Chances are, if you’re starting an ecommerce company you’re going to need to find a factory to work with. Alibaba is the largest online marketplace of manufacturers in the world and it’s a great starting point for you to begin your search for suppliers. What many merchants don’t realize though, is that the manufacturers listed on Alibaba aren’t just factories. They are trading companies, wholesalers, and agents as well. Sorting through this plethora of Alibaba suppliers can be a nightmare if you don’t know what to look for.
In this article, we’ll help you differentiate between the different types of Alibaba suppliers so you can find the right factory to manufacture your products.
Starting Your Search for Alibaba Suppliers
On Alibaba, you’ll see two ways to search through Alibaba on their search bar: One is based on products and the other is based on suppliers. Use the “Products” search option if you’re still in the brainstorming stage and are trying to figure out what product you want to produce. When you’re actually looking to find a factory to work with, you’re going to want to use the “Supplier” search option.
By searching for suppliers, you’ll be able to see a list of potential manufacturers rather than just a list of products to purchase. Suppliers will showcase all of the products they have produced on their own Alibaba webpage.
Though you’re more likely to see relevant products when you search by the “Products” option, you’re going to be less likely to find an actual factory you want to work with. That’s why we recommend searching based off of suppliers, as your end goal is to find the right factory to work with after you’ve decided which product you want to manufacture.
The Differences Between Alibaba Suppliers: Factories, Trading Companies & Wholesalers
You’d think that every supplier is made the same. Unfortunately, that’s not the case and there are many frauds on Alibaba that will claim to produce products they actually can’t. This is why you need to be extremely careful when finding your partner factory on Alibaba.
So, what separates a factory, trading company, and wholesaler from one another? For the most part, factories are the actual company that produces products whereas trading companies or wholesalers are considered middlemen.
Alibaba Suppliers Type #1: Trading Companies
These are companies that deal with a wide array of products and often have close ties with factories. They make money by adding a margin to the actual product they supply to merchants.
Most ecommerce entrepreneurs want to avoid trading companies as they will decrease your margin and can cause complications in your production process. If you’re really looking for a small production run, however, you may have to go through a trading company as it won’t make sense to work with a large factory on a small scale.
Alibaba Suppliers Type #2: Wholesalers
These companies are similar to trading companies in that they add a margin to the cost of the products they sell in order to earn money. Wholesalers are common in America as they enable companies to buy domestically, instead of having to deal with international imports.
Wholesalers often have a warehouse too, meaning you may not have to hold as much inventory while your lead times and shipping times may be reduced.
Alibaba Suppliers Type #2: Factories
When searching for Alibaba suppliers, this type of supplier should be your target. Factories are the companies that actually produce the product you’re looking to manufacture. They own the factory and know where the raw material to produce your product comes from.
Most companies you’ll find on Alibaba won’t be factories, as their marketplace is swamped with trading companies and wholesalers.
Pro Tip: If you’re looking to analyze suppliers in real-time so you can find a trusted supplier more quickly, use the Sourcify Factory Confirm tool.
Key Points to Analyze in Alibaba Factories
When you look at a supplier’s page on Alibaba, right off the bat, you want to see if the supplier you’re looking at is a “Gold Supplier.” This is Alibaba’s main way of monetizing their marketplace: Every supplier that joins Alibaba must become a “Gold Supplier.” Companies in China looking to list on Alibaba’s marketplace spend around $5,000 a year to get this badge and outside of China, in areas like Taiwan or Hong Kong, suppliers spend $2,999 a year.
These suppliers are sold on many upsells and cross-sells to boost their exposure. In general, Alibaba’s marketplace is pay-to-play so the more a company pays Alibaba, the more exposure they will get. Keep this in mind, as it means the highest ranked supplier for a certain product like watches, doesn’t mean this supplier is the best. In fact, you may often find better factories that aren’t ranked as high as they are already near capacity and focused on production, rather than sales.
As you dive into your search for the right Alibaba suppliers, you’ll realize a few common characteristics you should be keeping an eye out for:
- How Many Years Have They Been Listed on Alibaba? In general, the more time the supplier has been listed, the more likely they are to be high-quality.
- Do They Have the Words “Trading” or “Industrial” in Their Name? If the name of the supplier includes either of these terms, there is a higher chance that they are a trading company and not a factory.
- Where Are They Located? Factories that produce certain products are often located in the same areas. As an example, Yanjiang, a city in Sichuan, China, is famous for making knives.
- Have They Had a Full Supplier Assessment? This is an in-depth check often conducted by a third party inspection company that verifies factory information.
- Ask to Check Their Business License: The business license will tell you what kind of company you’re dealing with (factory, trading company, or agent). Once you’ve got a copy of the business license, you’ll need to look at the “Business Scope” label (经营范围 – Jīngyíng Fànwéi).
- Inspect Their Product Catalog: Factories focus on producing products that stem from a certain raw material. If they produce across multiple product categories like sunglasses and wallets, they are probably a trading company.
- What Audits Have They Received? Many factories will claim to have produced for big retailers like Walmart. Ask to see the audit report and check the company name on the report. If it’s the same name as the one on Business License, then it is probably a factory.
- Do They Have Any ISO, BSCI, WRAP, or Other Certificates? Ask for a copy and if it matches their name, they are likely a factory.
For more information on what to look out for when sourcing products from Alibaba suppliers, check out our How to Source Products from Chinese Manufacturers article.
Check the Company Overview Page for Alibaba Suppliers
When looking at pages for Alibaba suppliers, many merchants focus on the actual product images they list that they can produce. Though it’s important to check product images, the most important page you want to analyze is their “Company Overview” page.
This will give you an in-depth overview of the supplier you’re potentially going to work with. It will help you answer many of the questions above and enable you to see some of the certificates the supplier may have. Do not contact a factory without first checking this page.
Getting in Touch with Alibaba Suppliers
Once you have a list of factories you think are a fit to produce your product, the next step is to actually contact them. Getting in touch with Alibaba suppliers is an art as the response rates are typically pretty low.
You need to first understand that the factory sales representatives you’re getting in touch with likely don’t speak English natively. This is why you should keep communication simple and stay away from using complex words.
Your first message via Alibaba should sound something like:
“Hey (Insert the Alibaba Supplier’s Contact Name) — My name is (Insert Your Name) and I’m interested in producing (Insert Product) at your factory. I see you have great experience in producing similar products. I run a company called (Insert Company Name) that is growing very fast. We are looking to do a test run to start with your factory. I have all specs ready to produce a sample and am excited to start. Can you please send me an email at (Insert Email Address) or via WeChat at (Insert WeChat). I look forward to hearing from you!”
This message will get the ball rolling but what you should really keep an eye out for is if they have their email or WeChat located on their Alibaba supplier’s page. You will also find this contact information in their header image, as Alibaba doesn’t actively enable these factories to list their contact information to try and keep communication on Alibaba.
Above you’ll see the contact information for a watch factory. In addition to contacting them on Alibaba, you should also reach out via email and see if their phone number is connected to a WeChat account.
As you scale up with this factory, you’re going to want to have multiple ways to get in touch with them as well as multiple contacts at the factory. Your communication methods will usually stem around WeChat, Email, Skype, and phone calls. For your factory contacts, it’s usually best to have a sales representative you become friendly with as well as their manager.
To get in contact with another employee that works at the manufacturing company, simply ask to be introduced to a manager or another sales representative. Your main reason for wanting another introduction can be to confirm information or to have an employee to fall back on. Your sales representative should understand this and be willing to introduce you to other employees at their company.
The best way to have a great manufacturing experience is through constant communication.
Note: For more tips on how to communicate with Alibaba suppliers safely and to safeguard your business from potential scams, check out our Ultimate Guide to Safely Sourcing Your Products from Alibaba.
Your Next Step Forward with Alibaba Suppliers
Once you find a product you want to produce and a factory who claims they can produce it, you shouldn’t dive right into a production run. You’re going to want to start actively chatting with them over email or WeChat.
You’re most likely going to be dealing with a bilingual sales rep there who can speak some English. It may make sense for you two to have a video call for you to see their facility without actually traveling there.
When you have your product specifications ready to go, you’ve got to produce a sample. Never go into production without having a sample confirmed beforehand.
From there you’ll want to stay in constant communication, ensuring you understand what is going on as your product is being produced. Delays are common in production and some of the worse case scenarios happen when companies are unaware of their production status. You might be expecting a shipment and find out a week before the delivery date that production is delayed by a month. For tips on how to keep the process running smoothly, check out our article on how to cut manufacturing costs and lead times.
If you want to streamline the process of finding Alibaba Suppliers and analyze factories in real-time on Alibaba, check out the Sourcify Factory Confirm tool. It takes all the information above and reads each Alibaba supplier’s page to give it a rating from 50-99% so you can have more confidence finding an Alibaba supplier.
Now you can spend less time sourcing Alibaba suppliers and more time selling!
This article was originally published by our friends at A Better Lemonade Stand.