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  • Is The End In Sight For Alibaba?

    You are here: Home » News » News & Events » Is The End In Sight For Alibaba?

    The Death of Alibaba? Is the end in sight for B2B websites like Alibaba, Made in China, Global Sources, EC Plaza etc…

    The world wide phenomenon of b2b sites has made international business via the internet more accessible to thousands of businesses around the world. Type any product into Google and the chances are the first few pages will be filled with dozens of links to b2b companies in China or developing countries looking for buyers.

    A great way to market your products for sure and for a company with no history or reputation in the market an easy way reach potential customers.

    But what does this mean for small to medium sized companies looking to buy reasonable quality products at affordable prices.

    The Advantages.

    1. Easy to find products which can be quickly compared to other similar items.
    2. A company introduction with ratings for service and delivery.
    3. Direct contact with an English speaking member of staff.
    4. Pictures of items with product description.
    5. Some very honest and reputable enterprises looking for new customers.

    Now for the bad news.

    My parents always told me “In this world, you get what you pay for”. If we look at a popular product such as a Sony TV, an i-phone or a Cummins diesel engine you really have to visit China to see what is possible in the field of copying famous brands.

    Most trading companies advertising on b2b websites are selling fake or copied products.. FACT!!

    The most popular products on Alibaba this year are mobile phone covers, electronic cigarettes and fake hair.

    Let’s look at the evidence. A basic entry level membership to sell on one of the big b2b’s is around $15,000 usd per year. Add in some extras and a high page rank and the price can be 2 or 3 times higher.

    Companies like Cummins and Deutz have a fixed price for an engine; if you order more units you can get a discount up to a maximum percentage. After that there is no way that engine can be cheaper FACT!!

    For years the big trading companies on b2b’s have been mixing fake and real product together to meet a price point that is set lower and lower every year by demanding customers.

    Let’s look at how to save money on a large engine order of say 30 diesel engines.

    1. Swap genuine accessories for copy: starter motor, alternator, compressor. Saving 2-3%
    2. Swap some key components for fake items: Flywheel, injector pump, injectors. Saving 5%
    3. Build an engine from genuine Cummins parts and mix copy components. Saving 5-15%
    4. Build an engine with fake parts using fake components and accessories. Saving 30-40%

    In recent years companies have been employing more and more of the above tactics to keep ahead of the competition. In a vicious circle of undercutting to keep a market share, pay overheads and b2b site fees we have arrived at the point where if you want to get ahead, you must use all the above tactics.

    This has led to the current situation, in order to sell an engine it must be assembled in a small workshop with semi-skilled workers in dirty conditions using 100% fake components and manufactured in small factories using retro fitted CNC machinery at best. Why pay for a CNC work station when a guy can machine a component by hand for a 10th of the price, right? Stick on a Cummins badge and call it genuine.

    Warranties? Yes One year warranty, they will send you as many fake parts as you need, if you argue long enough.

    Spares back up? Sure just go back to them for all your spares.

    Cummins after sales? Er..Er…Er.. Better just to deal with them, they say.

    While we are talking about spares, let’s have a look at spare parts supplie on b2b’s.

    In the past OEM means original equipment manufacturer, a high quality product supplied to a manufacturer because production costs are too high to make every component in house. For example Bosch fuel pumps and injectors, Holset turbo’s, Federal Mogul pistons, Payen gaskets, Luk clutches etc. These are OEM parts.

    Genuine, OEM and aftermarket. 3 different grades of spares which have gone the same way as genuine engines, first they sold some genuine mixed with OEM, then OEM as genuine then aftermarket as genuine.

    So what’s the next step? If we look at the ultra competitive electronics market where most companies list a purchase price for items, the obvious way is to lie about the price; the next step is to bait and switch for another product or lower spec item. The final step is to not send the product at all. In the area of scamming, it’s more rewarding to put skills and staff hours in to keeping one step ahead of the website security systems. These internet based con artists register many different vendor accounts with a view to simply getting customers to send money to various different bank accounts. Many are based in Fujian an area of China famous for b2b con artists.

    Using tactics like getting the customer to talk directly away from the b2b chat services, means no records are kept of the conversation. Sending money directly to the seller with no payment controls is an easy way to scam buyers with little or no risk to the seller. If it’s too good to be true, then usually it isn’t true. Ask no questions they tell no lies, becomes ask some questions and they tell all the lies necessary for you to send your money.

    Make no mistake, b2b’s are in the business of making money and ruthlessly pursue as many new sellers as possible to use their services. This makes it hard or nearly impossible for an new company to compete with the established players without resorting to shady tactics. Mix in foreign agents, supply chain management companies trying to make as much money as possible by driving down prices and the only loser is the end user who is getting little more than a no brand, poorly assembled Chinese engine with a Cummins badge stuck on top.

    So what’s the answer?

    For small to medium sized businesses the answer is to take back control of your purchasing, use your instincts, invest a little time in speaking to your agents. Try asking for real time pictures of products to get around the photoshop culture. Everybody has a camera phone these days right? View company websites, Google search names and companies. World travel is cheap, go for a quick business trip, most Chinese companies are very helpful and hospitable. Use your computer as a tool but do the real thinking with your brain after all your laptop could be a copy.

    Richard Smith

    Export Sales Manager

    EMAC International Group Ltd

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