I was hoping to receive advice from people who are familiar with outsourced manufacturing and/or Alibaba. I have no clue how to spot a scam on this site (or if we have any recourse with Alibaba if that happens). What have your experiences been with sourcing a manufacturer on Alibaba? What do you look for in this manufacturer, and what are some red flags that you have spotted?
Alibaba offers a Trade Guarantee (you pay for it) that adds a 3rd party verification process. I have not used it nor anyone that has.
I've had reasonably good experience, though I only count on the site to identify potential suppliers or partners and then do normal due diligence after that to vet these. But, with the exception of 1 scam I've found the most of the suppliers are legitimate, though they span the gamut from a quality perspective. However, my experience has been largely with electronic components, I'd image the consumer electronics or apparel spaces might be significantly different.
As @David said, due diligence is important, but often you can't find any information about a supplier, outside of Alibaba.
So, order a small quantity first, and absolutely insist on paying with PayPal, or a credit card that has fraud protection.
The number one red flag is, if a supplier only accepts direct bank transfers for payment!
With a direct bank transfer, you have no insurance against fraud, so if they won't accept PayPal, even for ordering a few samples, forget about them.
Also, make sure you create a separate email account for dealing with Alibaba and be prepared to deal with spam.
If you just search for a product, you'll get a lot of spam about, often unrelated products.
I searched for LCD screens for our VR headset prototype a couple of years ago, and I'm still getting a lot of LED lighting spam (a completely unrelated product)...
I only use AliBaba, if I absolutely can not get a part from anywhere else.