Why Is Alibaba so Cheap & it Does not Compromise Product Quality

Alibaba is an ecommerce platform that offers other businesses and consumers access to cheaper commodities.

Many assume that cheap is low quality, which is not always the case on Alibaba. In fact,buying on Alibaba, you get high quality products at affordable prices.

Let’s look at genuine reasons why goods on Alibaba are relatively affordable.

1. Dealing Directly with Chinese Factories or Manufacturers

Alibaba platform offers different Chinese suppliers and manufacturers a centralized place where they can sell their wares. This eliminates numerous middlemen that add on their costs thus raising the commodity prices.

Buyers who order large quantities can easily connect with Chinese factories and manufacturers through Alibaba thus reducing the prices even further.

You can check Alibaba Factory section to search for manufacturers.

Alibaba Factories
Alibaba Factories

2. Many Similar Products (Many Chinese Manufacturers Selling same Product)

The presence of many Chinese suppliers selling similar goods on Alibaba is advantageous to purchasers due to competition.

This is because different supplier is trying to outdo a competitor thus ending up offering affordable rates in order to sell.

3. No Intermediary between Sellers and Buyers

Alibaba B2B Platform
Alibaba B2B Platform

Alibaba platform allows manufacturers to market and sell their goods to buyers directly in most instances. Most manufacturers prefer paying to use the platform because it’s generally cheaper compared to using conventional way of marketing.

This way intermediaries are reduced because they will have to incur extra costs. Such overhead costs spill over to goods pricing thus forcing them to charge highly in order to make profit.

4. Low Cost of Manufacturing in China

China enjoys readily available raw materials and cheaper labor rates compared to other nations thus making manufacturing costs low.

These two factors majorly influence the overall pricing of commodities because manufacturers do not spend a lot in production cost.

Secondly, electricity cost per kilowatts is lower than in most parts of the world. This greatly reduces overall production cost thus leading to inexpensive commodities found on Alibaba platform.

5. Minimum Order Quantity (MOQ)

Alibaba has a minimum number of goods that one can order from their platform. This allows suppliers to offer wholesale prices to bulk purchases thus translating to lower unit prices compared to when bought individually.

As a result, the businesses are able to realize profits upon resale.

Additionally, shipping goods in bulk also reduces overall cost on the buyer expanding their profit margin on Alibaba.

MOQ for Clothes on Alibaba
MOQ for Clothes on Alibaba

6. Alibaba’s Business Model

Alibaba is purely a site that acts a trade platform where manufacturers meet buyers and trade.

This business model is a low cost one because it does not include additional costs that comes with stock keeping. This allows them to ventures in another enterprise that help generate revenue like cloud computing, entertainment, and many more.

7. Wholesale Business Model Focusing Mainly on B2B

The whole idea of Alibaba was to create a common market place for both manufacturers and buyers.

This wholesale business model makes it possible for businesses that purchase from Alibaba to repackage and sell at a profit.

Secondly, wholesale selling offers discounted pricing to the buyers as opposed to retail business model or B2C.

Thirdly, when manufacturers connect with the bulk buyers they are able to get into a contracted shipping thus lowering the overall cost.

8. Accessibility of Raw Materials

China is a home to many natural resources and raw materials such as cotton, timber, minerals, ceramic, steel, etc. The readily available raw materials and resources significantly influence commodity prices on Alibaba.

The availability of large forest cover enables cheap tissue and paper production.

Vast cotton production reduces clothing manufacturing cost, while raw ceramic materials offer cheap ceramic production in the world.

Minerals such as steel deposits and ore influence metal production.

9. Chinese Government Creating Favorable Environment for Business

The Chinese government has created a business friendly environment by reducing taxes on raw materials, manufacturing, cost of electricity and shipping.

Additionally, they have put in place tax refund policy on exported goods to encourage more exports.

This has influenced prices on Alibaba positively as suppliers are able to offer even cheaper rates.

10. Low Shipping Cost

The Chinese government is keen in supporting export business by offering subsidies and favorable terms that make shipping less expensive. Bulk exports of goods attract lower cost per cubic meter compared to shipping small quantities.

Secondly, bulk orders are cheaper to ship via sea than air freight which is used mostly for small orders and its expensive.

You can learn more on the cost of shipping from China.

11. Allowing Price Negotiations

It is possible to negotiate prices on Alibaba. Buyers who especially buy in bulk, connect directly to manufacturers thus enabling them to enter into an agreement.

As a result, buyers can negotiate even cheaper rates than those on Alibaba provided they commit to regularly buy from the supplier.

Some suppliers also allow flexible payment plan for buyers after creating a rapport with them.

12. Limited Services

One of the unique attributes of Alibaba is the lack of physical storage facilities such as warehouses or factories. This has greatly reduced its operational costs unlike its counterpart Amazon which has warehouses and fulfilment centers.

Once a buyer places an order, the supplier ensures the goods are shipped from their warehouses to the buyer directly.

13. Mature Industry Chain which is Diverse

Products on Alibaba
Products on Alibaba

China’s diverse and matured worked force couple with efficient supply chain management, makes it the go to manufacturer in the world.

Right from raw material sourcing, to component assembly and production, there is a well laid down plan for easy tracking and quality assurance.

The end-to-end well defined and run production system such as seen in electronic production, makes manufacturing cheaper and of good quality.

Conclusion

In summary, Alibaba is cheap because of its business model and the willingness of the Chinese government’s friendly manufacturing policies.

From experience, most products are high quality on Alibaba at affordable prices. Even most products sold in the American and the European market are from China under OEM arrangements.

For any questions or clarifications, contact us now for free consultations.

More Resources:

Tips for Saving on Alibaba Shipping Cost – Source: BANSAR

Is Alibaba Safe and Legit – Source: BANSAR

How to Buy from Alibaba – Source: BANSAR

 

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