Sourcing with Alibaba - Practical Advice

The same article can be found on my Blog: Starting a New Company

We order some parts from overseas in Hong Kong and China. We sourced the components from Alibaba, a whole community of sellers and buyers for just about everything from all over the world. When buying from Alibaba overseas, you must consider a few issues.

First, you should verify that they are trustworthy before giving the supplier your money. If you are able to get samples from the seller or verify that they are either a Gold Supplier and/or a TrustPass member, then you should be okay. Do the research into their website, and communicate a few times via email. They should send you a decent invoice, usually in Excel format. As a buyer, you probably do not need to sign up with TrustPass, which costs quite a bit of money.

Second, when you ask for a sample from your supplier, know that you will need to pay for the shipping. Even small samples that weigh next to nothing will cost about $50-80 per shipment. The supplier will often ask you for your FedEx or UPS courier number. They won’t spend the few dollars it costs to send via the national postal service, since that’s an upfront cost for them with no guarantee of an order from you. FedEx offers the FedEx International Priority, which costs about $50 for a one-pound FedEx envelope, even though it’s listed as being about $36 online. UPS Worldwide Express cost me $70 for a one-pound UPS envelope, even though it’s listed for $30 online. I now have a discount program with FedEx, which helps to offset some of the shipping costs. You should ask for some basic discounts from your FedEx representative.

The usual method of payment is Wire Transfer, also known as Telegraphic Transfer, or T/T for short. It directly deposits funds from your bank account to their bank account. It is considered high risk for the person making the transfer, and less risk for the recipient. Before you wire thousands of dollars overseas for anything, you should try to get smaller orders first to make sure that the company is legitimate and can supply the goods consistently at the quality you want. A wire transfer costs anywhere from $0 to $40, depending on your bank. If you bank is really too costly, then consider using OrderWires.com. Western Union does not seem to do bank to bank transfers.

To complete a wire transfer you will need to have the invoice from the supplier. It should include the following information: Name of supplier (the business name), Address of supplier, Supplier’s bank account number, Supplier’s bank’s name, Supplier’s bank’s address, and the Supplier’s bank’s Swift code (an 8 or 11 digit code for the specific bank). If you want to send the money via your bank account, then you will need your own business’s bank account information. Some banks allow for the wire transfer to be processed online. Other banks require you to sit down with a bank representative. Most routine tellers are not able to process these, so you would have to sit down with someone to fill out the paperwork. They will probably ask you some questions to make sure that you are not being scammed – such as the Nigerian Letter fraud.

Sometimes their bank will assess a bank charge for the currency conversion. That can be more than $30. Most suppliers will request that you pay for this. You may consider checking with your bank to see if they can wire the funds in the Supplier’s currency. There may be a fee for that too.

Depending on how much your order costs or is worth, you may be subject to import duties.

Therefore, to buy just one shipment from an Alibaba supplier will have an overhead cost of at least $100. Sampling costs may run $50-300. These costs need to be considered when sourcing your materials from overseas.

-submitted by the CEO/creator of SleepPhones.com, an innovative sleep aid.