export
            4. Alibaba can hinder communication with manufacturers

          Where does this leave you? In short, we’d say if you’re looking to buy a one-off, off-the-shelf product with little to no adjustments, then Alibaba could be a great option. For everything else, we’d suggest a more robust, bespoke and long-term solution. This is where a team like China Connect can help. We have on-the-ground knowledge, experience and people to take your product from plans to shipped to your door.

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