July 29, 2022

How to Buy from Alibaba and Sell on Amazon FBA

Did you know that you can import products from China and sell them in your home country using Amazon? You don’t have to store or manage inventory or even post items to customers. Even better, you can run the business from your own home using just your laptop! Many Amazon sellers are doing this right now, and you can do too! The first thing you need to start your own six figure business is to learn about the wholesale e-commerce platform called Alibaba.

While the concept is straightforward and many Amazon sellers do very well with the sales setup, it’s important to understand how it all works. To succeed sellers must know all the possible advantages and disadvantages. This article provides new sellers with a step-by-step guide on how to buy products from Alibaba and sell them on Amazon at a profit. You will learn everything you need to know from potential profit to possible risks.

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What is Alibaba?

Alibaba is an e-commerce platform for manufacturers in China. You can communicate directly with Chinese wholesalers and manufacturers without the need for intermediaries. Alibaba provides distribution avenues for all levels of suppliers and offers a wide variety of low-cost, saleable products. It is the place to look when you want to add products to your brand.

The steps to start selling on Amazon using Alibaba are as follows:

  1. Find a product and the product supplier on Alibaba
  2. Ask the supplier to customize the product so it is unique to your brand. It could be as simple as custom packaging or minor changes like color and size.
  3. Request them to send you a product sample to check if all ok.
  4. Create your Amazon Seller Central account and list the item on Amazon.
  5. Ask your supplier to send a wholesale order to Amazon’s warehouse.
  6. Run some ads on Amazon and wait for buyers to purchase your product.

That’s it! Amazon will package and ship the items to your customers when they make a purchase. When you run low on inventory you simply ask your Alibaba supplier to send another batch of items to Amazon.

How to find products on Alibaba?

The first step to buying from Alibaba to sell on Amazon is finding the ideal product. You simply go to Alibaba.com and start searching. Use the search box to either find products or get to specific suppliers you already know are reliable. You can also use the markets list to see various categories of offered products or check out trends to see the latest products available. You can subscribe to "Trade Alerts" to get information about the newest trends.

How to Buy from Alibaba and Sell on Amazon FBA - Alibaba

For new sellers, it’s best to start with a familiar product you are very knowledgeable about. You will then understand the quality requirements, features, and market potential. By knowing the product, you can more easily study the competition and accurately calculate the selling fees and profitability potential.

Searching for product ideas

You will need to do some research to find profitable product ideas. Some research tips:

  • Review Amazon Best Seller's list
  • Read about market  trends in business publications and websites
  • Use tools like Product Research for Amazon to uncover low–competition, high–demand products using smart filtering.

When choosing, be aware of brand and patent issues. Some things sold on Alibaba belong exclusively to a national brand. Keep your own country’s laws in mind, too. Make sure selling the item is legal.

Reselling from Aliexpress

One option for selling Alibaba on Amazon is through AliExpress which was established in 2010. While it started as a strictly business to business buying and selling port, consumers can now buy there, too. You can buy small quantities and use the many offered coupons, so buying through AliExpress can be an ideal way to experiment with different resale products. Reselling from Aliexpress may not be very profitable, but sellers can easily get samples and eventually find a lower cost from a supplier by doing research on the main Alibaba page.

How to find a supplier on Alibaba?

On the main page of Alibaba.com, you can choose to search by product, product category, or supplier. If you already have a supplier in mind, you can search by name and see their website website.

If you go to a product listing, you see information about the product and supplier. You can click on the company profile as shown below.

How to Buy from Alibaba and Sell on Amazon FBA - find a supplier on Alibaba

This is where you can learn more about the supplier details like company, their sales, employees, quality control, and manufacturing process.

How to Buy from Alibaba and Sell on Amazon FBA - supplier Alibaba

Verify your supplier

You can and should do independent research on any supplier you might be considering. A simple Google search can give you more information. Check for things like:

  • Business License and Ownership Status
  • Supplier’s Physical Location
  • An active website with photographs of company operations
  • Necessary certifications for product quality and worker safety

Make sure they have the necessary shipping authorizations and are familiar with Amazon shipping requirements. It is best to deal with Gold suppliers who participate in Alibaba Trade Assurance. The Gold star badge indicates that they have passed a strict Alibaba security check and Alibaba will protect you and help you get your money back if anything happens to your shipment.

How to buy and pay for products from Alibaba?

When selling Alibaba on Amazon, you start the negotiation and buying process once you decide on a product. Steps for buying from Alibaba are given below;

  • Set up a free Alibaba account. You must do this before you can contact a supplier.
  • Communicate with the seller to introduce yourself and ask any questions.Use either the "Contact Seller" button or the "Chat Now" link on the site.
  • Ask any questions you have regarding product features and quality, supply, price, and delivery.
  • Negotiate a price and minimum order quantity(MOQ). Get a quote in writing.

Supplier payment methods

You can pay Alibaba suppliers through several different methods. While it’s possible to transact business outside of the systems mentioned below, it is risky to do so. For example, there are fake suppliers, and international transactions may be deemed illegal if you use irregular portals.

Letter of Credit

Also known as a document credit or letter of undertaking ( LoU), this works well for larger orders with costs above $20,000. It’s also the most secure method when purchasing products with stipulated quality. The purchase and delivery terms are clearly stated in a letter issued from a creditworthy bank to an exporter. The issuing bank underwrites the purchase, promising to pay the supplier once the goods arrive at the buyer's designated destination.

Bank Transfer (TT)

This is a simple, straightforward purchase payment in advance. Paying the entire amount is risky because the supplier may not deliver what was promised. If you choose to use a bank transfer, it is better to submit only a partial amount in advance, with the balance paid after delivery. It’s also vital to get all the supplier’s information correct. You need an individual’s or company’s legal name, the bank name and address, and the bank identifier code. It usually takes about three business days to transfer money.

Escrow

Escrow, also called the “Alibaba Secure Payment Service," has fewer risks. The buyer submits payment for the goods with the order. Alibaba holds the buyer's money until the shipment arrives and is approved. The method ensures you get what you ordered within a reasonable period and that the quality is acceptable. As long as the supplier is dedicated to providing quality products and service, the risk is low for them, too.

PayPal

PayPal is another lower-risk international payment method. The money transfers to the supplier quickly, and when problems arise, PayPal will assist buyers with getting their money back. However, there are downsides for the manufacturers. Often, high taxes are added to these money transfers, and suppliers may have difficulties withdrawing their money. PayPal will generally support the buyer when there are conflicting opinions about product quality.

Trade Assurance

Alibaba offers this purchasing method to protect buyers. You use the secure payment gateway on Alibaba.com. The system will compensate you for any losses due to delivery delays or poor-quality merchandise. It also protects Amazon sellers from fraudulent suppliers. Some suppliers won't participate in the Trade Assurance program, but those that do are often safer, more reputable sources.

How are products shipped from Alibaba?

Ordering products within the United States isn’t complicated. You pay for the product and the shipping from the factory to your desired location. Ordering from China, through Alibaba or otherwise, is more complex.

Understanding International Commerce

The formalities and paperwork involved in any import/export business are time-consuming and often costly. So it's important to understand the basics and know who pays for what. The typical steps in an international import transaction are given below.

Document delivery

The supplier sends a proforma invoice to the buyer, which is the formal purchasing agreement. You, as a buyer, pay (usually FedEx or DHL) $40-$50 to have these documents delivered.

Customs clearance in China

Suppliers pay to move goods to the port of exit. When the goods reach the port and are about to leave, they go through customs clearance. The supplier covers the costs involved. Some countries have free trade agreements with favored countries so that custom duties are waived.

Freight charges

With freight shipping, whether by air or sea, charges can be very high. They can be as much as $1000 or more. You, the buyer, pay freight charges.

Insurance

Insurance is also a significant cost in the import business. When someone is sourcing goods from Alibaba for sale in the USA, the insurance on the products will pay for any unforeseen accident happening during shipping. Typically, the insurance cost is around $50-$150.

Customs clearance in your home country

When the product reaches its destination, it goes through customs again, and you pay any additional customs duty. These are often waived if a product’s worth is less than $800.

Transportation of goods to the importer’s address

The trip from Alibaba to Amazon FBA isn’t over yet. Instead, the goods must get from the port to its distribution point. The costs to move from the port to the final delivery point in an Amazon warehouse vary depending on the distance, weight, and carrier. The prices may vary from $50-$500 maximum. You pay these costs.

Alibaba shipping methods

Once you’ve purchased your sales merchandise, you must decide where and how the Alibaba supplier should deliver it. Amazon sellers can have an order drop shipped directly from Alibaba to Amazon FBA’s warehouse. While some Alibaba suppliers offer “free shipping," which just means they include all freight and delivery costs in the item’s price, many others charge freight costs separately.

Here are some Alibaba shipping options.

Express shipping from Alibaba

Express delivery is fast and efficient. It’s an excellent option for bringing a small number of goods to the USA or your home country. Some carriers include:

  • DHL
  • UPS
  • FedEx

FedEx is usually the most efficient option because it is more technologically sophisticated and has better infrastructure. As an example of shipping costs through FedEx express, the costs for one kg are $1.5-$4.5.  ( 1 kg=2.205 pounds)

Air freight

An airfreight system is typically used for weights over 300 kg or about 662 lbs. When the weight of the goods exceeds 300kg, they come under a different category of imports and have many legal obligations that need to be fulfilled.

Sea freight

Sea freight is more complex than air freight or express delivery because of the legal formalities and port charges involved. Although the costs are usually low, the shipment takes much longer to reach the destination.

Getting a shipping quote

You need certain information to get shipping quotes from the various carriers. You need:

  • Cargo volume
  • Total weight of the goods
  • Embarkation port
  • Destination port
  • Supplier and shipper incoterms (International Commercial Terms)
  • CIF (cost, insurance, freight)

What is the profit to resell from Alibaba?

The definition of “profit margin” is the percentage of revenue a company retains as income after deducting all associated expenses.Knowing how to buy from Alibaba and sell on Amazon profitably means setting the right prices. The two keys are counting all costs and studying the competition. Don’t establish a price until you understand all shipping and importing costs plus Amazon fees. Only take on products you can sell competitively.

Some approaches to profitability for Alibaba products you sell on Amazon:

Double the sale price

Some experts recommend doubling your total costs to make 50% on each sale. That means totaling purchasing costs, including shipping and import fees plus Amazon fees and multiplying times two to reach a sale price. It is important to check competitors' prices on similar goods to determine whether they can be competitive and still  earn a reasonable profit after all expenses are covered.

Rule of three

Another approach is the 3X rule, which means that the total price you charge the customer, 1/3, should be product costs, 1/3 Amazon fees, and 1/3 profit. So, on a $60 priced item, $20 is product cost, $20 Amazon fees, and $20 profit.

Are there any risks?

When selling products from Alibaba on Amazon, there are many risks from poor product quality to transaction fraud connected to buying products. There are also proven ways to avoid these pitfalls.

Here are a few risks you may encounter when buying from Alibaba.

  • Low-quality products or product inconsistency
  • Inaccurate product pictures and descriptions.
  • Payment transaction fraud
  • Unreliable supplier
  • Wrong product strategy.
  • Unknown patent or branding issues

Here are a few tips for avoiding or minimizing risks:

Choose suppliers carefully

For example, Gold Suppliers are awarded that status because they are reliable and have been with Alibaba for a long period. Suppliers that accept purchases through the "Trade Assurance" system are also more reliable. Use the Amazon Brand Registry to find patents and trademarks associated with any merchandise you consider.

Request advanced samples

Because quality standards vary, and language differences can lead to misunderstandings, it is always best to see examples of what you purchase ahead of time. You can then test samples yourself or with a small focus group of customers.

Choose payment methods carefully

Online transactions can be hacked. Use one of the more secure payment methods whenever possible. For bank transfers, don’t pay everything in advance, and be sure to cross-verify your manufacturer’s bank details with what is provided on Alibaba.

Communicate constantly

Avoid the risk of miscommunication by continuing to ask questions and confirm information until you are satisfied that everyone understands what is being ordered and what the transaction specifics are. Professional, experienced manufacturers have no problem providing detailed information. They will also freely answer questions you might have.

Alibaba Trade Assurance Program

One way to avoid losing money due to poor product quality is using the Trade Assurance Program.For sellers who decide on selling Alibaba on Amazon, Alibaba.com offers a protection service for overseas buyers. You get a money-back guarantee if a shipment is delayed beyond the contracted shipping date or the items do not meet the specified quality requirements.

However, only Gold suppliers are covered. An Alibaba gold supplier pays to become a member. Just like companies pay to be members of associations or professional organizations,Chinese companies pay to be registered as reliable suppliers. In addition, all members in China must pass an onsite check, and suppliers in other countries must pass Alibaba’s A&V checks.

Conclusion

Selling Alibaba products on Amazon has several advantages. Prices for Chinese goods are often very low, even with freight and import/export duties, and there are opportunities for creating private label goods under the seller's brand. Amazon sellers can potentially find the perfect product at an excellent price and sell it at a profit.

However, sellers must be smart about the products they buy, the suppliers they use, and the payment method they employ. Product quality can be problematic, so ordering samples and dealing with reputable companies is important. Amazon sellers should stick with Alibaba Gold suppliers and do their own research on each company. Using the Trade Assurance Program will protect the buyer with its money-back guarantee. So the answer to “Can you sell Alibaba products on Amazon?” is “Yes, you can, but do your research!”

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