Alibaba Scams And Fraud Guide // How To Avoid Getting Ripped Off When FBA Sourcing

Are you concerned about being taken advantage of when sourcing from FBA suppliers in China, Vietnam, or elsewhere? Want to know which suppliers on Alibaba are legitimate? Here's our guide to common Scams on Alibaba and ways to become an expert when buying from Vietnam, China, and elsewhere. 

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. Therefore, taking certain precautions is essential to avoid scams and being taken advantage of. To avoid scams, it is essential to understand the local culture, business environment, and common tricks to use when vetting 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’re ready to pay and find out. The best way to avoid this is to obtain payment details early and not compromise if they change them later.

  • Requesting additional payments for customs clearance isn't a deal-breaker, but rather a way for a supplier to make a quick profit off of you. It would be helpful if you were certain that you had clarified the shipping terms and understood which party (the seller or you, the buyer) is responsible. Our next post will cover shipping terms, so please look for it.

  • Payment is only accepted through Western Union. NEVER under any circumstances should you make a wire transfer to a supplier. Western Union leaves almost no paper trail, which is a common method for scammers to 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, the products are of poor quality, falling short of 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 will almost certainly use: Industrial and Commercial Bank of China (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 that you 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 out 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, 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’ll encounter various 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 suppliers buy directly from the factory, not through 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, try contacting the factory directly. Avoid trading companies, resellers, and buying offices whenever possible, and conduct 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, which means they pay more when dealing with a trading company. Trading companies generally act as brokers.

Wholesalers 

Dealing with trading companies and wholesalers is similar in nature. Still, the critical difference is that wholesalers buy and store the product 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 are often 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 also have more control over the final product, including its quality. Working with manufacturers will also significantly improve your quality standards. 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 in small quantities, it may be easier to work with a trading company. Just be aware that you are paying a higher price, as the trading company needs to get its cut, but the convenience may be worth it.  

TIP: Not sure if you're talking to a factory? Ask the salesperson to take a photograph of themselves in the factory, holding up a piece of paper with your name and date on it.   

How to find legitimate suppliers

Now that you are familiar with the different types of companies, you can begin searching 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 key points to consider. First, Alibaba does not adequately vet its suppliers and still allows them 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 offers hundreds of unrelated products, then you're likely dealing with a trading company or reseller.

  • Check out 1688.com - Another resource is the website 1688.com, which is similar to Alibaba but specifically designed for Chinese buyers looking to purchase from Chinese factories. There is little motivation for Chinese companies to resell to other Chinese companies, so most listings are from 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.

  • Request documents - Ask a supplier to provide the documents and certifications they hold, such as ISO 9001. Always request business registration certificates and verify 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 will need to know which province the factory is located in. Additionally, you will need to search for 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 intend to go. 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 not very skilled at marketing and English. If you receive poorly formatted emails, it's not a big deal. Additionally, do not expect them to speak English well or at all. They may be using an online translation service to translate messages. Do understand this–be sure they are trying to be honest and helpful.

How to double-check their legitimacy

At this step, you should have a decent number of suppliers listed. I keep mine stored in a Google Sheets document. By now, you should review your suppliers, double-check their information, and eliminate those 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 receive a quote that is significantly cheaper than everything else or exactly (and I mean exactly) what you want.

  • Check their email address - An excellent way to gauge the authenticity of the person you're talking to is to pay attention to their email address. A QQ address is common, but check if they use a general sales email, such as sales@Companyname.com.

  • Ask detailed questions - For instance, if you are buying aluminum products, ask them what types of aluminum they work with. If they respond with "6061" and discuss the types of products they manufacture, you are likely talking to a legitimate supplier. If they are a genuine manufacturer, they should be familiar with these questions.

  • Get pictures—A good supplier should provide detailed pictures of the product and the factory. They should also take pictures quickly and fulfill any requests you might have, such as pictures of specific equipment or product details.

  • 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.

  • On-site visits and factory tours—While this step is unnecessary, it is extremely useful. You can hire a third party to visit the factory and inspect it in person (and yes, Cosmo offers this service), or if you're willing to spend more, fly there and inspect it 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 those you already have on file.

Be sure to ask follow-up questions.

Communicating with suppliers is essential to gain a sense of the product and the supplier. Before and during the negotiation phase, you should talk to at least 12 suppliers, depending on the product. While questions can vary, here are a few to ask as a reference. Keep this in mind. It would also be beneficial to ask 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 key points to note when you receive 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 gauge their authenticity. Chinese culture is often hesitant to give a 'No' answer to save face, so you'll almost always get " ‘Yes’ or ‘We'll try’ (or similar). "We'll try" doesn't necessarily mean they can't, but it may indicate they'll 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 that they may not understand your question due to their limited English proficiency. 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! 

Would you like our team to identify top manufacturers, obtain quotes, and connect you directly with excellent suppliers? 

Our Simple Sourcing service is designed to do everything to turn your idea into a shipped product. Our services are designed to take your idea, turn it into a product, and ship it to its final destination. Cosmo can handle everything from creating a product spec sheet to validating, sourcing, ordering, evaluating samples, arranging inspections, finding freight forwarders, ensuring quality assurance, negotiating, 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 aspect of your business in China and Vietnam, allowing you to focus on 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.

 info@cosmosourcing.com

Previous
Previous

Vietnam Sourcing Guide // How To Find Suppliers And Manufacturers In Vietnam

Next
Next

How to Source On Alibaba And Sell On Amazon FBA // A Step-by-Step Guide