In this episode…

Renaud and Adrian from the team talk Taobao!

Taobao is a huge Chinese online marketplace where it’s possible to get almost anything at a decent price. The problem is, some importers have been purchasing components from there for use in their mass-produced products!

You might be thinking:

If prices are good and they have the items, what’s the problem with sourcing from Taobao?

Listen, and you’ll find out..!

Just hit the play button to start listening..!

Listen to the episode right here 👇👇👇

🎧 Should You Buy Parts for Mass Production from Taobao? 🎧

Show Sections

00:00 – Greetings + why not to take checked baggage on flights within Europe + the UK’s 2-day heatwave 😂 

01:59 – Today’s topic: Why not to buy parts from Taobao to use in mass production?

02:40 – What is Taobao?

Renaud explains what Taobao is – a huge Chinese C2C online shopping platform where you can purchase almost anything, usually at reasonable prices. Originally a competitor of eBay, Taobao kicked them out of the China market and became a titan, helped partly by not having seller fees. Products tend to be cheaper and at the lower end of the market. Branded or higher-value goods are commonly sold on Alibaba’s luxury online platform, Tmall.com. Vendors are often people who set up a storefront and sell items part-time from home as a side-hustle and they are also people who own a physical market stall, say in an electronics market, who sell the same products in parallel via Taobao. Vendors must provide great customer service as the platform penalises those who don’t reply to chat quickly and provide a good customer experience when issues occur.

10:36 – Scams and other issues on Taobao.

A Google search for ‘Taobao scam’ returns more than 300,000 results! It’s not well-regulated aside from via customer feedback and ‘bad’ vendors can easily set up a new account and start again.

11:32 – Why buying parts from Taobao for use in early proof-of-concept prototypes is fine.

Engineers in China developing a new product need to make a proof-of-concept prototype and put it together quickly and roughly. They will often buy a few pieces of a component from Taobao so they can quickly get a prototype done to test. This helps cement your BOM at an early stage. There’s no harm in this as long as the components are purchased solely for this purpose as a one-off.

13:00 – More advanced prototypes and mass production.

The same engineers, for ease and convenience, may keep buying the same components from Taobao in increasing quantities as they go through the NPI process and make further iterations of prototypes for validation testing. If it ends up in the BOM and they go into mass production that’s risky.

• Early concept = getting feedback from users, refining concept.
• Production-intent product design = use production intent parts only, work directly with suppliers who qualify to be able to supply you reliably during mass production, not Taobao.

There’s a big difference between buying 5-10 pieces from a consumer-level Taobao store for a few prototypes and buying thousands to be used in mass production.

15:55 – 5 reasons why using Taobao parts for mass production is not a good idea.

1. Batches may vary each time. They might send you certain components and then change the next batch without warning, such as design, materials, etc. When selling C2C, consumers might not even notice or care if the product fails as it’s just one for them and cheap. But if these are embedded into a mass-produced product you’re looking at massive failures and non-compliance.
   The vendor will buy from another trading company or directly from a manufacturer, but they may not be told if changes have been made to the components/products. If it looks and behaves the same, they may not care much. If this is the case, how can you assure that your product is compliant, reaches your quality standard, or will be reliable? A C2C platform vendor is very unlikely to be concerned about traceability, engineering change notices, compliance, etc.
2. The item on your BOM might suddenly be delisted. The vendor may stop selling the part for various reasons and won’t warn you, unlike a manufacturer who will provide a warning about a part’s end-of-life date. The vendor may disappear because they’ve been running a scam or the store is closed by Taobao itself. If so, how do you contact or return items to them?
3. You buy subject to Taobao’s terms and conditions. This doesn’t give you the protection signing your own enforceable manufacturing agreement with a supplier would. The only recourse you probably have is to return the items as is normal with e-commerce platforms, but that’s not realistic for large orders of production parts. What if some have already been used which is why the problem was found, for example?
4. The vendor probably has little liability for performance or quality issues. If your customers return products due to a component that you bought from Taobao being out of specification, for example, that’s more than likely going to be your loss and damage to your company’s reputation.
5. They might not be a real company. If you don’t know who you’re dealing with how do you tackle issues or assure you’re buying something legitimate? This ties in with vendors just disappearing when problems occur. It’s potentially a haven for ‘bad actors.’

27:06 – Could your IP be at risk when dealing with Taobao vendors, and will you get the best price?

Because Taobao isn’t well regulated you cannot be sure you’re dealing with someone who will respect your product IP if you have shared anything with them.

Also, these vendors usually have an MOQ of 1 and sell piece by piece, so when purchasing large amounts, say 1,000+ pieces, is a price per unit better than the price you would get if negotiating with a manufacturer or trading company? Probably not.

28:29 – You can’t really pay and get an invoice (fapiao) that is needed for business purchases. 

Businesses need a fapiao from vendors for business purchases in order to apply for the VAT rebate, but buying from Taobao is the same as calling into a market and buying from a stall. Vendors probably won’t provide an official fapiao and most manufacturing companies won’t accept this as they cannot claim any business expenses.

30:58 – The lack of transparency and control.

Taobao takes away your ability to know who you’re purchasing from, how components are made, batch consistency, and whether they are good quality and compliant. All things that manufacturers need to know!

32:06 – Wrap-up.