Anne Wallace, Esq.

Alibaba — Open Sesame to Global Sources?

Alibaba Group Holdings and its website alibaba.com have created lots of buzz lately. The Chinese e-commerce giant is prepared to go public on the New York Stock Exchange this fall, and may give Amazon and EBay a run for the money. Unfazed by flash, though, small businesses ask, “What can you do for me?”

For those interested in global sourcing, the answer is something, but not everything and there are other contenders to look at, too.

Alibaba Connects Global Manufacturers with Small Businesses

U.S. small businesses cannot ignore the fact that some commodities, like toys, are either not produced domestically, or not produced at a competitive price. Sourcing products or components from international sources can make a lot of economic sense, all other things being equal. An easily searchable website, Alibaba.com focuses on the sprawling base of Chinese manufacturers (but includes other countries of origin) and connects them small businesses across the globe. If you need Custom Design Soccer Uniform Kits, search Apparel, but you can also browse Metals & Metallurgy, Gifts, Furniture and Mechanical Parts.

Don’t Outsource Due Diligence

This is where we get to that important caveat “all other things being equal.” Alibaba is not a guarantor of quality.  Sourcing from international suppliers has its own unique set of issues that may, in fact, be made more acute with greater ease of connection.  Among these are:

  • Questions of governing law and dispute resolution,
  • Product quality and specification issues.  There is no reason to assume that imported products will be compliant with U.S. law relating to things like lead paint, unless that was part of the original specifications.
  • Contract negotiation,
  • Warranty problems,
  • Payment issues sometimes involving foreign letters of credit,
  • Customs law,
  • Trademark and copyright violations and
  • Country of origin marking.

Even with what initially looks like a significant price differential, small businesses may discover that importing carries hidden costs relating to due diligence. But ignoring the due diligence can cost your business dearly in terms of both customer satisfaction and legal liability.

Who Else is in This Business?

Although Alibaba has the spotlight today, there are actually a number of other players in this industry. The following list hardly exhausts the resources but may suggest a place to begin for small businesses beginning to investigate global sourcing:

  • The FITA Buy/Sell Exchange provides information about country profiles, government agencies, industry news, trade organizations, shipping and international business travel, and their “Really Useful Sites for International Trade” section lists over 8,000 websites related to global commerce.
  • Euro Pages is an online European business directory where businesses can search by suppliers by product, service, company name or business sector.
  • Global Sources is a business purchasing search site that verifies suppliers from around the world.
  • National Customs Brokers & Forwarders Association of America is a membership organization that refers customs brokers.

Global sourcing can be very attractive, but there may be more to it than meets the eye.  Even beyond the due diligence issues listed above,  international suppliers may be reluctant to sell goods in the smaller quantities small businesses require and every buyer/seller relationship requires tending, which may be more difficult to do in a global setting. Success depends on research and good advice, among other things.

 

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