Ecommerce Integrations / Ecommerce News

How Alibaba’s IPO Will Make Sourcing Easier for Ecommerce

/ 2 min read

SHARE

Most Popular Reads

On Monday, options trading for Chinese ecommerce giant Alibaba debuted on the New York Stock Exchange. In September, the company raised a record-breaking $25 Billion with their initial public offering, making it the biggest haul in history. While that is an impressive feat, the bigger news is how Alibaba’s funding opens up huge opportunities for online store owners and small businesses, not just in China, but everywhere.

What is Alibaba?

While new to many Americans, Alibaba was founded in 1999. The company, founded by Jack Ma, was started to help small businesses use the Internet to grow and compete on an international level–and it’s succeeding. In the last fifteen years, the company has grown into a complete ecommerce ecosystem that includes everything from selling and sourcing to logistics, loans and payment processing.

It’s this incredible growth that has Wall Street all abuzz. Not only is the market far from saturated in China, but the US market seems primed for Alibaba’s main property, Alibaba.com. The site offers direct-from-manufacturer goods in bulk, solving one of the hardest problems for small businesses: how to source products.

Sourcing for the masses

No matter what size store you have, one of the biggest obstacles to overcome is finding a supplier to source and ship your merchandise. Big players like Amazon, Walmart, and Target either have connections directly with the manufacturers, or they have a team of folks constantly looking to find the highest quality and lowest cost  source. Small and medium-sized businesses, often running on tight budgets with limited resources, have to navigate the supply chain maze themselves or have an expensive agent guide them. Now, thanks to Alibaba, merchants of all sizes can easily buy and source directly from suppliers.

As you can imagine, this is extremely exciting news for store owners. While there are other sites to help with sourcing, like Worldwide Brands, SaleHoo, Wholesale Central, and doba, Alibaba has the largest number of suppliers. In just a matter of clicks, you can pretty much find anything from electronics and apparel to jewelry and food–just like you were shopping for it on Amazon. And if you can’t find it, you can place an ad or buyer’s request looking for suppliers. Also, everything is at wholesale prices. Now everyone can get a little bit closer to competing against the big guys.

Alibaba

Admittedly, for me, there’s a little bit of anxiety about ordering a big batch of bulk items off the Internet. If I’m investing that much money, I want to know that I can trust the supplier. Bigger companies can afford to send employees or agents to inspect the manufacturer. Small merchants, on the other hand, just don’t have that luxury. Alibaba solves this problem by verifying 3rd-party manufacturer inspections, allowing you to organize an inspection, and keeping payments in escrow until you get your merchandise.

Looking ahead

News reporters and analysts are busy looking to see what Alibaba’s massive IPO means to ecommerce. In China, alone, “analysts predict that China’s e-commerce market will be bigger than the existing markets in America, Britain, Japan, Germany and France combined by 2020.” And while it may seem a little crazy, some analysts think that after the eBay/PayPal split, Alibaba could swallow the online auction site whole and buy it out. That’s one way to spend the $15 billion in cash and short-term investments. It would also help ensure Alibaba’s penetration into the US market.

For ecommerce store owners, Alibaba makes it easier to find more unique products that fill the demands of consumers. While this will help the little guys take on the large catalogs and low prices of the big boys, it could lead to increased competition in the niche markets. To stand out in the long run, ecommerce entrepreneurs will need to focus on building their brand so they can own their niche.

Have you sourced from Alibaba? How was your experience?

 

Leave a Comment
  • Hi Chris. I think it’s just in bulk–but vendors might be able to work out a deal. Also, Alibaba does have different options like AliSource Pro where you can tell vendors what you’re looking for. Alibaba also uses AliPay, which puts the money in escrow so that you don’t pay until the goods are received and how you like them.

  • Hi Jomie! Glad you liked the article. I think it’s going to be crucial that stores make a name for themselves. It *is* a little bit scary–but sometimes if we’re scared, it means it’s what we need to do! Thanks for reading.

  • Thanks for the advice, Scott!

  • As for your question about dropshipping, it all depends on the supplier. At first they will all say that they only sell in bulk. As you start communicating with them, you’ll find quite a few who will ship onesy-twosey. I have found many that will dropship; although, sometimes you have to pay for bulk and they dropship one at a time as orders come in.

    Although fraud is fairly rare, it does happen more often in niches where you are selling to young people or in ones where you are selling small, expensive items (jewelry, personal electronics – basically anything you can envision being sold from the back of a van).

    I highly doubt Alibaba’s payment processors will be any better detecting fraud than any other payment processor. Really, it’s not their job – it’s yours. Make sure you have set up the processing gateway to check for address match and for the CVV code. Check to make sure something doesn’t look strange with the bill-to/ship-to/ip address relationship before you ship anything to a customer (i.e. billing to New York, shipping to France, but ordered from a Nigerian IP address). New orders from unknown people for massive amounts of the same product is also a red flag. When in doubt, call the phone number the customer used with their order. In 100% of the fraud cases I have seen, it will be a wrong number. Oh, and think seriously about requiring a signature (even better – an adult signature) upon delivery – just so that they can’t pull the old “no package was ever left here” scam.

  • I’m not sure this article addressed its main point – how the IPO would make things better for small businesses. We’ve always been able to source products through Alibaba and I have been doing it for years. Other than a nice, fat check for Alibaba, how does the fact that there is now also public ownership make my sourcing any easier than it has ever been?

    The author also expressed some anxiety about ordering bulk from an unknown supplier. Even with Alibaba’s checks, you should always ask for samples (you’ll have to pay for them) and place a
    few test orders to see how long shipping takes. Don’t send a bunch of money before feeling comfortable with the supplier and the product. You’ll almost always have to pay via Western Union or bank transfer, which offers no protection, because no company over there is set up with a real credit card processor. Although for small orders, some will take PayPal (and no, PayPal is not a real credit card processing company governed by banking laws), they will charge you extra payment processing fees, so it’s cheaper to use Western Union.

    As for Chris’s question about dropshipping, it all depends on the supplier. At first they will all say that they only sell in bulk. As you start communicating with them, you’ll find quite a few who will ship
    onesy-twosey. I have found many that will dropship; although, sometimes you have to pay for bulk and they dropship one at a time as orders come in.

    Although fraud is fairly rare, it does happen more often in niches where you are selling to young people or in ones where you are selling small, expensive items (jewelry, personal electronics – basically anything you can envision being sold from the back of a van).

    I highly doubt Alibaba’s payment processors will be any better detecting fraud than any other payment processor. Really, it’s not their job – it’s yours. Make sure you have set up the processing gateway to check for address match and for the CVV code. Check to make sure something doesn’t look strange with the bill-to/ship-to/ip address relationship before you ship anything to a customer (i.e. billing to New York, shipping to France, but ordered from a Nigerian IP address). New orders from unknown people for massive amounts of the same product is also a red flag. When in doubt, call the phone number the customer used with their order. In 100% of the fraud cases I have seen, it will be a wrong number.

  • Jomie Casas

    Great article. When I started selling RTW items online, it was really difficult to search for suppliers within my niche. Now, its just a matter of googling and you’ll have tons of options on page 1. So now there’s a LOT more new competition, and the challenge is no longer how to bring in hard-to-find items, but how to get noticed and remembered among everyone else. It’s disconcerting but exciting too – keeps me on my toes. The BC blog really helps, I get great stuff here, so thanks guys.

  • Do they offer drop shipping, or do you have to bull in bulk and warehouse merchandise? Also, if using their payment processing, do they have top notch mechanisms in place to weed out the stolen credit cards and other fraud that runs rampant? I owned a store before (not on bigcommerce) and I would get hit quite bit with fraudulent transactions that the payment processor/gateway didn’t seem to catch for whatever reason…. leaving me holding the bag.

Less Development. More Marketing.

Let us future-proof your backend. You focus on building your brand.