How to avoid Scams and Fraud When Sourcing products for Amazon FBA
Are you afraid of getting ripped off when FBA 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.
Buying a product from China, Vietnam, or anywhere else 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. It’s important to take certain precautions in order to avoid scams and getting ripped off. To avoid scams you need to know about the culture and the business environment as well as tricks you can use to properly vetted suppliers.
Common Scams to be aware of
Changing the payment recipient at the last minute - This is one of the most common and most 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 is lying about who they are, they often pass a basic test when you search the factories authenticity. It’s not until the very end that you are ready to pay do you find out. The best way to avoid this is to get payment details early and do NOT budge if they change it later on.
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. You need to be sure that you have the shipping terms clarified and be aware of which party (between the seller and you the buyer) is responsible for which. Our next post will be about shipping terms so be on the lookout 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 that scammer accepts 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 you should never work with a factory that sells counterfeit products. If they are willing to ignore copyrights then 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.
Poor quality products and products less than your standards - Unfortunately, Asian culture (particularly China and Vietnam) tends to be ‘Yes men’ in that they will almost always say yes when you ask them about customizations. As a result overpromising and under delivering is 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. There are a few different reasons for why this 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 they simply bought the sample from the store. 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 that does not match the factory - If they are a legitimate factory or supplier then they will always have a legitimate bank account. In China, there are 4 major banks 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 they do not have access to - Unfortunately most of the people that you talk to fall into this category. Fortunately for you, most of this guide covers how to figure out and weed these people out. 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 getting rid of the illegitimate supplier and leaving you only with some well-vetted legitimate suppliers
What types of companies should you work with and which to avoid?
If you’re searching for a supplier, these are the different types of companies you will encounter in China. When sourcing on Alibaba, Global Sources or other similar websites, be careful 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 is buying from the factory directly and not from a reseller.
TIP: When a potential supplier sends you a picture of a product, 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 try to do business directly with the factory.
Avoid working with:
Trading companies - Trading companies are middlemen who make deals with a factory (or more often 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 so you will pay more dealing with a trading company. Trading companies generally act as brokers.
Wholesalers - Dealing with trading companies and wholesalers are similar but the key difference is that wholesalers actually 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 who make your products. By dealing directly with them you not only will 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. Your quality standards will be greatly improved as well. If you want quality products at the best price then you should go straight to the source.
If you are sourcing one or two single products you should ALWAYS work directly with the factory. If you are sourcing a wide range of products, and a small number of each, then 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 take a photo of themselves in the factory holding up a piece of paper with your name and date on it.
How to find a legitimate suppliers
Now that you know the different types of companies, you can start looking for suppliers. Like most people starting out, you’ll almost certainly begin by finding a supplier online. While many people will use Alibaba, you can expand your search to global sources as well. Alibaba is the most dominant, but there are a few things you should keep in mind. Alibaba does not do a good job vetting suppliers and still allows suppliers to misrepresent themselves.
Make sure they are a Gold Supplier on Alibaba and offer Trade Assurance - If they have both of these labels, it means that Alibaba has vetted the company and determined their legitimacy. With Trade Assurance, Alibaba can act as an escrow service for your transaction.
Find them on Global Sources - Global Sources, like Alibaba, has a massive searchable database of suppliers. However, Global Sources does a much better job of vetting suppliers and making their information transparent. Personally, I use Global Sources as much, if not more than Alibaba now.
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 who are looking to buy from Chinese factories. There is not much motivation for Chinese to resell to Chinese so the majority of the listings are factories and not resellers or trading companies. Because the site is entirely in Chinese and requires you to sign up to use it, this is an advanced trick.
Ask for documents - Ask a supplier what documents and certification they have. Such as ISO 9001. Always ask for business registration certificates and check the dates. Also, make sure that the business certification matches the info that the supplier is giving you 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 up to see if a factory is registered. A few things to note it’s 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 make customization to 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: Keep in mind that factories are typically pretty bad at both marketing and English. If you receive emails that are poorly formatted, it’s not a big deal. In addition, do not expect them to speak English well or even any English at all. It’s very possible they are using an online translating service to translate messages. Do be understanding of this–just 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 and 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 will make sure there is no one posting warnings about them in a forum.
Have reasonable prices - If a supplier sounds too cheap to be true, then they probably are. If you get a quote that is way cheaper than everything else or EXACTLY (and I mean exactly) what you want, then you should be suspicious of their authenticity.
Check their email address - A good way to feel out 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 about what types of aluminum they work with. If they answer with “6061” and go into detail about the types of products they make from it, then you are probably talking to a legitimate supplier. f they are a real manufacturer they should know these questions well.
Get pictures - A good supplier should be able to supply you with detailed pictures of the product and of the factory. They should also be able to 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 legit 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 not necessary, 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 make the payment, make sure the bank account name matches the business name, and that the stated phone numbers and business addresses are the same as what you already have.
Be sure to ask follow up questions
It’s important to communicate with suppliers so you can get a feel for both the product and the supplier. Before and during the negotiation phase, you should be talking 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 in mind, you should ask questions that are specific to your product as well.
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?
If I were to place a full order how quickly could it be ready?
What payment term do you require for a new customer?
Can you refund my sample fee if I were to place a full order?
What is your factories best selling product?
Aspects of Chinese culture to understand:
There are two things to note when you get your responses. First, Chinese very often say yes, regardless of if they can or not, and second, they often give vague answers. Regarding a simple yes, make sure you follow up so that they explain and you can 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 it does mean they may give an effort, with no guarantees.
It’s perfectly fine for you to press them on vague answers, in order to get more specific details. 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 in simpler terms. Keep pressing until you get firm answers you are happy with or move on.
Hire a professional to help you
If you’re confident in your abilities, feel free to go at it on your own, but there is nothing wrong with asking for help. If you’re sourcing product from China for the first time, it may be a good idea to hire a company to help you out. You may find yourself spending hours, if not days or weeks, sorting out the details on how to source your product. When your time is valuable, you may be better off hiring a partner to help you source. Time spent sourcing is less time building up your new product or company. Working with a professional will take one major item off your mind and allow you to focus on
Of course, we would recommend Cosmo Sourcing (though we admit we are biased), as we have been sourcing and buying from China for years. While there are a few decent companies out there, do make sure any company you choose has a transparent model and that they do not work on commission. You need to find one that will keep you informed at every step. You likely already have enough on your hands, investing in a reliable sourcing company will ensure your process goes smoothly and you aren’t paying more than you should for a subpar product.
If you are interested in working with us to source your products, send us an email to info@cosmosourcing.com or visit our product request page. Even if you don't use our services, we are happy to answer your question as well so feel free to reach out!