Alibaba Scams And Fraud Guide // How To Avoid Getting Ripped Off When FBA Sourcing
Are you afraid of getting ripped off when FBA is sourcing from China, Vietnam, or Beyond? Want to know which suppliers are legitimate on Alibaba? Here's our guide to common Scams on Alibaba and ways to become an expert when buying from Vietnam, China, and beyond.
A bad supplier will make you feel like your were abandoned
Buying a product from China, Vietnam, or elsewhere overseas can be intimidating. Most of the time, you're probably dealing with a supplier you've never met from a culture you may not understand. So, taking certain precautions is essential to avoid scams and getting ripped off. To avoid scams, you must know about the culture, business environment, and tricks you can use to vet suppliers properly.
Common Scams to be aware of
Changing the payment recipient at the last minute - This is one of the most common and frustrating scams that Cosmo and most FBA sellers encounter, and it's hard to detect until the last minute. Since the person you're talking to lies about who they are, they often pass a basic test when searching for the factory's authenticity. It's not until the very end that you are ready to pay that you find out. The best way to avoid this is to get payment details early and not budge if they change it later.
Asking for additional payments for customs clearance - This isn't a deal-breaker but is a way for a supplier to make a quick buck off of you. It would help if you were sure that you clarified the shipping terms and knew which party (between the seller and you, the buyer) is responsible. Our next post will be about shipping terms, so look for that.
Only accepting payment through Western Union - NEVER under any circumstances should you make a wire transfer to a supplier. Western Union leaves almost no paper trail and is the most common way scammers accept payments. Please see our guide to paying a Chinese supplier: What is the best way to pay a Chinese Supplier?
Counterfeit products - If you are an FBA seller, you should never buy counterfeit brand name products and never work with a factory that sells counterfeit products; if they are willing to ignore copyrights, what's stopping them from ripping you off? Further, Amazon is Very aggressive about clamping down on counterfeit goods, and you will be banned, potentially for life.
Unfortunately, poor quality products and products are less than your standards - Unfortunately, Asian culture (particularly in China and Vietnam) tends to be 'Yes men.' They will almost always say yes when you ask them about customizations. As a result, overpromising and under-delivering are very common. See our notes on Chinese culture below for more info.
Products not matching the samples - Sometimes, the final product does not match the sample. A few reasons might occur: sometimes a different process was used (such as hand stitching for the sample and mass machine stitching in the final product) or, worse, buying the sample from the store. The best way to avoid this is to hire an independent third-party inspection service to inspect your goods before they are shipped. This is one of the services that we offer.
Payment info does not match the factory - If they are a legitimate factory or supplier, they will always have a legitimate bank account. There are four major banks in China that they almost certainly will use: Industrial And Commercial Bank of China (aka ICBC), China Construction Bank, Agricultural Bank of China, and Bank of China. The account name should match the business name.
Selling products that do not exist or do not have access to - Unfortunately, most people you talk to fall into this category. Fortunately for you, this guide covers figuring out and weeding these people. Most are easy to detect, but for many, they will be harder to detect. By the end of this guide, you should be an expert on eliminating illegitimate suppliers and leaving you only with some well-vetted legitimate suppliers.
What types of companies should you work with, and which should you avoid?
If you're searching for a supplier, you will encounter the different types of companies in China. Be careful when sourcing on Alibaba, Global Sources, or similar websites, as many trading companies and wholesalers will present themselves as factories. It's difficult to tell from a beginner's perspective, and it can take a second look to tell them apart. Always remember that the best supplier directly buys from the factory, not a reseller.
TIP: When a potential supplier sends you a product picture, zoom in and see if you can find a logo or factory name. If you can, you should try to contact the factory directly. Avoid trading companies, resellers, and buying offices if you can, and do business directly with the factory.
Avoid working with:
Trading Companies
Trading companies are middlemen who deal with a factory (or several factories) and sell a wide range of items. There are a few cases in which it is beneficial to deal with trading companies, specifically when you are looking to buy a small quantity of a wide variety of products. Trading companies also have a markup on the total cost of goods to pay more when dealing with a trading company. Trading companies generally act as brokers.
Wholesalers
Dealing with trading companies and wholesalers is similar. Still, the critical difference is that wholesalers buy and store the product and keep it in bulk, and sometimes, they may even import it from other countries. Due to the extra fees associated with warehousing and other expenses they incur, they will often be the most expensive option.
Resellers
Though not as common, they are similar to wholesalers in that they buy their goods from the factory to resell; however, instead of buying a large number of items in bulk and storing them until they are sold, they will buy the items from the factory as soon as you buy the goods from them. The resellers have some similarities with the dropshipping business model.
Work with:
Manufacturers - They are the actual factories that make your products. By dealing directly with them, you will not only get the best price, but you will get more control of the final product while having more control over the quality of the final product. Working with manufacturers will significantly improve your quality standards as well. If you want quality products at the best price, you should go straight to the source.
You should work directly with the factory if you are sourcing one or two single products. However, if you are sourcing a wide range of products and a small number of each, it may be easier to go with a trading company. Just be aware you are paying a higher price since the trading company needs to get their cut–but the convenience may be worth it.
TIP: Not sure if you're talking to a factory? Ask the salesperson to photograph themselves in the factory, holding up a piece of paper with your name and date.
How to find legitimate suppliers
Now that you know the different types of companies, you can start looking for suppliers. Like most people, you'll almost certainly begin by finding a supplier online. While many people will use Alibaba, you can also expand your search to global sources. Alibaba is the most dominant, but there are a few things you should keep in mind. First, Alibaba does not do a suitable job vetting suppliers and still allows suppliers to misrepresent themselves.
Please ensure they are a Gold Supplier on Alibaba and offer Trade Assurance. If they have both labels, Alibaba has vetted the company and determined its legitimacy. With Trade Assurance, Alibaba can act as an escrow service for your transaction.
Find them on Global Sources - Global Sources, like Alibaba, have a massive searchable supplier database. However, Global Sources does a much better job of vetting suppliers and making their information transparent. I use Global Sources as much, if not more, than Alibaba.
The narrow product line - A factory can only make a limited number of related products. If you're talking to someone who has hundreds of unrelated products that they offer, then once again, you're talking to a trading company or a reseller.
Check out 1688.com - Another resource is the website 1688.com, which is like Alibaba but for Chinese buyers looking to buy from Chinese factories. There is little motivation for the Chinese to resell to the Chinese, so most listings are factories, not resellers or trading companies. This is an advanced trick because the site is entirely Chinese and requires you to sign up to use it. Or hire a 1688 agent to do quality control and shipping from China.
Ask for documents - Ask a supplier what documents and certifications they have, such as ISO 9001. Always ask for business registration certificates and check the dates. Also, ensure that the business certification matches the supplier's information; otherwise, you may be dealing with a reseller. Use AIC (https://www.saic.gov.cn/). This is China's company registry, and you can look to see if a factory is registered. A few things to note are organized by province, so you need to know which province the factory is located in, and you will need to search the company using its Chinese name.
Inquire about personalization - if you're dealing with a factory, you should be able to customize your product since they have direct access to the machinery.
Plan a visit, even if you don't plan on going - If they are a legitimate factory, they should be perfectly fine with you visiting; if they make excuses, this should raise red flags.
Reminder: Remember that factories are typically pretty bad at marketing and English. If you receive poorly formatted emails, it's not a big deal. In addition, do not expect them to speak English well or any English at all. They may be using an online translation service to translate messages. Do be understanding of this–be sure they are making an effort to be honest and helpful.
How to double-check their legitimacy
At this step, you should have a decent amount of suppliers listed. I keep mine stored in a Google Sheets document. By now, you should go through your suppliers, double-check them, and eliminate the ones that don't meet your criteria. Here are a few tips you can use to double-check a potential supplier:
Google them - A good company will have a basic web presence and ensure no one posts warnings about them in a forum.
Have reasonable prices - If a supplier sounds too cheap to be true, then they probably are. You should be suspicious of their authenticity if you get a quote that is way cheaper than everything else or EXACTLY (and I mean exactly) what you want.
Check their email address - An excellent way to feel the authenticity of the person you're talking to is to pay attention to email addresses. QQ address is common, but see if they are a general sales@Comanyname.com.
Ask detailed questions - For instance–if you are buying aluminum products, ask them what types of aluminum they work with. If they answer with "6061" and discuss the types of products they make, you are probably talking to a legitimate supplier. If they are a real manufacturer, they should know these questions well.
Get pictures - A good supplier should provide detailed pictures of the product and the factory. They should also take pictures quickly and fulfill any request you might have, i.e., pictures of specific equipment or details in the product.
Get a sample before you buy - Any legitimate supplier will have no problem shipping a sample. Ask them about who they've sold to and, if possible, get a reference from another customer.
Onsite visits and factory tours - While this step is unnecessary, it is extremely useful. You can hire a third party to visit the factory and do an inspection in person (and yes– Cosmo offers this service), or if you're willing to spend more, fly there and do the inspection yourself.
Check the address and business accounts - Assuming you are already about to pay, ensure the bank account name matches the business name. The stated phone numbers and business addresses are the same as you already have.
Be sure to ask follow-up questions.
Communicating with suppliers is essential to get a feel for the product and the supplier. Before and during the negotiation phase, you should talk to at least 12 or more suppliers, depending on the product. While questions can vary, here are a few to ask as a reference. Keep this in mind. It would be best if you also asked questions specific to your product.
Do you understand what FBA is and what the packaging requirements are?
Have you exported to the USA (Or wherever you're shipping to) before? If so, how often?
Do you have the proper certification to ship to the USA?
Do you have SINOSURE or other trade insurance?
How quickly could it be ready if I placed a full order?
What payment terms do you require for a new customer?
Can you refund my sample fee if I place an entire order?
What is your factory's best-selling product?
Aspects of Chinese culture to understand:
There are two things to note when you get your responses. First, the Chinese often say yes, regardless of whether they can, and second, they often give vague answers. Regarding a simple yes, follow up to explain and get a feel for how authentic they are. Chinese culture is very hesitant to give 'No' as an answer to save face, so you'll almost always get "Yes" or "We'll try" (or similar) as a response. "We'll try" doesn't necessarily mean they can't, but they may make an effort without guarantees.
It's perfectly fine for you to press them on vague answers to get more specific details. However, while it isn't uncommon for them to give vague answers if they don't know, there is also a fair chance they may not understand your question due to poor English. If you believe it's the latter, rephrase the question. Then, keep pressing until you get firm, happy answers, or move on.
Cosmo Sourcing // Go Straight To The Source!
Do you want our team to find great manufacturers, get quotes, and introduce you directly to great suppliers?
Our Simple Sourcing service is designed to do everything to turn your idea into a shipped product. Our services are designed to do everything to take your idea, turn it into a product, and ship it to the final destination. Cosmo can do everything from creating a product spec sheet, validation, sourcing, ordering and evaluating samples, arranging inspections, finding freight forwarders, quality assurance, negotiations, and shipping. We aim to handle every single step of your business in Vietnam for you.
If you start a new business, finding products and suppliers for your products is one of many things you need to handle. Our services are designed to handle every part of your business in China and Vietnam so you can focus on the rest of growing your own business.
We have helped clients from Fortune 500 companies, brick-and-mortar stores, FBA sellers, and brand-new businesses. So don't hesitate to contact us and let us know how we can help you.