Marry Alibaba and Ebay for hot profits

In this post I will consider using these two online giants (and longstanding rivals) Alibaba.com and Ebay to create a business model with some potentially hot profits.

For those who don’t know Alibaba, it can be nicely summed up in it’s meta description:

Find quality Manufacturers, Suppliers, Exporters, Importers, Buyers, Wholesalers, Products and Trade Leads from our award-winning International Trade Site.

While Ebay can be B2B, it is primarily a B2C (business to consumer). My idea is not exactly rocket science – it is combining the B2B with the B2C (B2B2C), where you are the middle ‘B’.

Take a moment to think of how other B2C’s work. A retailer such as Kmart is a B2C. It sources all of its products cheaply via B2B (through wholesalers usually). Actually most large retailers are simply the end of a large chain of middle men:

Each middle man has their own business, and makes a profit from it. My business model proposal is to simply become one of these middle men. In the past it was very hard to do this – you needed to organise complex supplier relationships, and required a lot of money to set it all up. Not anymore.

Alibaba is your cheap source of products, and Ebay is your cheap ‘retailer’ or shop-front. Ebay is literally swarming with buyers, like a giant shopping center full of people. However this shopping center doesn’t require large startup costs to set up shop. In fact it costs under $10.

So you have a cheap shop in an incredible shopping center, but now you need products. This is where the internet lends a hand – Alibaba has created transparency between suppliers and buyers. You, as an individual, can now import batches of products at super cheap prices. Of course there is always risk involved – for example you must buy a minimum amount of products per transaction (so if you wanted to buy frisbees, you might have to buy 50 of them at a time).

While it looks like I am thinking up this idea out of no where, it is by no means a new concept; many people are using this model already. I went and had a look on Ebay for some examples and found one straight away.

If you type in “expresso machine” into Ebay you will see that perhaps the top 10 results are all the same machine (or one of two machines). The machines “Buy-it-now” price averages $350 to $400, and auctions usually get over $300. I haven’t seen any go for under $200.

I searched on Alibaba for “expresso machines” and quickly found the exact images that are used on the Ebay listings. I contacted the main supplier and asked for the price list – the machines cost about $200 each from this supplier; I’m guessing long term customers would get discounts, and I’ve read on forums that you should always ask for less from Chinese suppliers. Anyway minus shipping and storage costs, I would guess they’d be making at least $50 profit on most sales, which could add up quite fast if there are plenty of buyers. And this is just one product; I’m sure there are many others.

If anyone has had experience with Alibaba in Australia, post a comment! I’d be interested to get some inside knowledge.

Resources:

http://www.chinadaily.com.cn/business/2010-09/11/content_11289572.htm

http://en.wikipedia.org/wiki/Business-to-consumer