Guide To Launching an Amazon Fulfillment Business with Alibaba Safely

Hi, money hustlin’ readers! Let’s continue with our new series on making money on Amazon as a seller.

When you’re starting off, you will need to source high-quality product(s) to sell. The issue for almost everyone is you likely may not have large amounts of capital to spare. Plus it’s likely you also need a storage warehouse to store your imported goods too. These are the most common concerns for aspiring Amazon marketplace merchants.

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If these are the Amazon selling concerns then let me tell you this: don’t worry too much about that part YET. Almost every successful seller I know (and not just Amazon ones!) started off facing the same dilemmas – and it didn’t stop any of them from making a 6-figure income or growing their web business!

If you’ve decided that you want to start an Amazon business; good move, there are profits to be had in this area. I know this probably sounds too good to be true to those who are not familiar with the Amazon FBA business model but trust me. Though it’s no longer an overnight get rich quick scenario now that Amazon fulfillment has blossomed as a passive income goldmine for many sellers – there’s still loads of profit-making potential you could be missing out on.

? This is a part of MFM’s Amazon FBA series. Sign up to our mailing list for more Amazon FBA series updates and other creative, money-making, side hustle inspirations you didn’t know about!

Selling On Amazon

For this series, I enlisted the extra help from my friend Fredrik Gustafsson, so he could share his firsthand expertise with us. Fred has over 7 years of experience as an Amazon FBA seller, HK importer, and FBA coach. We’ll let him take over and start this series off. Here’s a quick background on Fred:

I have 7-years of experience selling on Amazon and I have in-depth knowledge about Amazon’s algorithm and marketplace. I have started 5 successful brands that are still selling and doing very well on Amazon.

I have got a lot of experience when it comes to product research, design, copywriting, SEO listing, optimization, PPC, keyword research, brand development market research and more. I also currently coaching 7 other Amazon sellers 4 startups and 3 other bigger sellers.

As you know, selling on Amazon can be extremely profitable but also very tricky (nevermind everchanging as well!) There are a lot of things to consider, and pitfalls to watch out for, but it’s also akin to streaking a literal money goldmine (if you do it right!).

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An Introduction To Alibaba

So, you know exactly what you want to sell, the question is how do you get your hands on this stuff? Alibaba is one of the companies that make it possible for you to become an Amazon pro, they basically provide you with a list of global suppliers that provide what you need. The majority of suppliers listed are from Asia which means you can significantly cut your costs because everything on that side of the globe is cheaper.

Alibaba also lists the most products with approximately 100,000 suppliers selling millions of items. You can more or less find anything on Alibaba not even companies such as eBay and Amazon can rival them.

It is important to note that even though Alibaba is a dream come true for most, there are also several risks involved that you will need to be aware of before you dive in. To enable you to make intelligent buying decisions, here are the main positives and negatives associated with making your purchases from this site.

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The Positives – What’s Great About Alibaba

There are several advantages associated with purchasing products from Alibaba, here are some of them:

Price

As mentioned, the majority of suppliers on Alibaba are from Asia which means that the price is way lower than purchasing from a Western supplier. The bottom line is that lower prices equate to more profit for you.

Bargaining Power

Because buyers usually purchase their products in bulk, their prices are not set in stone and the suppliers are more likely to give you the best deals. Also, if you have just started out and you are not willing to make a large investment, a lot of the manufacturers will allow you to purchase in smaller numbers instead of in bulk.

Diversity

There are so many different products on Alibaba it’s unreal. There’s nothing you can’t find; there are so many different variations of products, so you are spoilt for choice. The site also allows you to perform price comparisons so that you can find the supplier that best suits your budget.

Convenience

With Alibaba, there is no need to spend all day searching different websites looking for what you need. Everything is found in one place which saves you time.

Negatives – What’s Not So Great About Alibaba

I think the positives outweigh the negatives; however, it is important to mention them anyway, so you don’t run into any nasty surprises.

Low Manufacturing Standards

Without getting too technical here, this basically means that some of the suppliers will sell products of bad quality. Have you ever ordered something and it broke within a couple of days? Well, that’s because it was probably made by a supplier in Asia that had low manufacturing standards. To compound this problem, there is no insurance to cover you which means that if you sell the product and the person who purchases it is not satisfied with the quality, you are responsible for refunding the customer.

Communication Barriers

The majority of suppliers are from Asia; therefore, unless you are of the same ethnicity, you will find it difficult to communicate with them. Also, unless you are prepared to pay for a trip to Asia, you won’t be able to meet with your supplier face to face so that you can inspect the items before purchasing them.

Shipping

There is no overnight service when it comes to shipping from Asia which means that it is going to take a while before you get your products. It is also possible that you will need to pay overseas shipping fees before you can receive your goods, and if for whatever reason they are not delivered, you will end up losing your money.

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Using Alibaba – The Process

There are two ways you can use Alibaba, neither is better than the other it just depends on what’s most convenient for you.

Products First

Once you log onto the Alibaba website, enter the name of the product you are looking for into the search bar. You can click on categories to give you broader options. Once you find the product you are looking for, you will see the price and the name of the supplier. There will also be additional details about the product on the page.

It will be helpful if you have an understanding of some of the terminology associated with this method.

Unit Price

Once you find your product, there will be a price range attached to it, which means that it gives you the lowest price, the highest and every other price in between. You may also see the letters ‘FOB,’ this stands for ‘free on board,’ which means that the supplier will pay for the products to get to the marine port. If not, you will have to pay for it yourself.

Minimum Order Quantity (MMOQ)

Obviously everyone in this business is in it to make a profit, so one of the ways the suppliers make their money is to have a minimum order, which basically means that if you are going to make a purchase, you have to buy a certain amount. In some cases, the supplier will allow you to negotiate this number; however, it all depends on the supplier.

Payment Options

As with any transaction, you can only play with certain cards, so underneath the products, you will see a display of credit card symbols, this will let you know which payment options the supplier is willing to accept.
There are different risks associated with each transaction, so it is important that you are aware of them. The highest risk is Western Union, this is because the supplier can easily say that they didn’t collect the money. Whereas with a credit or debit card, the money is sent straight to the merchant’s account and there is a record of this.

If you don’t want to pay with a credit or debit card, the safest options are escrow, a letter of credit or PayPal. PayPal is the safest because the site has got strict buyer protection regulations; this means that if you are not happy with the products, you are entitled to a refund from the supplier. Making an escrow payment means that a third party holds onto the funds until you receive your goods and you are satisfied with them. A letter of credit states that you will pay the amount owed; however, a supplier will only accept a letter of credit if you are making a purchase of $20,000 or more.

Shipping

This is pretty self-explanatory, it basically lets you know when you should expect to receive your products.

Finally, before you make a purchase, it is important that you do some research into the company. Think about it like this, would you buy a product from Amazon without making sure that the majority of its reviews were good? Use this same approach when it comes to the right suppliers. The company profile is there for all to see, happy and unhappy customers alike leave reviews about their experiences, so check them out.
Once you are satisfied that the supplier is legit, you can then go ahead and order your products.

Supplier-First

When you log onto the Alibaba website and enter the product you are searching for, the site will provide you with a list of suppliers that sell them. You can then select the company to find out more information about them. A Word of Caution. I can not deny that Alibaba is a great site for people in the eCommerce business; however, there are also plenty of dodgy characters on the site who will rip you off in a heartbeat which is why it’s so important to do your research before making a purchase.

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3 Types of Sellers to Avoid on Alibaba

1. Middlemen

There are plenty of suppliers on the site who state they are manufacturers, but they are really middlemen. One of the problems with Alibaba is that they don’t have a strict policy when it comes to signing up to the site, so basically anyone can say they are a manufacturer even if they aren’t. You can easily spot a middleman and they prey on newbies. A middleman will always have a ridiculously high minimum order amount, this is because the order has to go through two channels and they need to make a profit.

2. Scammers

Middlemen are bad, but scammers are the lowest of the low, these people basically take your money and run. Again, they target newbies and the only payment options they accept are bank transfers and Western Union, this is so that buyers are unable to claim a refund when they don’t get their goods. These people have no products to deliver in the first place; once they have got your money, they close down their site and open another one in a different name and do it again.

3. Liars

I don’t know who is worse out of scammers and liars, they basically advertise nice and shiny looking products but when you receive them, they are nothing like the advertised goods. They might look the same, but the quality is absolutely awful, and it falls apart as soon as you touch it. Since the majority of transactions take place online and most buyers don’t come to their warehouses to check out their products they take advantage of this. These companies will purchase the cheapest materials to make their products to boost their profits.

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How To Avoid Scams on Alibaba

Unfortunately, it’s easy to get scammed on Alibaba, this is especially true if you are new to the industry and not familiar with how things work. Becoming an eCommerce millionaire is a great idea, but you don’t want to quit before you’ve reached your goals because you got scammed on your first transaction.

The easiest way to avoid the crooks is first to make sure the supplier is verified according to the Alibaba’s verification policy, and second, do your own research. Because at the end of the day, there is only so far Alibaba can go when it comes to verifying a company.

It is clear that many of these companies have found plenty of ways to dodge the system and find their way onto the site; therefore, it is your responsibility to do some additional research about the supplier before you part with your hard-earned cash. The best way to do this is to Google the name of the company, in this day and age disgruntled customers are forever writing negative reviews about their experiences to ensure that other people don’t have to go through what they did.

Final Thoughts

I hope I haven’t scared you off from getting into the Amazon business, because as you have read, there are some major pitfalls you will need to overcome. However, is it not better to know what you’re dealing with than to go into something with your eyes wide shut?

I don’t work for Alibaba, so I’m not going to tell you that it’s the best site in the world and that there are no problems, and neither am I promising that if you follow the instructions in this article you won’t get scammed because as I have mentioned, these people come up with new ways to beat the system every day.

However, you will significantly reduce your chances of falling into the hands of an unscrupulous manufacturer if you do.
I wish you every success in finding the best products for your eCommerce business.

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