Selecting a supplier and sourcing goods online can be risky, particularly for a small import business with no personal representative in the other country. However, you can improve your chances of success by performing due diligence.
Before attempting to search for suppliers, research the product you're looking for. You need to have an understanding of its market price, differing levels of quality, the use of alternative materials, and anything else you can find out about the product before finalizing the deal.
Problems can also result if you select a supplier before you know whether a supplier is reliable and capable of delivering a product that meets your expectations.
Begin your search by communicating with several suppliers. Sourcing suppliers, negotiating prices, and reviewing samples can take time. Some suppliers may be unable to match your specifications, have an unusually high minimum order quantity, or just ignore or not respond to your email requests. The more suppliers you communicate with, the better your chances of success.
Check the supplier's company information. Does the company have a valid address, telephone number, and website? Does the email address match the company name, or is the supplier using an Outlook or Yahoo! type email address? Can the supplier provide references of firms that have purchased from it? If you located a supplier on an Internet sourcing platform like Alibaba.com, make sure you check the online reviews. If purchasing licensed goods, make sure that the supplier has a license to sell those product; China has long had a reputation for selling counterfeit goods.
Working with Alibaba Gold Suppliers
Gold Suppliers on Alibaba.com belong to a membership program that verifies that the supplier is a legally registered company. A Gold Supplier goes through a screening process and publishes company information that may not be readily available to an importer. An importer can then use this information to attempt to distinguish between a good and a bad supplier.
Gold Supplier membership requires a third-party verification of a business license, a contact person, and a mandatory visit to the supplier facilities by an Alibaba employee.
Gold Supplier membership doesn't mean that the supplier is safe and trustworthy. The Alibaba site clearly states that through the authentication and verification process, "Alibaba.com can only check whether the business is registered in its local business administration region. This verification does not verify the integrity of the business, so it is still important for you to use your best judgment regarding both the supplier and any impending transaction. As Alibaba.com is not involved in transactions conducted between buyers and sellers, please choose the safest payment method to protect yourself."
The Gold Supplier status verifies the following:
Date of issue: This is date when the supplier's business license was issued, which is not to be confused with the year in which the business was established.
Date of expiry: The expiration date isn't really important, because the renewal process is routine.
Registered capital: Registered capital can serve as an indication of the size of the company. A large registered capital can indicate a large supplier, and a small amount can indicate a one-man operation or small supplier. The smaller suppliers tend to be riskier.
Company name: The name can be important, because you want to make sure that when you're transferring money to a bank account, the name matches the supplier name on Alibaba.com.
Country/territory: This is where the company is legally registered.
Registered address: Suppliers can register and operate from a different address. You need to be careful, because suppliers often subcontract work to other suppliers, and at times these companies produce inexpensive or inferior quality items.
Year established: The longer a company has been in business, the more likely it's good.
Legal representation: This is usually the chief executive officer, which should be the individual who signs any formal agreement.
Issuing authority: This is the government entity that issued the business license, which should be the same city as the supplier's registered address.
Remember, the Gold Supplier designation alone has little value, but it does provide certain information that might not be readily available. It's never recommended that an importer deal with a free member on Alibaba.
Developing supplier relationships
Finding the right supplier could be your key to success, because a good supplier will bring significant profits to your business for years to come. You have to look at how you can maintain a relationship that will last beyond the first order, in case you've found that ideal supplier.
Following are some recommendations that you can use to establish a good relationship with your supplier:
If you decide to change suppliers, make sure you maintain contact with your existing supplier prior to switching. You always need a fallback option. Beware of the cheaper supplier; changing suppliers to save a few pennies can be risky.
Remember that the supplier is a business and also needs to make a profit, so do not make unrealistic price demands.
Maintain quality standards.
Plan ahead and avoid last-minute orders.
Never rely on just one contact person. Employee turnover is very high with suppliers in countries like China. Your contact could decide on a moment's notice to move on to another company, requiring you to start all over again.
Getting a better price
The following are some ways you can lower your price through means other than negotiating:
Purchase larger quantities.
Avoid requesting customized, special, or made-to-order products.
Coordinate shipments by sea. Air freight costs can be exorbitant, having a significant impact on the unit price.