“How To Source Your Private Label Product In China, Without Getting Screwed By Alibaba Suppliers.”
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How to Pay Alibaba Suppliers WITHOUT Getting Screwed (SAVE)
To get your product, you need to know how to pay Alibaba suppliers. But when your Alibaba contact is halfway across the world, how do you know that they won’t screw you over?
Sending money abroad is always a hassle.
It’s no different when importing goods from China. You need to be confident that you are going to your money’s worth and won’t be left short changed.
That’s why as an Amazon Seller you need to know how to pay Alibaba suppliers without getting screwed.
Keeping your money safe while working with Alibaba suppliers is a challenge. However, there are simple steps you can take to protect your hard earned cash.
If you’re serious about saving money and getting the Private Label Products you need, it’s time to skill up. Discover the professional money protection methods that I use to keep my savings safe.
It’s the only way to be sure that you’re not getting screwed.
1. Never Pay For An Order Until Product Quality Is Agreed
Protecting your money begins with agreeing the right contractual agreements.
Never send an Alibaba supplier a payment until you’ve agreed your terms and product quality.
If you send money before agreeing terms, you’re guaranteed to get a product that you won’t be able to sell.
Now, this doesn’t mean that you shouldn’t pay for samples.
Unless you’re working with a Sourcing Agent, you will need to pay for your simple samples. It’s an important part of supplier research. While that’s fine, make sure you do not agree to an order until you are satisfied that your supplier can deliver your product.
Before committing to an order, you need to negotiate a Purchase Agreement Contract. For this, I strongly recommend using a Sourcing Agent or consulting a legal expert.
It can seem like an unnecessary expense, but Sourcing Agents negotiate Purchase Agreement Contracts all the time. These contracts allow you to insert enforceable clauses that compel your suppliers to deliver your products on time, to budget and to spec.
When drawing up your Purchase Agreement Contract, consider adding punishment clauses. This will protect your Private Label Business from the late delivery of goods.
When agreeing your contract, it’s important that you know what sort of contract your signing.
FOB & EXW: Two Types Of Shipping Agreement You Need To Understand
Free on Board (FOB) and Ex Works (EXW) are two different types of shipping agreements that can be negotiated between Amazon FBA Sellers and Alibaba Suppliers. The type of agreement confirms who is responsible for the product during shipping.
- Free on Board is a trade agreement in which the supplier is responsible for the product until it is delivered to the seller. This means that the Alibaba Supplier carries the risk of the product being lost or damaged during transit.
- Ex Works is a type of trade agreement where the Amazon FBA Seller assumes responsibility for the delivery of the product. It means that the supplier is no longer responsible for the product after it’s left the factory.
When you agree a contract with a supplier, it’s important that you understand what they are responsible for delivering.
2. Agree A Deposit Not A Full Payment
When you are satisfied that you have found a reliable supplier and have a suitable contract in place, do not release the full payment upfront.
Don’t be fooled by Alibaba suppliers. Some will tell you that a full upfront payment is standard. However it is NOT a normal practice.
After you’ve agreed a contract, settle on paying a 30% deposit for the order. This will allow you to withhold 70% of the payment until specific manufacturing milestones have been met.
Withholding a proportion of the payment gives you leverage throughout the manufacturing process.
If you surrender 100% of your payment when you agree the order, there’s nothing left to motivate your supplier. This means that suppliers will be more likely to deliver poor quality products to you late.
3. Use Alibaba Trade Assurance
Protecting your payment isn’t complete with your supplier agreement.
There are additional, specialist techniques you should employ to add additional protections to your money.
When paying suppliers on Alibaba, seriously consider using Alibaba Trade Assurance.
Trade Assurance is a free service provided by Alibaba that protects your payment against suppliers that fail to deliver on their contractual obligations. Not all suppliers support Trade Assurance, so if you want to use this service, find one that does.
Through this service Alibaba acts as the escrow, or the third party payment holder. This means that they hold the payment, only to release when certain contractual obligations have been met.
Alibaba Trade Assurance provides you with features including On-Time Shipment Protection and Product Quality Inspection Protection. These are assurances that Alibaba will refund your payment if your supplier does not ship your goods on time, or if your supplier does not meet the quality control requirements stipulated in your contract.
To use Alibaba Trade Assurance effectively, you need to have a robust and enforceable Trade Agreement contract in place with your supplier.
However, note that when using Alibaba Trade Assurance, you are required to pay the full payment upfront. In this instance it is fine to do so, as it is not sent to the supplier. Instead it is held by a third party.
Big payments like this though can cause cash flow problems for emerging Private Label Businesses.
If you want to use Alibaba Trade Assurance, consider making your payment with a credit card. This will cost slightly more, but will give you some financial room to maneuver while you wait for your product to be manufactured.
4. Always Pay Deposits with Payment Protection
If you do not want to, or can’t pay the full upfront cost to use Alibaba Trade Assurance, always make sure you have payment protection.
Payment protection is important, particularly when you are using a supplier for the first time.
While it does add around 5% to the cost, it’s the easiest way to insure your payment. Most credit card payments automatically offer payment protection, so consider using one.
5. Use Pre-Shipping Quality Control Services
Withholding a proportion of your payment is a great way to motivate suppliers.
However, to withhold payments successfully, you need to know when it’s the right time to release them.
Never release the remaining 70% of your payment until you have completed a thorough pre-shipping quality control check on your products. If you are not based in China, work with a Sourcing Agent or use a reputable firm like QIMA.
Remember, if you release your payment before you receive your products, there’s a chance that they will not be up to scratch. Full payment to the supplier means loss of leverage.
While a pre-shipping quality control may seem like an unnecessary expense, spending around $100 now will save you $1000s in the event that something goes wrong.
A pre-shipping quality control is also a requirement of certain aspects of Alibaba Trade Assurance.
6. How To Pay Alibaba Suppliers – Sending Payments
When you are satisfied with the quality of your product, it’s time to pay your suppliers.
I recommend that you wire your payment via bank transfer.
Ask your Alibaba Supplier for their bank details. If it’s over the phone make sure you note them down very carefully and double check that you’ve got them right. Check all the letters and numbers to make sure you have it down accurately.
Once you have the payment details, either use internet banking to send your payment, or call up your bank and ask them to arrange the payment transfer.
Save Your Payments From Alibaba Scammers
These payment techniques are how to pay Alibaba Suppliers while keeping your money safe. Make sure you use them.
Never forget, the best way to keep your payments safe is to find a reliable supplier in the first place.
If you’re having trouble, find out how you can find a great Alibaba Supplier here.
Finally, remember that if something doesn’t feel right, it probably isn’t. Never let yourself be pressured into making a payment that you have not agreed.
While sending money overseas can seem scary, there are ways to do it right. However, don’t get comfortable. It’s important that you always remain vigilant.
Have you had any horror stories while paying Alibaba suppliers? Are there any other techniques you use to keep your money safe?
Let me know in the comments below!