alibabaNowadays it doesn’t take much initiative to become self employed. It takes a dream and a goal. It doesn’t really take that much money to get started. With online resources such as Ebay, Amazon, and Craigslist, your marketplace has already been established. Sourcing inventory through sites such as Alibaba are an entrepreneur’s paradise.

But is that really the case?

Alibaba (BABA) had their IPO today on the NYSE with shares priced at $68. The official opening price was $92.70 as shares were taking off in early trading. Alibaba raised $21.8 billion dollars through the offering, valuing the company at just under $168 billion placing them in between Amazon ($150 billion) and Facebook ($200 billion).

So what does this mean for people like you and me who want to live our dreams of working for ourselves and calling all the shots? Not much really…for now. It’s great for investors with the buzz of being the largest IPO in history but what does that have to do with the long run? Well, hopefully it will mean lots of things. For starters, how about dealing with an industry known for piracy and knock-offs and establishing a safe haven where legitimate transactions can be made?

China and Hong Kong accounted for 93 percent of the value of Intellectual Property (IP) infringing products seized by U.S. Customs and Border Protection in fiscal year 2013, according to a U.S. government report.

It is always important to do your due diligence when working with a supplier. And Alibaba is poised to make itself a safer and more reliable marketplace. But when will that be? There is lots of ground to cover.

I recently contacted several suppliers making bicycle frames, wheels and accessories all at too-good-to-be-true prices. I found some racing wheels “made in Holland” which were manufactured in a Chinese industrial district. I also found a complete Pinarello DOGMA F8 priced around $1000 per unit. As a cycling enthusiast, I knew immediately that those were selling here in the US for 10x that amount. Yes, a bike that costs $10,000. And no there is no motor. I get asked that all the time.

You may be able to imagine the excitement. You can easily sell 10 or 20 of these per month, buy a bigger house, take some extravagant vacations, put your kids through college and still have some left over for an early retirement.

On Pinarello’s web site, they have a link specifying beware of false frames stating that since August 31, 2014 that 24,971 false frame online auctions were blocked. Also 631 counterfeit e-shops were attacked.

Aside from potentially buying fake products, there still needs to be the assurance of your products actually showing up and in the quality you had imagined.

But Alibaba must now live up to its name and turn things around if it wants to rise up to the vision Jack Ma, the CEO of Alibaba, has for his company. Almost a quarter of Alibaba’s 20,000+ workforce form an IP protection team and the company spends over 100 million yuan ($16 million) a year fighting counterfeit goods. In the past year, it removed over 100 million links to products suspected of IP infringement, the company said in a February filing to the World Intellectual Property Organization (WIPO).

Aside from potentially buying fake products, there still needs to be the assurance of your products actually showing up and in the quality you had imagined.

In the meantime, here are some safeguards to take in order to verify suppliers:

  1. Check how long the supplier has been in the market and check to see if they are in good standing (a gold supplier for more than 2-3 years is ideal)
  2. Search the company name on Google to find any disputes or if they actually exist
  3. Ask for company registration and business licenses
  4. Ask for references (I was told once that information is top secret. NEXT!)
  5. Ask for a sample (be willing to pay for it)
  6. Check company email address (not Hotmail or Yahoo)
  7. Call the company’s phone number (a mobile phone is not enough)
  8. When it comes to payment, tell them you will have a local agent pay in cash at their address.
  9. Good suppliers accept PayPal in addition to Western Union or Money Gram.

I love the vision that Jack Ma has for Alibaba with “customers first, employees second, and shareholders third.” I just hope the first truly does come first.

 

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