review system for Chinese suppliers is excellent, but there are some problems in monetizing the business model (plus a few other things).
We were actually accepted into a business incubator with this idea (40k USD):
Here’s what I would like to see develop in this industry:
There’s a trillion USD in exports leaving China each year, Europe, Latin America, USA, Asia.
(Above: only most significant imports, not all included)
are around 90,000 importers in the United States alone that account for the $400b in trade volume.
Small and medium sized businesses can’t afford the costly due diligence services to verify multiple suppliers (fly to China, meet with multiple buyers, guides, visas, it’s $10,000USD easily). Thus, new startups like Panjiva.com, trademango, goodfactories.com, and mfg.com help buyers make short-lists more quickly of qualified suppliers. If buyers can compare pricing, then the most efficient producers will sell and less efficient producers will fail-Saves money in due diligence.
So, where does a factory review website come into play?
(Above) This would be insanely useful. We spend days going through suppliers trying to determine if they are reputable, legitimate, and professional. If there was a fast and easy way to evaluate suppliers, it would help a lot. However, Alibaba doesn’t want to help buyers do this because it will impact their sales. They are incentivized to prevent factory reviews because their customers (factories) certainly would not appreciate negative reviews. Yet, this implicitly (explicitly) facilitates fraud.
What are the problems with this model?
Subscriptions-Charge subscriptions for expert reviews-let anyone review via linkedin/facebook-Linkedin’s model for factories (My favorite)
Ad Sales-Ad sales suck
Value Added Services-referral services to lawyers, China trade experts, blah blah blah
The other major problems are potential defamation and copyright legal issues. Alibaba has the cash and means to kill a hopeful little startup like this. I think this is probably why goodfactories.com is uploading their own data rather than cross linking to Alibaba.com (which is what I would like to do because you could generate so much revenue so easily). The defamation issues are a real problem because I could see Chinese factories getting really nasty:
Anyways, some people have talked about an open source factory review platform, but I don’t know if this is sustainable.
What about factory reviews by bogus people?
I think this is easy to get a round as Yelp.com, Tripadvisor.com and others have successfully managed this problem. Plus, facebook is blocked in China, so an army of Chinese internet trolls couldn’t attack your website.
Ultimately, I think factory reviews benefit good Chinese (and other countries’) factories the most because they have an improved way to market their products. With Alibaba, they are grouped together with so many fraudsters, it destroys their brand value. If Chinese manufacturers are going to assume the lofts of global Fortune 500, they will need to invest more in brand development. So far, only SOE’s like Huawei, TZE, and quasi-state partnerships like Lenovo can compete, and only with help from subsidies from the government controlled banks. Also, an accountability system would really develop. If importers can threaten to harm Chinese factories reputation, it will increase their leverage. Right now, Nobody knows the difference between Chongqing Machinary and Ningbo Machinery (we do….but we have a sourcing company in China). Also, I think Chinese factores DO care about their brand and at least in China, they will spend money on it. Yet, they are still clueless as how to market themselves to overseas clients.
I think the next two best startups; Panjiva.com and mfg.com don’t quite solve this problem (for different reasons).
Panjiva.com is great if you want to spend the money. A lot of importers don’t.
Mfg.com, I absolutely love except they still have the same business model as Alibaba.com and, after I tried it for the first time, I only received RFQ’s from trading companies which might as well be fraudsters for all I know.
do you think?