Periodically our customers inform us that they’ve found suppliers on online platforms like Alibaba.com and GlobalSources.com and they’ve expressed their concern on more than one occasion about if they can trust them.
These platforms certainly have pros and cons and provide certain functions that are meant to give buyers more security such as ‘Trade Assurance’ on Alibaba.com, for example.
So, can suppliers found on these platforms be trusted? Let’s explore that here…
Is it safe to use Alibaba and GlobalSources when sourcing?
However, they should only be the starting point (getting an initial list of potential suppliers and some general market information such as ‘are there many suppliers making this’, ‘what is the minimum order quantity in general’, ‘what is the average price they advertise’, etc).
Are the suppliers we find there trustworthy?
This is the issue. These platforms collect all kinds of suppliers and generally don’t do a great job of helping you screen the best/safest suppliers for your business. Alibaba especially is an example of this, as it seems that their marketing is focused on getting Chinese suppliers to pay more, rather than truly differentiating between ‘good’ and ‘bad’ suppliers. Remember, just because a supplier pays a platform extra to be ‘verified’ or ‘gold’ doesn’t necessarily mean that it’s any safer to work with them.
I wrote about the “Gold Supplier” gimmick a few years ago, and I have the feeling the situation hasn’t improved. Similar caution should be shown with the ‘Factory Assessment Reports’ that Alibaba provides, too.
How about ‘Trade Assurance?’
When it comes to the “Trade Assurance” program on Alibaba, I don’t have much experience with it. It seems some buyers use it for the first ‘trial order’, which is usually small in size. That program is simply one more way of reducing risks when the buyer has no time & resources to properly vet the supplier.
As Dan Harris, an experienced China business lawyer, wrote in this post:
My standard response on whether buying “through” Alibaba will “protect” them is no. Alibaba Trade Assurance has been and will always be borderline worthless. I know nobody who has ever had a good experience with it and plenty who have not.
I agree with Dan on this point.
A number of people told me they didn’t get good products and were unable to get compensation through that program. (It’s ‘assurance’ which is a vague word, not ‘insurance’, don’t be mistaken here.)
How to vet potential suppliers, then?
If we accept that a ‘manufacturer’ who has a verified supplier status could possibly be a couple of people in an apartment in China running a small trading operation, then you can see why thorough vetting is important before placing any orders.
Here are some tips to get you started:
- Check for their company name + scam in a search engine.
- Do the company’s profiles on Alibaba, GlobalSources, Made In China, etc, all add up and provide the same information?
- Have they exhibited at trade shows before? The show directories will list their name so you can go back and check.
- Work with a local specialist who can perform a background check on the business (this due diligence could also include checking legal records, and safety reports & certifications, too).
- You can check if the company is who they say they are yourself, too, by ordering a sample and requesting to pay for it directly to their company bank account and sending a courier to pick up the package from their address. If the information given is, for example, a personal account in Hong Kong, say, or a residential building or co-working space address, this is not a good sign that you’re dealing with a manufacturer. Also, this information needs to match what you’ve already been given.
- When communicating with the supplier, mention that you insist on auditing their factory with a third-party agency to assess their capabilities, capacity, processes, etc, before working together. A legitimate factory shouldn’t object to this.
- The same goes for product inspections. Insist on those to be performed by a third-party agency before making a final payment, usually, a Final Random Inspection is done. Again, a legitimate factory should accept inspections.
Properly vetting potential suppliers is a thorough process involving a number of different activities as you can see, some from your country and some locally or on-site at the supplier’s facility.
Use Alibaba and GlobalSources to kick off your sourcing journey. They’re a great source of information that will start to give you an idea of supplier types, locations, market rate, etc.
However, once you have a shortlist of potential suppliers from these platforms, go through a comprehensive vetting process to find one or two options that are both a great fit for your needs and legitimate/trustworthy businesses.
Read and listen to even more content about sourcing and vetting suppliers
👉 We also created an 11-episode podcast mini-series about everything you need to know about vetting Chinese suppliers here:
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- Identifying suppliers,
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