Advantages & Disadvantages Of Sourcing Overseas

What Is Alibaba?

Per Wikipedia** : Alibaba is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals. It also provides electronic payment services, a shopping search engine and data-centric cloud computing services. The group began in 1999 when Jack Ma founded the website Alibaba.com, a business-to-business portal to connect Chinese manufacturers with overseas buyers. In 2012, two of Alibaba’s portals handled 1.1 trillion yuan ($170 billion) in sales. The company primarily operates in the People’s Republic of China (PRC), and at closing time, on the date of its historic initial public offering (IPO), 19 September 2014, Alibaba’s market value was measured as US$231 billion.

In September 2013, the company sought an IPO in the United States after a deal could not be reached with Hong Kong regulators. Planning occurred over 12 months before the company’s market debut in September 2014. The Alibaba Reuters Instrument Code is “BABA.N”, while the pricing of the IPO initially raised US$21.8 billion, which later increased to US$25 billion, making it the largest IPO in history. However, buyers weren’t purchasing actual shares in the group, since China forbids foreign ownership, but rather just shares in a Cayman Islands shell corporation.

Alibaba’s consumer-to-consumer portal Taobao, similar to eBay.com, features nearly a billion products and is one of the 20 most-visited websites globally. The Group’s websites accounted for over 60% of the parcels delivered in China by March 2013, and 80% of the nation’s online sales by September 2014. Alipay, an online payment escrow service, accounts for roughly half of all online payment transactions within China.

Alibaba reported sale of more than $9 billion on China’s Singles’ Day in 2014.**

Advantages

  • Super low manufacturing costs. Compared to US factories. You will save 10 fold sourcing overseas.
  • Choice – There are millions or products and thousands of factories to source from.
  • Expertise – Everything think “Who in the hell makes this?” The odds are it is made in China. Some of the factories are the only places online who make these products.
  • Customizable – Have an idea for a spin on an existing product? Chances are the manufacturers can customize it to your liking

Every good has a bad. So here are the disadvantages:

Disadvantages

  • Cheaper quality. Not saying all the quality will be bad but the perceived quality is lower. “Made in America” is usually associated with quality. “Made in China” more so with high quantity, low quality. .
  • Language barrier – Offer hard to communicate with suppliers. Can cause mistakes.
  • Little to no intellectual property protection – Your stuff can be copied. They did it with Beats by Dre and will do it to anyone.
  • Longer shipping time – Shipping from China can take weeks or months depending on how you order.
  • Extra costs – You have to pay shipping fees, duty costs on big shipments. be sure to ask
  • Scammers – With anything there are big scammers in China. People who disguise themselves as suppliers and take money from distant entrepreneurs. Make sure to do your research.

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