What Dropshipping Business Buyers Should Know
There are some things you need to know if you want to purchase a dropshipping company.
First, find out which system the seller uses for finding new products. We find that dropshipping is a business where the seller may not be knowledgeable about the niche but can still succeed due to their product selection process.
Vendors (the people who supply you with the product) often have bestseller lists or popular items lists. You can get the benefit of this list if the seller uses it when you become the dropshipper.
Next, consider whether the seller has an exclusive deal with the dropshipper. It will most likely not be exclusive, as there are many other sellers of the same product. You might be able negotiate an exclusive deal with the vendor/supplier if you can outcompete your competitors in sales.
You might be able to source the product yourself down the line. This will reduce the cost of wholesalers or warehousers. You could save yourself a lot of logistical headaches by sourcing it yourself.
What makes a dropshipping shop unique? What is it that makes them different from their competitors? Is their marketing more effective than the competition? Are they creating richer content to build brand awareness?
These are important aspects to be aware of in order to maximize your potential return and grow your investment.
There are good ways and bad ways to deal with suppliers on Alibaba. Today I will share 6 tips and tricks for finding, contacting and negotiating with suppliers on Alibaba.
Alibaba Do-not #1
Do not use the Products dropdown to search for suppliers in Alibaba search
You will notice a dropdown at the left of the search bar when you first visit the Alibaba.com homepage. It defaults to Products. Although I understand that you are looking for products to sell, don’t be fooled. In reality, you are looking for a supplier to purchase products.
Alibaba will display all listings for the product if you search Products. Alibaba does not consider whether the seller of the product makes the product.
If the supplier doesn’t make the product…
Reorders may not be fulfilled by the supplier. You can still make short-term profits. You’ll need to search for unique products and suppliers all the time, which will take up your time. You can buy products from the supplier who makes them, and then you can reorder the products, capitalize on a market niche, and make more money. This model of selling, known as “private label”, can produce passive income.
Suppliers who don’t manufacture their products won’t likely be able make customizations. Let’s suppose that you found out that customers want copper-colored French presses after conducting product research. All your competitors sell them in silver. You go to a supplier to ask if they can make the copper-colored products. They won’t, because they don’t produce the product.
Trading companies are suppliers that do not produce the product. A trading company is a middle-man who purchases products from a manufacturer, then resells it to you at a higher price. Let’s suppose you are looking to sell an insulated French presse. They might be purchased from a manufacturer by a trading company and sold to you for $10 each. You could have saved $4 per unit if you went straight to the manufacturer. Even if you ordered 100 units, there are still $400 that you could have saved. (Note: Suppliers can also be a manufacturer or a trading company.
DO use the Suppliers dropdown to search for suppliers in Alibaba search.
Select Suppliers from the dropdown.
Suppliers Search results will be more likely to include suppliers who can create a custom product for you than just selling you what they have.
Enter your most important keyword to describe your product. If you are looking to sell French press insulated tea and coffee makers made from stainless steel, type “insulated French presse” in your search box. Although you might be able to search for “French Press”, it is possible that this will work, but because you are trying to sell a particular type of French press, you may find it easier to add an additional adjective.
Do-not #2 & Do-not #1 on Alibaba
Do not search for products using the Ready To Ship product type.
If you search Products rather than Suppliers, as I advised you (*shame*), you will see the Ready To Ship option you don’t want to click.
Ready To Ship refers to the supplier’s willingness to send you products as is. This is fine if your business is wholesale, or if you just need a few French presses to gift to family and friends for Christmas. However, it’s not ideal for private label.
Before you contact them, do your research to find reliable suppliers.
You first need to search for your primary keyword on Alibaba.
You will then see two boxes: Trade Assurance and Verified supplier.
These two boxes should be checked. Alibaba will reload your page every time.
Trade assurance is a contract where the supplier is paid 30% upfront and 70% after the job is completed. You can’t promise that you will send the 70% back later. These funds must be sent to an “escrow” account, a third-party holding account. Alibaba will act as the intermediary escrow holder in this instance.
Your supplier gets 30% of the funds upfront to enable them to get the raw materials needed for your product. After you have verified that your supplier has met all terms of your contract, the remaining 70% will be paid to your supplier. It’s fair for you, because the supplier cannot take your money and run. And it’s fair for the supplier, because they don’t have to make your legs as a loan shark in order to get their money.
A third party who works for Alibaba confirms Verified Suppliers. To be verified, suppliers need to provide proof of their operations, capabilities, network, and tons of other documentation. They are as legitimate as suppliers can get.
Alibaba Do-not #3
Do not contact potential suppliers via the Start order button.
If you’re ready to place an order with the supplier, choosing “Start Order” is only sensible. This is not the right option if you are looking to earn passive income with your private label brand.
Do not hesitate to contact potential suppliers via the Contact Supplier link.
To speak with a representative, use the “Contact Supplier” option.
It works the same as sending an email but through Alibaba. For every reply the supplier sends, you will receive an email notification. Attach images of samples, etc.
The majority of Verified suppliers who offer Trade Assurance and have low prices will come from China, Taiwan, or Hong Kong. The Dos as well as Don’ts will be based in China.
Alibaba Do-not #4
Do not ask 21 questions of your supplier within the first message.
If you ask Chinese suppliers three questions, it is very common to only receive one answer. These conversations can last for days because of the time difference. It takes longer to ask only one or two questions at once. Building your own business isn’t a quick way to make some extra cash. It is a long and rewarding journey.
After a few messages, you can ask your supplier to fill out a form asking for information about pricing, etc. A good supplier will complete at least half of the sheet. If they leave one section blank, great suppliers will explain why.
Ask the supplier if they can make your product.
Although asking about the price is not the worst message you could send, it’s not the most important.
If the supplier is unable to make any changes to your product, price does not matter. Your product will look the same as every other Amazon product if they are unable to make customizations. Your product will be a failure to stand out among sellers with reviews and you’ll likely close your shop. You need to be sure the supplier can make your product different.
Alibaba Do-not #5
DO NOT negotiate on samples.
Most suppliers will accept samples orders. Samples will cost you more per unit than if you order in bulk. This is the cost of verifying the craftsmanship of the suppliers.
You’ll appear like a beginner if you try to negotiate for the sample. The sample cost is not a one-time expense. Instead, think about the recurring expenses that will have a greater impact on your bottom line.
DO negotiate on large product orders.
If you are not ordering samples, your supplier may have a minimum order quantity (MOQ), which you must meet. Your MOQ is the minimum order quantity your supplier will make at one time. If you are looking to purchase insulated French presses, your supplier may require you to order at least 500 units.
Suppliers don’t make much per unit. Their profit model demands bulk sales. It’s not worth it if you order less than enough in one batch.
The MOQ can range from less than 200 to more than 20,000 units. Higher MOQs are associated with more expensive products.
A larger quantity of units will generally lower the unit cost.
Once I was offered a $0.50 discount for ordering additional 200 items. I didn’t realize $0.50 was possible, but it was a great deal. However, $0.50 can add up. That’s $2,500 if you order 5,000 of the item with $0.50 per unit. Do not assume that the supplier is only trying to make ends meet. By increasing the quantity of your order, you might get a better deal.
Many suppliers are open to bargaining, provided you’re polite, respectful, and not too pushy. You could say, “I am looking for a long-term supplier relationship.” If I order 500 units, would you consider offering a $0.20 per-item discount?
Alibaba Do-not #6
Do not use a lot of fluff when communicating with suppliers.
You should not work with suppliers from China if their English is not good. Make sure you are as simple, clear, and direct as possible. It is a waste of time to clarify miscommunications.
They don’t care if your employer is IBM or Main Street Local Store No Two. Chinese suppliers will cooperate with you as long as your position is confident and assertive.
Write as if you’re talking to another person.
Suppliers are just like you. They have real jobs. Treat them as human beings. Ask them about their day. It’s always a good idea to be friendly.
A supplier that I worked with for more than a year offered me a $5 discount on each item. I was overwhelmed by her kindness. It was a great experience to build a trusting, friendly relationship with the supplier. She knew that I would be loyal customers and bring more business to her.
Make the most out of your investment time and money. You’ll soon be earning passive income so that you can spend more time doing what you love with those you love.