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Alibaba Supplers: FOB vs EXW

It’s time to start meeting our potential suppliers!   In this step, we will make the first contact with suppliers on Alibaba. Alibaba is the biggest supplier platform in China, so you will be sure to find a suitable supplier! If you search for your product name on Alibaba you will find a huge list of potential suppliers!

Trade Assurance

Before we start browsing through these suppliers we want to make sure to select only suppliers who offer Trade Assurance:

What do we want to know? 

  • Can they manufacture our product?
  • Can they customize our product? (for example, different color)
  • Can they manufacture our packaging?
  • What is their minimum order quantity (MOQ)?
  • From which port do they ship?
  • What is their lead time?
  • And of course: What price do they charge?

We like to use this email template to contact as many possible suppliers:

Hi,

I am looking to manufacture product X ( see attachment for picture ).

Product description
Size: X
Weight: X
Material: X
Packaging: x
Color: X

Are you able to manufacture this product?

For my first order, I am looking to purchase 1000 units FOB. Can you send me a quote for this?
Is it possible to add my logo to the product? How much is the extra cost for this?

What is the current lead time?
How is the product currently packaged?

If a supplier would come back with an unreasonable price we can respond with the following message:

Hi,

Thank you very much for your quote! I really like the product you manufacture and appreciate that you respond very quickly. However, my boss wants me to pick the lowest price for this product and we received a quote for: $4,70 FOB for the same product.

I would much rather order from you but this is only possible if we get a more competitive price.

Please let me know if we can do something about the price.

Thank you!

Now grab a cup of coffee as we will continue to discuss incoterms below  

FOB vs EXW
When we start to request quotes we will run into the following Incoterms a lot: FOB & EXW.

Different incoterms FOB stands for Freight On Board. In this scenario the supplier will pay for the shipping cost to the port you will ship from. And the possession of goods is transferred at the port. Therefore you will usually see the FOB term followed by the port name. For example: $3,50 FOB Ningbo. This means the supplier will manufacture the goods and ship them to Ningbo port for $3,50.

EXW stands for Ex-works. In this scenario, the supplier will not pay for any shipping and you will have to arrange pick-up and the supplier’s factory. Because shipping is not included in the EXW price, EXW prices are always lower than FOB prices.

Sometimes a manufacturer will also quote their price based on DAP. Which means they will take care of everything up to your doorstep. This might seem convenient but you want to understand the product and shipping cost break down separately, as we will ship ourselves once our volume goes up. Comparing prices with other manufacturers is also harder when they quote one price.

👉 Tip: If you are starting out and just shipping a couple boxes, just ask them a quote for express shipping. Usually for small volumes, it’s cheaper to have them ship to you, as freight forwarders have several fixed costs. You can always compare your quote from your manufacturer with the freight forwarder though. Don’t know what a freight forwarder is? We will explain this in the shipping section.

Intense right? All those FOBs and DAPs flying around. I hope your head doesn’t hurt. It’s actually not that complicated once you get used to it. Soon you will be throwing these incoterms around like a ninja to your manufacturer  

  Tip: Use your personal notes in this step to fill out the spreadsheet with information you requested to keep track of progress.

About the Author: Jay

I've been an online seller since 2013. Over these passed 16 years I have tried just about every method to make money online. Currently I am an Amazon FBA seller & Blogger.

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