Small Business Advice

How to set up your Alibaba dropshipping business

Wondering about dropshipping as a new side hustle? Here's how to set up your own dropshipping business on Alibaba.

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Alibaba is by far the world’s largest ecommerce marketplace by gross merchandise value (GMV)1. That makes it a great place to find import products from abroad – specifically China – if you run an ecommerce business.

But can you dropship from Alibaba? In a word, yes. However, the company mostly operates as a B2B (business-to-business) marketplace. Alibaba suppliers are generally set up to sell goods in large quantities, and a majority are often unable or unwilling to ship individual items to buyers abroad. This tends to suit wholesalers more than dropshippers.

However, some entrepreneurs on Alibaba require a minimum of one piece per order, which opens the door for dropshipping. That, combined with the low shipping costs that China is known for2, makes Alibaba dropshipping a viable option for any online store. You can get your hands on unique products that may set you apart from your competition.

The key takeaways

  • Alibaba dropshipping is a viable option for any ecommerce store, but you have to thoroughly vet suppliers for quality.
  • One way to ensure that your payment is secure and the products meet your quality expectation is by using Alibaba’s Trade Assurance.
  • The fact that prices on Alibaba are negotiable makes it a great site for anyone seeking to leverage their business charm for low prices and high profit margins.
  • Keep in mind that Alibaba is generally meant for wholesalers looking to buy goods in bulk. Therefore, finding suppliers who are willing to work with dropshippers may not be the easiest thing. In case you’re not willing or able to search through Alibaba’s large database for potential suppliers, you can consider Alidropship, which is essentially dropshipping with AliExpress.

How does Alibaba work for dropshipping?

Generally, Alibaba dropshipping starts with you searching for a supplier who sells the product(s) you need. Once you find one, you can proceed to contact them and ask about dropshipping. You’ll also want to know whether they have minimum order requirements.

If you’re on the same page with the supplier, discuss the preferred method of payment, and then place your order. Below is a detailed, step-by-step process for dropshipping on Alibaba.

Step 1. Search for suppliers on Alibaba

The first thing to do as a dropshipper is head to Alibaba and find the products you want to sell. Although it’s home to tons of factories, manufacturers and suppliers, Alibaba has a great search function - complete with product categories - that can help you find the products you need. If you know how to use popular marketplaces like Amazon, then you’ll certainly find your way around Alibaba.

After searching for the products that you want, use the left sidebar to refine the search and find the most suitable suppliers.

It’s always a good idea to work with verified entrepreneurs as well as those with Trade Assurance (more on this in later sections). These add an extra layer of protection on your order, ensuring that you can pay securely and that the product meets the quality standards you expect and will be shipped on time.

“Ready to Ship” and “≤ 1h response time” are also good options to select because suppliers who follow these criteria are more likely than not to support dropshipping on Alibaba.

You also have the option to choose products that are available specifically for dropshippers. On Alibaba’s home page, scroll down to the “Dropshipping” section and click on it.

This will take you to a page where you can search for dropshipping products.

Step 2. Check price and MOQ

Once you’ve run your search and found products that you are interested in, read their details along with the packaging and delivery info. Take note of the price per unit and the minimum order quantity (MOQ).

These will tell you whether dropshipping the product makes economic sense and is viable to your business model. You don’t want a per-unit cost that will price you out of the market when you factor in your profit margin. Oftentimes the price per unit will drop considerably as you increase quantity. But keep in mind that a good number of sellers don’t include shipping costs, which they list as “To Be Negotiated”.

As far as minimum order quantity (MOQ), many Chinese suppliers who support Alibaba dropshipping allow buyers to purchase one unit at a time. This is a great option if you don’t have a physical shop or warehouse to store bulk products. The downside is that when you buy one item at a time, you’re usually spending more on each unit compared to bulk buying.

Step 3. Create a list of preferred suppliers

You need more than a few suppliers on your list because not every Alibaba seller that you reach out to will work out. Some may be out of stock and others might not have the best payment terms for you. You may even find yourself ruling out sellers because they don’t meet your verification criteria. Therefore, create a list with 5 to 10 suppliers. If you have enough time, you can go all the way to 20+.

With a decent list, you’ll find at least one supplier who meets most, if not all, your requirements and is willing to work with you in dropshipping on Alibaba. Such a supplier should stock the exact product you’re looking for, offer a minimum order quantity of 1, have reasonably-priced products, offer Alibaba Trade Assurance, be verified and have good buyer reviews.

Step 4. Contact the selected suppliers

An easy way to contact suppliers about Alibaba dropshipping is through the platform’s built-in messaging service. But you do have other options like email, call and WeChat – all of which are usually available on the supplier’s profile. The primary purpose of reaching out is to know whether your potential suppliers have the products in stock and if they are open to dropshipping in the country you plan to sell.

When contacting suppliers about dropshipping on Alibaba, make sure to keep your message concise. Many sellers on the platform are based in China and English is not their first language. A good number will use tools like Google Translate to interpret your messages from English to Chinese (specifically Mandarin or other local dialects).

To avoid misunderstandings, try keeping away from spelling errors, stick to simple words, and use short sentences – preferably in bullet points. This will help your selected suppliers respond to each of your questions one by one. Some of the key questions to ask Alibaba dropshipping suppliers are:

  • Do they have the products in stock?
  • Do they work with dropshippers who are looking for import products from abroad?
  • What are their payment terms?
  • Will they charge you a “drop fee” in addition to the cost of product and shipping?
  • Do they have MOQ requirements?
  • What are their other available means of communication?
  • What’s their shipping timeline?
  • What are their return policies?

Answers to such questions will give you a clear picture of what you’re getting into. For example, the supplier might need over two weeks to process and ship your products, yet you need them within a week. Perhaps they only accept PayPal (which also operates as GoPay), yet you want to use your credit card.

It’s also noteworthy that depending on your location, you may be on a different time zone with your potential suppliers. For instance, New York is 13 hours behind China. This means the suppliers may not be able to respond to your messages promptly.

Step 5. Negotiate product prices with suppliers

By this point, you should have a few potential suppliers that you’ve thoroughly vetted and are looking to partner with. While they’ll all have listed prices for the product, you can negotiate for lower payment terms. These negotiations are typically done via email, but phone call is an option too if you or the supplier have a common language.

Compare the prices listed by other suppliers for similar products. This will give you an idea of the best price per unit of the goods you’re buying. Besides, you’ll want to take your desired profit margin into account when negotiating prices on Alibaba. If the seller agrees to lower the price, make sure the reduction is enough for your dropshipping store to earn the targeted profit margin.

Step 6. Ask for a sample

This is optional, but it’s an option that you want to take. After honing in on one or two suppliers for your Alibaba dropshipping business, consider asking them for a sample of the product. The sample will allow you to test the product for quality. That’s something you need to know beforehand; before you introduce the product to your consumers. Otherwise, compromised quality can create a negative rep around your dropshipping store and ruin sales.

Some Alibaba suppliers provide free samples based on the promise of you placing a large order of the product. Others charge a fee because of the amount of work required to prep and ship the sample. Again, this is something you can negotiate.

Some things to check when examining an Alibaba product sample include:

  • The way the sample was shipped because this will reflect how the supplier will ship your large order(s).
  • How the sample was packaged. If the box is flimsy and has some damage, you can infer that the large order is likely to have the same issues. If you’re doing Alibaba dropshipping of fragile items, go for suppliers who offer enough padding.
  • The quality of the product. This includes the material used and production quality (like stitching).
  • Whether the product works as advertised or as expected.

So, while you may have to pay for a sample before dropshipping on Alibaba, it’s generally a worthy expense. It can help you avoid the mess that comes with second-rate products and disgruntled customers.

Step 7. Agree payment method with supplier

Ideally, you want to go with Alibaba entrepreneurs who accept your preferred method of payment. Generally speaking, dropshippers on the platform have four main payment options: bank transfer, Alibaba Trade Assurance, card payment, and online payment.

  • Alibaba bank transfer: the most common way of making bank transfers to Alibaba suppliers who are based in China is through Telegraphic Transfer. Also known as T/T or telex transfer, Telegraphic Transfer is essentially a form of electronic bank transfer. With this method, the supplier will typically want to receive full payment before they start producing or packaging your products. Plus, it’s a slow and cumbersome method of payment, which makes it unsuitable for most dropshippers.
  • Alibaba Trade Assurance: this is a form of escrow. A third-party holds your money until the supplier fulfils your order. They only pay the supplier after you’ve confirmed that the products have been delivered and are in good condition. These conditions make Alibaba Trade Assurance a very safe method of payment. However, it’s just as slow and cumbersome as bank transfers.
  • Alibaba card payments: you can use your credit or debit card to pay for your order when dropshipping on Alibaba. The platform supports all the main processors like Visa, American Express and MasterCard. The downside of using card payment is that you’ll pay fairly high transaction fees compared to other options.
  • Online payment: PayPal is perhaps the most common online payment method for Alibaba dropshippers. It comes with advantages, too. PayPal is fast, easy and offers reliable buyer protection. However, not all Alibaba suppliers will accept it because of the fees charged – which are usually the responsibility of the seller. Besides, PayPal comes with the possibility of chargebacks.

Ultimately, the best payment method for you is one that you can agree on with the supplier.

Step 8. Place your order and connect your ecommerce storefront

Once you chose, vetted and negotiated with your supplier, you can go ahead and place your order. As long as the sample product turned out okay, you can connect your ecommerce storefront and immediately start selling that product. You can either host the storefront on your own website or through a third-party like BigCommerce, Shopify or Wix. In case you set up your online store with WordPress, then a plugin like WooCommerce will help a great deal. In any case, the supplier will start order fulfillment as soon as you connect the storefront.

You can automate some tasks like submitting orders and payments using Alibaba’s Dropshipping Center. Further, the platform allows you to partner with dropshipping firms like Spocket, Dropified and Modalyst, which can customize data for you and even publish product details on your storefront. It’s always a good idea to link your account with these partners and automate as many dropshipping processes as possible. Doing so saves you a lot of time, which you can then dedicate to growing your ecommerce business.

How to choose an Alibaba dropshipping supplier

For many dropshippers, some clarity on a few questions can help in the process of choosing a supplier.

Is it okay to buy from Alibaba? The truth is, Alibaba is a safe marketplace with good and honest suppliers. However, like any other ecommerce platform, it’s not short of a few unscrupulous individuals. You will need to do lots of due diligence when choosing a dropshipping supplier on Alibaba. Here’s how to go about it:

  • Choose a verified supplier: while you have the option to work with any Alibaba supplier (including non-verified ones), you’re much safer choosing verified suppliers. The verification icon means that the supplier has been screened by Alibaba for authentication. Besides, ordering from a verified business entitles you to free supplier inspection reports from Alibaba.

  • Select suppliers who offer Alibaba’s Trade Assurance: Trade Assurance is a built-in payment protection system that works like escrow. It’s a free service that safeguards buyers’ orders and money. Working with a supplier who is part of Alibaba’s Trade Assurance means that you’re highly unlikely to encounter fraud and quality issues.

  • Request for the supplier’s contact details: at the very least, ask the supplier to give you their business phone number, email address and physical address. They won’t hesitate if they are a legitimate business. Plus, you can use the information to run a quick Google Earth search of the supplier. And don’t feel reluctant to call the number and prove its legitimacy.

  • Ask for business documentation: if you want to go a step further to verify the business, make sure to ask the supplier to show you copies of their business licenses and compliance certificates. You can even request for a few photos of their factory or warehouse.

  • Prioritize gold suppliers: an Alibaba gold supplier is one who has a golden icon on their profile and product page. Although any supplier can pay to have this icon, it’s only issued to businesses that agree to on-site verification by a third-party scrutineer. Among other things, the scrutineer’s job is to verify that the supplier is an actual, legitimate business. Therefore, if you wish to skip requesting for proof of legality yourself, you can rely on the gold icon as evidence of the supplier’s legitimacy.

  • Check the supplier’s reviews: Alibaba suppliers who are based in China are usually rated using the platform’s Supplier Online Performance Index (SOPI). The rating system – which runs from 0 through 5 – take into account a supplier’s product popularity, presentation quality, service quality and transaction volume. A rating of 5 indicates excellence of the aforementioned metrics. On the other hand, a rating that tends towards zero suggests that the supplier doesn’t have products that meet consumer expectations. They don’t put enough effort into packaging either. Therefore, it makes sense to go with a supplier with a high SOPI score. You can see their score (usually depicted as diamond icons) under their name. It’s also worth mentioning that Alibaba does not allow rating of products; users can only rate suppliers.

  • Trust your gut: don’t hesitate to walk away if you feel that something is off about a supplier. Things like unusually low prices or suppliers who insist that you work outside of Alibaba (where there are few to no buyer protections) are red flags to take note of. Walk away and find another a legitimate supplier who can help with your dropshipping on Alibaba.

What is Alibaba’s trade assurance?

Alibaba’s Trade Assurance is a buyer protection service that ensures four main things:

  • The product delivered to you meets your quality expectations.
  • Your payment process is completely secure and funds are tracked until safely delivered to the supplier.
  • You have multiple payment methods at your disposal. These include online bank transfer, card payment, wire transfer and PayPal.
  • The product is shipped and reaches your desired destination on time.

If a supplier’s products don’t meet the quality standards agreed upon, or if the order fulfillment date is later than promised, then Alibaba takes responsibility of resolving the matter. This may involve returns and refunds if deemed necessary.

When you are part of Alibaba’s Trade Assurance, you also get up to 30 days of customer support after your product is delivered. Alibaba offers mediation assistance in case of any disputes between you and the supplier. You also get reimbursement for all eligible claims.

One good thing about Alibaba Trade Assurance is that dropshippers don’t need to pay additional fees to enjoy protection. However, there are specific requirements that you must meet to be eligible for Trade Assurance coverage:

  • You must have made your product order from a supplier who has Trade Assurance. You can identify such suppliers from the gold-colored Trade Assurance icon, typically found in the “Protection” section of an Alibaba product listing.

  • You must have paid for the product(s) using Alibaba’s payment options that are available on the platform. You’re automatically ineligible for Trade Assurance if you use an off-site third-party payment system.
  • In case of a claim, you must initiate it within 30 days of delivery to get a refund based on Trade Assurance. Keep in mind that Alibaba’s investigators will only consider on-site communication held between you and the supplier. Any messages exchanged outside of the platform won’t be of any help. This underlines the importance of proper communication between you and all potential suppliers from the get go.

Pros and cons of Alibaba dropshipping

As is the case with all other online marketplaces, Alibaba dropshipping has its advantages and disadvantages. Here’s a look at the good side of Alibaba as well as the things to be mindful of:

Pros of dropshipping on Alibaba

  • Large variety of products. Alibaba is the world’s largest ecommerce marketplace by GMV. That’s mostly down to the huge range of products. Regardless of your niche, you’re bound to find a product that you want to include in your dropshipping business.

  • Competitive prices. China is famous for its low manufacturing costs, which often translates to low product costs. Dropshippers have a good chance at finding quality products for their ecommerce stores at very competitive prices.

  • Negotiable prices. One thing about dropshipping on Alibaba is that you can always negotiate prices. If you are a charming businessperson, you can save your ecommerce company some money by negotiating the lowest prices possible for products.

  • Large number of suppliers. Alibaba is home to over 150,000 sellers supplying products to more than 10 million buyers across over 190 countries With such a large database of sellers, your chances of finding an ideal supplier are pretty high.

  • Trade Assurance coverage. If you opt into Alibaba’s Trade Assurance program, you’re guaranteed to receive quality products, and on time. In case of inconveniences like quality issues and lateness in delivery times, the Trade Assurance protection will resolve and make a refund if necessary.

  • Easy to use. Alibaba’s website and mobile apps are easy to navigate. There’s a search function, complete with filters that help you hone in on verified suppliers who have Trade Assurance cover. You can further narrow down your search to suppliers who support dropshipping, have no minimum order requirements, and are ready to ship immediately.

Cons of dropshipping on Alibaba

  • Quality concerns. You can get your hands on high-quality products when doing Alibaba dropshipping. On the flipside, it’s very possible to get disappointingly low-quality products no matter how hard you search. That’s because many manufacturers of top-grade products prioritize wholesale buyers over dropshippers.
  • Longer delivery period. Dropshipping on Alibaba generally takes longer compared to alternative platforms. DHGate and AliExpress are just a few sites that have options for shorter shipping times compared to Alibaba.
  • Cumbersome return procedures. Even with Alibaba Trade Assurance, the process of making returns and claims is a long and tedious one. You first have to make a formal claim, then initiate talks with the supplier about the return. Once you reach an agreement, it’s your duty to ship back the goods, after which you have to provide proof of shipment to Alibaba. Only after the supplier has confirmed delivery of returned goods can you get refunded. And even that comes after seven business days. This underscores the importance of thoroughly vetting suppliers and their products before taking them up so that you don’t necessarily need to return anything or make any claims.

Is Alibaba or AliExpress better for dropshipping?

When it comes to dropshipping, AliExpress just edges out Alibaba. While both are owned by the Alibaba Group, is more of a B2B platform. As such, Alibaba is more suitable for ecommerce businesses that are looking to purchase products in bulk directly from manufacturers. This makes Alibaba better for wholesalers who want to take advantage of quantity discounts and lower purchase prices, thus increasing their profit margins.

On the other hand, AliExpress is a business-to-consumer (B2C) platform, which makes it better for dropshipping compared to Alibaba. In fact, AliExpress has Alidropship - a service meant specifically for dropshipping stores. You can make low volume orders directly from suppliers and enjoy ePacket shipping, which expedites delivery times from Hong Kong and China to any location of your choice. This low MOQ and fast delivery can be beneficial for your business, especially if it’s a startup with little capital.

The downside of AliExpress is that prices are non-negotiable. So, whatever price you see on a product page is what you have to pay. And of course, if neither Alibaba nor AliExpress dropshipping works for you, you can always turn to eBay, Amazon and other popular ecommerce and online marketplaces.

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