How Does Alibaba Work? (What You Should Know in 2024)


You’ve been looking around and the name Alibaba keeps coming up.

A lot of good things have been said about it.

But, you want to know more about what it is, how it works, and more.

If this sounds like you, you’re in luck!

This article will provide all the foundational information you need to start sourcing amazing products from Alibaba.

Let’s dive in.

What is Alibaba?

Alibaba homepage

Alibaba is a business-to-business (B2B) company connecting manufacturers and wholesalers with buyers around the world. It was founded by Jack Ma in 1999.

Although the name Alibaba is often used to refer to Alibaba.com, it actually refers to the Alibaba Group Holding Limited, the company that owns Alibaba.com.

Who is the ideal Alibaba customer?

Alibaba is a B2B business. Its main customers are businesses that buy products in large quantities. Bulk orders allow sellers to lower their prices and attract more customers.

Bulk orders mean that most sellers on Alibaba have minimum order quantities (MOQs) on their products. This means you are required to buy a specific number of products at a minimum.

Although Alibaba is a B2B business, traders can sell to anyone who meets their MOQs.

Note: Although each seller has their own MOQ, you can always negotiate for better terms.

How do you use Alibaba?

You must create a free account to find and buy products on Alibaba.

How do you create an account?

Alibaba Signup

Create an account on Alibaba by following the steps below:

  • On your favorite browser, open Alibaba.com. Click on the ‘Sign up’ button, as shown in the image above.
  • Fill in your information in the registration form. Remember to check the box if you agree with the Membership Agreement, Privacy Policy, and Terms of Use.
  • Submit the form. You will receive a verification email. Enter the verification code sent to you on the next page to finish setting up your account.

Your account is ready; you can sign in to start using it.

How do you find products on Alibaba?

Alibaba makes it easy for you to sieve through the millions of products and over 200,000 suppliers in its database; this part is easy.

There are two ways to go about it:

  1. Search by keyword or image. Type the product name you want in the search bar on the homepage. Alternatively, search by photo if you have an image of the product.
  2. Browse product categories. There’s a menu with the ‘All Categories’ option right below the Alibaba logo on the home page. Use it to explore all the categories available on Alibaba manually. It’s great for when you’re not looking for anything specific.
Alibaba categories menu

Alibaba products

Alibaba has millions of products in its database, but you probably already know this.

What you really want to know is the quality of products, prices, and how to find high-quality products.

Let’s get into that.

The quality of products sold on Alibaba

There are thousands of suppliers on Alibaba with varying product quality. This makes it difficult to generalize the quality of all products on the platform.

Some suppliers focus on selling large volumes of low-quality, inexpensive products, while others prioritize quality over price.

There’s a wide range of qualities at different price points. Ultimately, your budget, business strategy, and target audience determine the quality of the product you go for.

How do you find high-quality products on Alibaba?

Alibaba product reviews

Here’s what you must do to find a high-quality product.

Research your supplier thoroughly

By default, a wealth of information on suppliers is listed on Alibaba. However, this information is mainly provided by the suppliers, so you can’t rely on it 100% because it may be exaggerated.

To find reliable information, research the supplier off Alibaba.

Find reviews from past customers (maybe even reach out to the customers) on review sites. Find out if they have a physical location and where it is and request them for any necessary certifications.

Finding a good supplier on Alibaba is the key to finding a high-quality product, so please take your time with this step.

Request detailed product information

For this part, you must understand the crucial attributes of the product you’re looking for. This way, you’ll have the information to ask relevant questions, leading you to a high-quality product.

For instance, if the product you want is meant to be integrated with a larger system, you want to look out for compatibility with the existing system.

On the other hand, if you’re sourcing fabric for a high-end fashion brand, the gram per square meter (GSM) metric is critical. Therefore, you’ll know to request this information from the supplier.

Order product samples

A sample lets you interact with the product and get a feel of how it works and whether it meets your performance goals.

A key reason for ordering a sample is to minimize the risks of ordering products in bulk. For instance, if a product doesn’t meet your specifications, you can request the manufacturer or supplier to make changes before making your order.

Use third-party inspection services

If you can’t visit the supplier, third-party inspectors can represent you on the ground.

For a fee, specialized companies and individuals visit production centers and assess the quality of the physical products on your behalf.

Is Alibaba safe?

Yes, generally speaking, Alibaba is safe. It ensures the safety of transactions between buyers and sellers through the Trade Assurance program.

Alibaba trade assurance program

The Trade Assurance Program protects you from low-quality or defective products, ensuring you always get what you pay for.

Here’s a rundown of how the Trade Assurance program achieves this:

  • It facilitates safe and easy payments. The Trade Assurance program lets you make fast, secure, encrypted payments. It supports many major online payment methods or bank-to-bank transfers.
  • It provides a money-back policy for failed deliveries. If your order fails to arrive, disappears, is faulty, has incorrect items, or has other issues, you can claim and receive a full refund through the Trade Assurance program.
  • It guarantees reliable shipping and logistics services. The Trade Assurance program helps provide a fixed-date delivery guarantee for all your orders. In addition, it enables you to track your shipments in real-time worldwide.
  • It offers after-sales protection. For eligible products, the Trade Assurance program helps you get on-site installation, free part replacement, repairs, and maintenance.

As stated earlier, Alibaba is generally safe. However, practice caution when approaching and engaging suppliers to avoid getting scammed.

How do you avoid scammers on Alibaba?

Although Alibaba is safe, it’s still possible to find yourself on the receiving end of a scam, especially if you don’t transact through the Trade Assurance program.

Alibaba has millions of traders and robust security systems, but scammers often find ways to cheat their way into the system.

Here are a few ways to protect yourself from their gimmicks:

  • Avoid traders who ask for more information than seems necessary. If they ask for personal information like credit card details or your social security number, it’s best to avoid them.
  • Assess a seller’s badges before engaging them. Alibaba provides the Gold, Verified and Trade Assurance badges to help buyers identify trustworthy sellers. Although they shouldn’t be your only measure of trust, avoid sellers without these badges.
  • When the deal is too good. Chances are, you have a price estimate of the product you want. Thus, something is probably wrong when the price is unusually low or high. Also, if the deal feels too good to be true, it probably is.
  • Research suppliers. Even if a seller has a Gold badge, it’s best to research their presence off Alibaba to establish their authenticity. Legitimate businesses will have social proof, like a website, physical location, or social media pages.
  • Keep all communication and payments on Alibaba. Alibaba can only protect you if you transact through its platform. Don’t make payments directly to sellers unless you know and have a long-standing relationship with them.
  • Check ratings and read reviews. You can tell a lot about a seller’s quality of products and customer service from reviews. Read as many reviews as possible on and off Alibaba to better understand a seller before buying.
  • Avoid branded products. Big brands like Nike, Adidas, Marvel, and Disney have strict policies on selling their products in marketplaces. Therefore, if you find a seller of branded products, investigate their legitimacy so they don’t sell you knockoffs.
  • Order a sample first. If a trader on Alibaba is legit, they shouldn’t have a problem sending you a sample of your desired product. You’ll pay for it, but it’ll help you verify the quality of products and avoid getting scammed.

How payments are processed on Alibaba

Making payments on Alibaba is painless because it supports numerous payment methods.

It’s worth noting that several payment methods are region-specific.

For instance, to use Boleto, your account must be registered in Brazil and your delivery address must be in Brazil.

Other payment methods like ‘Pay Later’ require you to be US-based and invited by Alibaba. With Pay Later, you can’t spend more than the credit amount Alibaba grants you.

Below is a list of the major payment methods on Alibaba.

Wire transfer (Telegraphic Transfer or TT)

A wire transfer allows you to pay a supplier directly. It’s suitable for large orders because:

  • It costs around $40 per transaction.
  • It’s international.
  • It’s multicurrency.

Local wire transfer transactions typically process in one to two days, while international transactions may take up to seven days.

Due to the amount of money transacted, only pay trusted suppliers directly using wire transfers. Otherwise, always transact through the Trade Assurance program to protect yourself.

Debit or credit card

Debit and credit cards are among the fastest payment methods on Alibaba.

You can pay up to $12,000; payments typically take less than two hours to reach the seller. However, only Visa and MasterCard cards are accepted.

PayPal

PayPal homepage

Most suppliers on Alibaba accept PayPal. Paypal is:

  • Safe and easy to use. You can cancel orders and request refunds on PayPal.
  • Speed. Suppliers receive the money you send instantly.
  • Multicurrency and international. You can send money to a supplier from many countries using your local currency. PayPal handles the conversion for you.

Despite its omnipresence and ease of use, PayPal exchange rates and fees are unfavorable. We recommend you use PayPal if:

  • A supplier is receiving payment in your currency.
  • You don’t mind the unfavorable exchange rates.

Western Union

Money transfer international money transfer western union

Western Union® is a convenient way for users in the US to send up to $2,500 to suppliers on Alibaba.

Payments are typically processed in less than a day and sellers don’t need a bank account to receive payments through Western Union.

One of the downsides, however, is that you can only transact in US dollars.

Transaction fees for amounts exceeding $1,000 are 1.8% of the amount.

Letter of Credit (L/C)

A letter of credit is a form of payment backed by a financial institution. Your local bank and the seller’s local bank create a binding contract that ensures goods are packed and shipped as agreed.

Only when the goods are shipped will your local bank release payment to the seller’s bank. A letter of credit is one of the most secure payment methods because it guarantees that a seller will receive their payment and a buyer will receive their product.

However, the cost of opening a line of credit, conversion rates, and processing speed can significantly affect the processing time of your order.

Can you dropship on Alibaba?

The dropship model - Infographic

Yes, you can dropship on Alibaba.

The Alibaba Dropshipping Center lets you search, filter, and track orders and manage shipments.

Additionally, it supports direct integrations with stores on major ecommerce platforms like Shopify, eBay, and SquareSpace.

If your store is hosted on one of these platforms, you can import products directly to your store and manage inventory using tools like Dropified.

Despite being similar to AliExpress dropshipping, Alibaba dropshipping isn’t completely seamless because some products have an MOQ requirement.

Tip: Want to learn how to dropship with Alibaba? Check out our article here!

Shipping on Alibaba

Alibaba provides several methods to ship your orders. The price you pay depends on factors like:

  • Shipping method. Available methods include air freight, sea freight, or air express (only ships to the US). Air delivery costs more but saves time, while sea deliveries save money at the expense of time.
  • Destination country. The further your order is from the warehouse it’s stored, the more it costs.
  • Shipping time. The shipping time is tied to the shipping method. Faster shipping times require air freight (five to seven days), typically costing more. Sea freight takes longer (30-60 days) but costs less.

Alibaba ships to over 190 countries worldwide. However, always ask your supplier whether they ship to your country before placing a bulk order.

For logistical reasons, it may be impossible to ship directly from China. For instance, countries like India have an active ban on Alibaba.

You can work around these situations by collaborating with third-party logistics companies or freight forwarders in countries like the US who receive your order from the supplier and forward it to you.

Taking action

Reading and absorbing information and knowledge is great (definitely if it’s free!), but do you know what’s even better?

Taking action!

So, to help you with taking action with what you have learned in this article, take a look at the bullet points:

  • Have an objective. Before logging on to Alibaba and contacting suppliers, learn everything you need to know about the product you want. That way, communication with the supplier is seamless and you end up with the desired product.
  • Research your preferred payment method. Some payment methods have high transaction fees and others take longer to process. The wrong choice can significantly affect the order processing time.
  • Check the MOQ. If you plan to dropship, ensure the supplier of the product you want can ship one unit at a time before marketing it. Otherwise, negotiate with your supplier to get a reasonable MOQ.
  • Research your shipping options. Ask the supplier whether they can ship to your target country and compare the shipping options available to you.

Conclusion

Alibaba can be a great asset. It can spur growth in your business by providing endless opportunities. All you need to do is learn how to use it effectively.

If you’ve read everything to this point, you have the spirit and information you need to start or grow your business using Alibaba.

It’s time to put this information to use and take action. When you do, may you find success!

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