Doing business online with the Chinese may seem as a big chance. In ordinary cases, online business is savvy, cost effective and easy: we save a lot of money, which would otherwise be spent on plane tickets, negotiations or onsite checks, so, in case of ordering simple, mass-produced goods, why bother? Obviously there are some risks, but some may say that if our potential partner has a status of a “golden supplier”, than what could possibly go wrong? Well, many things: it is not as easy as buying a book on Amazon.
Here we present the answers to the most common questions related with the Chinese B2B platforms. According to our experience, people who are new to China sourcing often commit similar mistakes, which result from the common misjudgment: they are naïve and treat things written online literally.
- What is B2B platform? What are the biggest B2B platforms for China sourcing?
B2B means “business to business”. It is an online system for companies, which sell goods to each other. The company, which runs the webpage, makes money from membership fees and extra fees (keep this in mind), and – of course – may charge every successful transaction according to its own rules.
There are several B2B platforms in China, the most famous is Alibaba, there are also Makepolo, DhGate.com, Made-in-China or more reliable Global Sources. Every one of them operates on a similar basis: a seller can create his company profile, display products and wait for the buyers to come. Webpages may offer additional services: message center, messenger tool, and even some sort of verifying supplier services.
- What kind of companies are present on the Chinese B2B platforms?
Someone said once that “70% of those companies are swindlers”. It is an exaggerated opinion, but we must be aware that quite a lot of those companies may be dishonest, setting an account on B2B platform is, after all, very easy.
At first we should note that many of those companies are traders, not manufacturers. They buy the goods in factory, sell it to foreign customers and naturally charge margin, so the goods may be slightly more expensive. If our order is not very big, and when we want to obtain various goods and buy them from one company, using the trader’s services is not a bad thing.
Secondly, many companies impersonate real, legitimate company: it is not a big deal to copy all the products’ pictures and publish them on their own page (therefore we should check whether the pictures are watermarked). As soon as the advance payment is send to the company, it disappears completely with our money. We already described some of the scams in our Import from China Guide, check it for further information.
- What is “golden supplier”? Does it mean that the company is trustworthy?
“Golden Supplier” is a paid, premium membership for suppliers on Alibaba. It exists also on another B2B platforms, f.e. on Makepolo (as “Diamond Member”). The key information is that the huge membership fee is paid by the seller and, as we mentioned above, is one of the ways of earning money by the B2B platform. So the “Golden Supplier” has some additional functions enabled in his profile page and his company products came up first in the B2B’s search engine: but it does not mean that he is trustworthy. “Golden supplier” means only one thing – that the company was able to afford the premium membership fee (which is 3000$ yearly on Alibaba).
- How many companies are present on B2B platforms? Will I be able to find a suitable partner?
Alibaba boasts that it serves “millions of buyers and suppliers” Makepolo has 1200 active commercial members. Even though, we must remember that many Chinese companies are not using internet as their main tool of communication – traditionally, in China business is done by personal contacts or/and phone. Chinese companies webpages are often not updated, technically backward and hard to navigate. Moreover, the scammers may take the advantage of it and prepare a perfect webpage, which will lure foreign customers into cooperation.
On the other hand, no presence or limited presence in the internet is also a kind of a warning sign. The company, which does not have webpage, may as well be trading on the Chinese internal market only (lack of export license).
But we should keep in mind that the best deals are done “offline” – on a basis of personal contacts with our Chinese counterpart.
- If I get into trouble, how my problem can be solved?
Alibaba offers a service called “Dispute Centre”, where complaints on suppliers can be filled. But if we encounter a scammer, we have a poor chance of tracing him, left alone getting money back. We may, of course, sue the Chinese company, but if the order quantity is not big enough, we can lose a lot money on legal services, and the whole effort may be most likely fruitless. So, the only way to avoid problems is to check the Chinese company beforehand.
- Knowing the existent risks, should I use B2B portals anyway?
Internet is full with rants of beginner traders, who placed their orders and were duped by the Chinese scammers. Many may ask: should we use B2B portals anyway? Yes, but with caution. And it should be used rather to give us a general impression on the desired product, but placing an order and purchasing should be done independently, with the help of specialists. Another important issue: stay away from anything branded on B2B platforms. Genuine, high-end electronic equipment is not cheaper in China than in the other countries, so if you encounter reasonably priced “Samsung” or “Apple” products, they will be fake in 99% of cases and you will lose a lot of money.
- What else should I keep in mind when placing orders on B2B platforms?
Apart from the things mentioned above, you should always be aware of the fact that if the goods are more complicated and technologically advanced, than the risk rises. Quality check is a must, and the sample order is not enough – if you, for example order cellphone batteries of 2300mAh capacity, you will most likely get the sample which fulfills the requirements, but the final batch of goods will be 1000mAh batteries…
To sum up with, if you are willing to make a good deal and order a lot of goods, you cannot possibly refrain from verificating your supplier thoroughly. Saving money on a due diligence Credit report or onsite verification will certainly cause dozens of unsolvable problems.