The Rise of Alibaba and Decline of Sourcing Companies

Start-ups and small business are abandoning sourcing companies and agents in droves, to import direct from the manufacturer in China and South East Asia. Online B2B supplier directories like Alibaba mean you don’t have to pay to find and assess suppliers anymore. But the need for in market support has not diminished and the incidence of rip off is still uncomfortably high.

 

The Rise of Alibaba and Decline of Sourcing Companies

It is imperative to find high quality product and trustworthy, long term suppliers. In the past, most businesses relied on sourcing companies to find products and suppliers and import and ship their products.

However, relying on sourcing companies is costly. Here is why:

  1. You pay an up-front fee
  2. Pay commission on every invoice
  3. Still pay for a whole range of extra costs – like quality inspections
  4. You never connect directly with the factory – to protect their commission.
  5. Most importantly it deprives you of the opportunity to build a direct personal relationship with the factory

Working through an intermediary to sort our product specifications is a hassle, especially if they do not have your level of product knowledge or industry experience. What makes the situation even worse, there is a perception that you have passed off risk, but you don’t. Read your contract carefully and you will find you still carry all the risk.

 

Due Diligence of Your Supplier Still Critical

It is critical to still get external verification of suppliers. Here is how you can do that:

  1. Ask for recent inspection reports by reputable consultants (ask us who)
  2. Ask us to check facts and claims, or do a factory inspection for you
  3. Do your own factory inspection – just get help. Get to know the factory owner and people in production and equipment in action

 

Alibaba is a B2B Manufacturer Directories

However B2B directories are definitely not the answer to risk free importing. While it appears the solution to safe importing, Alibaba and many other B2B supplier directories are based overseas, and provide an advanced match making service.

  1. Check the website terms and conditions
  2. Check the supplier – multiple contact points

It is critical to read the B2B directory terms and conditions before you go placing an order and parting with your cash. Look at recourse, recovery of deposits and dispute resolution in particular.

An ongoing issue with B2B manufacturer directories is trusting suppliers you have not met, principally:

Are they really the manufacturer?

Many of the suppliers listed are actually agents, brokers or traders in China, rather than manufacturers and distributors.  These intermediaries stand in between you and the manufacturer, add a profit margin and will not always help resolve production quality issues. Also be aware of the ongoing risk of counterfeit products that are still widely available.

 

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Five Reasons Why Alibaba.com is killing Sourcing Companies – Import direct from China
My Import Label Review of Alibaba and importing direct from China

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