How to Find and Do Business With International Suppliers
Securing a manufacturer to produce unique items or finding a trustworthy supplier to purchase large quantities of general products for your online store is a big challenge for a small business.
"When you're a small business person, remember that each deal could be your first or last, depending on how you conduct business," said global trade expert, Jim Angleton, president of Aegis.
The last thing you want to deal with is the cost of losing an uninsured container at sea or transacting with a fraudulent supplier. The good news is that this kind of devastating situation can be avoided when transacting business overseas.
Alibaba.com Connects Small Businesses with Global Trade Partners
To start, you need to find a supplier who is a good match for your business. One of the leading global trade facilitators, Alibaba.com, provides a business-to-business (B2B) marketplace that helps connect businesses with suppliers and wholesalers in more than 240 countries and territories.
Alibaba.com is a good starting point to find an ecommerce supplier for larger orders and for securing customized goods. An on-site search tool can help you find general product wholesalers, but for more complex requirements you'll need to submit a request for quotation (RFQ) to be matched with up to 10 customized sourcing companies. Smaller businesses looking to source a smaller quantity of consumer products should look at AliExpress to find a supplier. For buyers, both sites are free to use.
Linda Kozlowski, director of global marketing and customer experience, said that small businesses often use Alibaba.com to purchase large quantities of general product, to look for complex machinery or to find a company to manufacture a new invention or product.
Alibaba.com has a number of services to help facilitate the relationship with any supplier or manufacturer you find on the site. Since most orders require customization and discussion, the transaction takes place off of the Alibaba.com platform, making it extremely important that you take the right steps to protect your business.
Due Diligence is an Absolute Must
Once you have narrowed down the list of suppliers to the best candidates you have to investigate the company you plan to do business with to ensure it is a legitimate supplier that delivers quality product. Fraud is an issue for these types of B2B transactions, no matter what supplier or website you use.
"We always -- no matter what supplier you are using on our site, any other site or even offline -- encourage people to conduct their own due diligence. For any B2B transaction, you must look for references, ask for samples and that sort of thing," said Kozlowski.
The Alibaba.com site was plagued with fraud issues in February 2011, related to false companies listed on the site as Gold Suppliers. The company dealt with the fraud, which resulted in the resignation of its then CEO, COO and 100 sales people, and it propelled Alibaba.com to implement a series of trust and safety services -- like options for escrow payments and inspection services -- to protect the experience of all Alibaba.com users.
The reality of doing business overseas today is that you need to have as much data as possible at your fingertips.
Describing the initial steps you should take when conducting business with international suppliers, Aegis' Jim Angleton added, "It begins with a Google search for negative or positive business conduct by your proposed customer. You need to ask for letters of recommendation from at least two banking sources, and then you need to check those references, review customs validations or certificates and shipping."
Aegis also provides research and due diligence services to businesses when they go offshore by running checks on the companies, the banks involved, brokers and any other individual or company involved in the transaction that you might not have the resources to investigate on your own.
Alibaba.com, a B2B marketplace, connects businesses with suppliers and wholesalers in more than 240 countries.
Another important thing to do is make sure the global trade partner can deliver the goods as promised. This usually requires and on-site inspection -- and there are a number of services and contractors who can help small businesses with on-site inspections in many countries.
Aegis has its own ground troop of expert inspection agents on its payroll. On Alibaba.com, the service lists more than 30 pre-screened inspection service vendors that small businesses can contact to perform on-site inspections on their behalf. Alibaba.com offers its Inspection Service for $1 as a time-limited promotion price to encourage small businesses to become familiar with using an inspection service to ensure quality products are manufactured and delivered.
Tips for Secure Payments, Escrow, Shipping and Insurance
Aside from knowing whether a company is legit, you also need to secure payments overseas and to make sure the goods are as described. To help facilitate the trade process, Alibaba.com recently launched an escrow service to hold payment until the supplier ships the goods and you confirm the order is received in good working condition.
Kozlowski advises buyers to use escrow payments on Alibaba.com, especially for the first transaction with a new supplier. The escrow service carries a three percent fee, but it helps establish a good relationship with a supplier and can prevent a fraudulent transaction from taking place.
Aegis offers a different solution to help manage transactions using a secure corporate card system. A primary card is held by the small business and a second card on the corporate account is sent to the international supplier. The business loads funds on the card that is held in an account that your global trade partner can see. When the products are shipped, payment is released and the supplier can pick it up by using the second card at their own bank.
Angleton said that no fee is charged to the small business for loading the card, and small business owners also benefit from controlling the transaction in the currency they choose.
Purchasing the right shipping insurance is another common concern. Angleton said he advises clients to obtain adequate shipping insurance, especially on container shipments. Without proper insurance, if there's an accident or a container gets swept out to sea, the loss is damaging to a small business.
The Cost of Global Trade
The cost of conducting global trade varies -- but above the actual product purchase you have to consider the cost of due diligence, shipping, insurance and other transaction fees related to payments and escrow services, if you use one.
In today's world, Angleton said that you can expect to pay upward of $3,000 for the most expensive and comprehensive set of due diligence and to send a qualified person in for the on-site inspection. Depending on the product and situation the inspection could be a lengthy process.
While that might be steep for some ecommerce businesses, in the end it could save you hundreds of thousands of dollars in embarrassment and litigation. And it can potentially keep you from sinking your business in bad deal when conducting business with international suppliers.
Based in Nova Scotia, Canada, Vangie Beal has spent the last decade contributing featured articles and reviews to more than 20 technology-focused publications, including Webopedia and Ecommerce-Guide. You can tweet with her online @AuroraGG.
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