Friday, May 10, 2013

Alibaba and the Forty Thieves - 11 Recommendations about Buying Directly from China

This popular childhood fable is no longer imaginary.

The mention of "alibaba.com" makes most Americans think it's the primary gateway factory portal.  To buy anything direct, alibaba.com is the one destination.

But if you work in China, alibaba.com is probably the last destination you'll ever visit.  Sure, there are still good information on the site, but at the end of the day, alibaba.com is made for foreigners.  There are more English search results than alibaba.com Chinese version.  That's got to tell you something.

The truth about alibaba.com is less than pretty.  Having great insights into how the company works from a Chinese perspective, I personally have to give it kudos for coming up with such a great name.  And the funny thing is, despite the metaphor, buyers line-up to buy from the site...  What's more funny is that the real Ali Baba is not even a Chinese...

There are scandals after scandals, scams after scams, reported in the domestic Chinese media about unscrupulous companies doing business on alibaba.com.  You can get some reports on this in U.S. media; however, this is one of those well-kept secrets that the Chinese are hiding from the West.

For example, alibaba.com has started to "certify" the factories on its site a couple of years ago.  But the truth of the matter is that whatever certification or Gold Supplier status can all be obtained if you pay the right amount.  Heck, my own China company had been approached by alibaba.com to buy these supposedly elevated standings.  So, next time when you see these on alibaba.com or similar sites, don't take too much stock in it - they are really meaningless.

The entire alibaba.com system has been developed to make it easy for foreign buyers to get stuff from China; it is supposed to be a neutral platform.  However, if the sellers are not successful in selling, they would not stay with the site.  So, there is a natural inclination for alibaba.com to see that the sellers succeed in whatever they do.  Unfortunately, this leaves the buyers out in the cold.  You'd think consumer (buyer) is the king, but when enough suppliers do the wrong deeds, all these wrongness suddenly becomes the norm.  The buyers are re-trained not to be too picky since all the suppliers (on alibaba.com) essentially act the same way.

By the same token, there are just as many brokers on alibaba.com masquerading as factories.  While we have developed a few operating procedures to filter out these brokers and trading companies, the average foreign buyers can't tell the difference.  So, next time when you shop direct from China, you may not really be shopping direct...

I have many customers often compare my prices with alibaba.com.  This makes things difficult for me...  Not that I'm afraid of a little competition, it's just that I can't play bait-and-switch like most Chinese factories.  After all, they can hide behind the vast Pacific Ocean when something goes wrong, and I'm here in the States exposing myself to all kinds of law suits.  So, I can't low-ball my customers with the promise of an unheard of price just to play games with them down the road.  Or, can I deliver something that is not to customer's spec and just walk away.

Here is a lively example...  Customer is looking for 16GB USB disks.  Simple enough.  If you go to alibaba.com, you'll see the terrific pricing of $1.50 per piece with a minimum of 100 pcs.  Some are more decent than others by stating $1.50 to $19,95, etc.  But what does $1.50 buy you anyway?  You get the bottom-of-the-line, cheapest "shell" of a USB disk; the actual memory chip is not included in this price...  To me, this is pure laughable...  Who'd buy a 16GB USB disk without the memory chip?  But tons of American buyers are falling for this...  My customer even use this to try to get me yield to the advertised price on alibaba.com.  Stories like this are a dime a dozen.

There are even more horror stories from other customers who have bought from alibaba.com and gotten burned.  Countless.  And this is not just limited to alibaba.com alone, there are many other similar factory portal sites offering similar services as alibaba.com with even worse records.

If you are thinking about venturing into the wild Chinese factory realm by the alibaba.com remote control, here are some tips for you:

1). alibaba.com is not Amazon or eBay.  Don't think that what you are used to here in the States is automatically transferred to alibaba.com.

2). Be very careful with anything that has to be shipped by ocean (higher volume or weight) unless you are a seasoned importer.  Most of the prices quoted are FOB China.  You are responsible to get your own freight forwarder and import the products.  Getting a freight forwarder is not exactly like calling UPS for a pick-up.

3). If something looks too good to be true, it probably is.  This good old adage works in the U.S., and works just as well in China.  Another adage is: You get what you pay for.  That one is also true.  Just keep these in mind.

4). Don't buy what you can't afford to lose.  While I have customers have great success buying directly from China through alibaba.com, I have more customers did not experience the same luck.  It's always one thing or another.  The rule of the thumb is if you are putting up your house to get the money to pay for the product, it's probably not a good idea to do so.  After all, we really don't need you to add into our homeless population.  In other words, don't bet the farm on it.

5). If your sourcing volume justifies for you to do a visit in China, by all means, go.  You'll be surprised to find that many of your alibaba.com contacts would suddenly stop responding once you tell them you'll be visiting them.  This is naturally because they are brokers and really don't have a factory for you to visit.  But do plan ahead, otherwise, the only thing for you to see during your visit will be the Great Wall of China.

6). Keep in mind that alibaba.com is just a platform; it is not a seller of things.  This means that whoever you choose to buy from has nothing to do with alibaba.com itself.  Despite the fact that alibaba.com is a huge company and makes billions of dollar every year, it is not liable to anybody if some of its registered suppliers engage in less-than-favorable acts.  You'll literally be on your own.

7). Don't shop exclusively on alibaba.com alone.  Although the site is set-up so that it makes it easy for you to shop amongst all alibaba.com suppliers, don't get caught in the scheme.  Get price quotes from a wide variety of sources.  Compare prices, yes, but also compare what you'll get in return.  Intangibles such as service, quality, value, etc, is an integral part of our lives here in America, don't let it evaporate once you landed on alibaba.com's home page.

8). The term "factory direct" has a totally different meaning when you engage in international trading, such as buying from suppliers on alibaba.com.  In the States, "factory direct" still involves quality, service, and the reputation of the manufacture.  You are supposed to be getting a lower price on the exact same item than retail.  But when you buy overseas, provided that whoever you are talking to is indeed a real factory, the exact same term takes on a totally different meaning.  The only thing you'll get is the lower price.  You won't get the quality, service, reputation, or the same item.

9). This one not only applies to alibaba.com but to anybody who you want to buy directly from in China.  Always ask for samples.  Not just any samples, but samples of the actual item you are looking for.  Nine out of 10 times, they'll tell you it's not available.  And prepared to pay for the international shipping for those who actually have something to show.  With a sample in hand, it'll be easier for you determine if what you are looking for is what they are selling.  However, please still be mindful that a satisfactory sample still does not mean your final product will be of the same quality.  I've had too many experiences where samples looks good, but the end product isn't.  Or, one step forward, a real deal prototype.  I still have experiences where the prototype can be signed off while the end products still come out different.  While there are some bad apples out there who had decided to scam you from day one, most Chinese have a very different fundamental concept of signing off on a contract proof than Americans.  So, if your sourcing need is something that is customized, please be extra careful.

10). Do your best to weed out trading companies and brokers.  The real Chinese factories themselves already have issues with lack of integrity, when you end up dealing with trading companies, your risks go up many folds.  This is easier said than done.  Without having a real Chinese company of your own, it's difficult to find out who's real and who's not.  The best you can do is be vigilant and mindful.  When something smells fishy, work with someone else.  Surely there must be a hundred other suppliers in the same search results...

11). Gambler's mentality.  When you cross the line and decide to engage directly with Chinese factories on your own, like it or not, you are a bonafied gambler.  Since that's been established, you need to take this gambler's mentality to the next level.  Once you paid down a deposit and gets a prototype or proof in return, if you don't see what you like, and the factory just can't seem to meet your specifications, walk away.  Yep, be the real gambler who's got the grits to walk away from a bad round.  If somehow you end up with one of those less-than-reputable factories, the tactic is to get you to accept a less quality item (at less cost to them) since they already have your money (deposit).  Most people would just yield to the factory and accept something less.  Once you give in at this stage, be prepared for a string of other misfortunes ready to happen down the road.  Review #4 above.

Finally, if we should have opportunity to talk business, please don't use alibaba's pricing to bargain with me.  I've been in China long enough to know what's up with alibaba.com.  If all you want to pay for the quality you want is confined to alibaba's world, please go with alibaba.com and take your chances.  If things turn out great, awesome, you win.


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