How to Avoid Scams, Middle-Men, and Fraud on Alibaba

If you’ve been taking action on the previous importing articles, you already know that Alibaba is the world’s biggest B2B marketplace. In fact, it may be a little too big…

There are millions of suppliers listing millions of products on Alibaba. Finding suppliers is easy, the hard part is selecting the right one.

The most dangerous obstacle in your path to the perfect supplier are the ocean of scammers and middle-men.

Luckily, it’s not too difficult to avoid these low lives.

Below, you’ll find a step-by-step guide on avoiding scams, middle-men, and fraud on Alibaba.

Step 1 – Review the Company Profile

The Company Profile consists of information both verified and unverified  by Alibaba.com. For an untrained eye, this short list of information might seem to be completely irrelevant to the purpose of the visit, which is to find the right products. However, you can get a good idea about whether this company is worthy to include in your sourcing process by analyzing the points listed below:

Company name

(Note - Applies to companies registered in Mainland China only)

• City: Small and medium-sized companies have the city they are located in as part of their company name. For example, “Ningbo Everbright Trading Co., Limited”.
• Province: Larger companies can be named after the province where they are located. For example “Zhejiang Everbright Trading Co., Limited”.

Business Type

• Manufacturer: This indicates that the supplier is only selling products it manufactures. A manufacturer is limited by its production line, set-up and tooling. For this reason, manufacturers tend to be highly specialized in their field of products.

• Trading Company: Some Trading Companies are independent while others own, or are owned by, a manufacturing company. While everybody wants to cut out the middleman, one has to keep in mind that many factories in Asia have neither the knowledge nor resources for exporting their produce. This function can then be filled by a Trading Company. On the other hand, some Trading Companies offer no added value and will only raise your costs.
• Manufacturer & Trading Company: Many factories have expanded their operation by not only selling and marketing products made in their own facilities, but also by trading similar products manufactured by other factories. While this Business Type indicates that the company is indeed a manufacturer, you cannot be sure whether they are manufacturing or subcontracting your products. So it’s tough to be sure if this supplier is a good choice or not.

Management Certification

Quality issues is a serious risk when importing from China. In fact, you’re more likely to lose money due to quality issues then getting scammed. Quality issues can  never be completely eliminated, but they can be minimized if the supplier applies a Quality Management System (QMS) such as ISO9001.

• Even multinationals such as Boeing and Toyota have quality issues. A “good manufacturer” is not a manufacturer that is completely free of quality issues, but one that is continuously monitoring quality during production. You know it’s time to walk away from a Chinese supplier when they claim to be completely free of defective and damaged products.
• When a defective product is discovered, the supplier should have a routine for how it should be managed. Some suppliers remake, others repair. The most important thing is not how they deal with defective products, but that their employees know exactly what do to when something goes wrong.
• ISO compliance require more than having a quick check up before the products are packed and shipped. The supplier is required to inspect incoming raw materials and components before production, set up inspection stations during productions and do final inspections after production.
• Some products require stricter quality assurance than others. These products have a low error tolerance and a mistake at one production stage can ruin a whole order. If you are importing “complex products” such as electronics or mechanical equipment, a Management Certification should be a basic supplier requirement.

Registered Address

• City, Province: Many cities in China are highly specialized in one or more industries. If you are sourcing consumer electronics for example, you will discover that Shenzhen, Guangdong, is very dominant. A manufacturer is dependent on the surrounding support industries such as logistics, component suppliers, raw material suppliers and labor. For this reason, a supplier that is based in an industrial cluster is likely to be more competitive than a supplier that is not.

Legal Representative

The Legal Representative is the only employee who can sign agreements on behalf of the company. Make sure that he or she writes a signature on any Invoice or Sales Agreement, along with the company stamp.

Registered capital

• Indication of company size: Companies with less than RMB 500.000 [around US$ 80,000] should be avoided if possible. This is the strongest indicator of the supplier’s scale of operations. The more capital they have, the more likely they are to care about their reputation. Also keep in mind that even the most reliable supplier cannot compensate you for defective or damaged products if they don’t have the resources (money) to do so.
• Foreign Currency Capital: Indicates that the company have foreign investors, which usually is a mark of quality. The currency invested can also give a hint about where the investor comes from;
  • Hong Kong Dollar (HKD) indicates that the investors are from Hong Kong. These guys has been exposed to international trade since the place was founded by the Brits back in the 19th century.
  • United States Dollars (USD) indicates that the foreign investors are… well, foreign. European, Asian and Latin American investors also tend to stick to the dollar for their investments in Chinese companies.
  • Taiwan New Dollar (TWD)

Step 2 – Review Other Company Certifications

First, why this is important…

Some products need to be compliant with a predetermined national and/or market standard. Different standards apply to different products, and it’s always the buyer’s responsibility to ensure that the imported products are compliant. Most products won’t require this; but if you’re thinking about buying a product in bulk, you might want to research and make sure.

The “Other Certification” link can be found under “Company Certification”.

Certification compliance is not mandatory for Alibaba suppliers, so don’t be surprised if many suppliers don’t have any “Other Certification” page at all.

Key Facts

• Compliance requires more than testing; products need to be produced with specific materials and components. If you don’t clearly specify that your products must comply with a certain standard before you place the order, the products will not be compliant.
• Far from all suppliers in Asia have the knowledge about which and where certain product standards apply, even less have the capability to actually manufacture products that comply with European and/or North American product standards.
• Many suppliers seldom update their Company Profiles. If you have a hard time to find suppliers with the right certification listed in the “Other Certification” page, then send out a message and ask them directly whether or not they can comply with the required certification standard. It’s quite common that suppliers can offer more than what’s shown in their Alibaba profile.
• An easy way to find compliant products is to type in the Product name and the certification standard in the Alibaba product search. [E.G. Mp4 player + CE]

Action List

1. Research which product standard is required for your product in your country and/or market.
2. Review the “Other Certification” page.
3. Are any of the product standards listed?
   - If not, review the product description and the company introduction. Some suppliers that have test reports available are not uploading them to the “Other Certification Page”.

Step 3 – Review Supplier’s Product Selection/Niche

There has been a lot of focus on paperwork in this article, but what you’re looking for is products.

An Alibaba suppliers product catalog can give you a lot of information, and it’s the most important factor when selecting a supplier. The golden rule is to find a supplier that is specialized in manufacturing or trading a certain product. Product specialization comes with a number of benefits that will have a large impact on your business.

Checklist

Is your product mentioned in the supplier’s company name?

This is a strong indication that the company was registered for the sole purpose of manufacturing the product you are sourcing. [E.G. Shenzhen Golden Watch Factory Co., Ltd].

Is your product making up the majority of the supplier’s product catalog on Alibaba.com?

It’s a strong indication that the supplier is highly specialized in manufacturing and/or trading the products you are searching. A supplier that is highly specialized in a certain product is more likely to be better at managing the quality standard and offer more customization options. It can also affect the pricing since they buy large volumes of materials, components and tooling that is used only for the manufacturing of your product.

You’ll also want to grow with your supplier and a supplier with only a limited product selection will prevent this from happening.

Is the supplier listing products that are completely different from the type you’re looking for? [e.g. Wrist Watches and iPhone cases]

The factories of the real world are not like Santa’s Workshop where anything imaginable is manufactured. You can’t use the same workforce or tooling for the manufacturing of both 3D Printers and Polyester Ties. This matters because you should not deal with a disorganized and opportunistic supplier selling a little bit of this and a little bit of that.

An “opportunistic” supplier is also more likely to discontinue products than a professional manufacturer. The result could be disastrous since you’re left without products to sell to your customers. This is especially dangerous if you’re selling products to retailers where reputation and reliability is everything.

How to use the Alibaba supplier search to identify specialized suppliers

Last year Alibaba.com introduced the suppliers search, a useful feature for finding highly specialized and professional manufacturers. In the beginning, all it did was presenting a list of suppliers with the product in the company  name. Now, it also searches the suppliers product catalog and shows the number of matching products each supplier have!

1. Go to Alibaba.com
2. Change the search box from “Products” to Suppliers
3. Enter the product name and search
4. Now you will get a long list of all suppliers selling the product you just searched for. This can save time when sourcing suppliers since you can skip the manual review of the product catalog.

Case Study

Guangzhou Guanghao Watch Co., Ltd is manufacturing and exporting LED watches. That’s in fact the only thing they do since they have listed 900 different models. When you work with this company, you can be sure about the following:

• All this supplier will ever care about is wristwatches, and certainly LED watches. They will develop new models and your company can grow your product selection together with Guangzhou Guanghao.
• 900 different models equals hundreds of thousands of different components. This supplier certainly know how these things work, and more importantly – what doesn’t work. Perhaps not today, but in the future you might want to create your own product its own unique design and features.

You’ll always be limited by the components and product knowledge a supplier can provide you with. If you would choose Xiamen Well Imp & Exp Co., Ltd**as your supplier, you will be very limited. They offer a staggering amount of 6 different LED watches to choose from. Then how can they be competitive? Why do they even bother to add a few watches on Alibaba when articles like this one clearly states that importers should stay away from these suppliers? Because few importers bother to read articles like this, thousands of importers fall for the trick of low prices and positive answers to every question. Don’t be one of these guys that think they’ve are smarter than everybody else – until they realize they just got what they paid for.

* We have no relation with Guangzhou Guanghao Watch Co., Ltd and they are mentioned for reference only. They do however have a nice selection of LED watches.

** We have no relation with Xiamen Well Imp & Exp Co., Ltd and they are mentioned for reference only. They are probably a great supplier, but maybe not for LED watches.


http://www.startupbros.com/how-to-avoid-scams-middle-men-and-fraud-on-alibaba/

Continue Reading

Supplier verification

Quote:

Originally Posted by En. Apai Kekadang kita jumpa trader, lagi bagus jumpa manufacturer. Apapun dua2 kalau genuine pulun jer. Asalnya saya konpius steps. Ok, dah klear water sikit. Saya cuma nak pastikan steps yg dibuat nanti adalah steps biasa. Taknak nanti tersalah minta dokumen yang exporter rasa pelik. Jadi steps supplier's verification dengan minta latest BL dan company profile adalah common. Ini akan digunakan. Satu lagi, consultation agreement tu sesuainya buat immediate selepas supplier disahkan ke atau tunggu bila dah ada buyer baru approach supplier deal dgn term. Keasnnya kalau deal dulu (immediate), mungkin ada lag time, buyer masih tak dapat tapi supplier dah asyik tanya2 takda buyer ker? sebab supplier mesti ingat kita ni full time fokus cari utk dia. kesan kalau deal bila dah ada buyer, mungkin buyer kena tunggu hanya selepas supplier agree dengan term, delay nak bagi senarai supplier. Mungkin juga hanya contoh 2 dari 5 yang respond awal, yang lain tu lambat respond. kita mungkin terpaksa bagi 2 list dulu takut kalau lambat sangat buyer dapat lain. Minta pandangan Abg Bear dan kawan2 yg dah ada pengalaman. TK

For first time suppliers - we don't know them and they don't know us. Pushing them for a formal agreement immediately is not really recommended. It is just common sense. Nobody in their right mind will ever sign a formal agreement with somebody they hardly knew. Would you sign a formal agreement with a total stranger? (look at page 13, The 300K Manual)Some of them might be offended if we push a formal agreement down their throat so soon.

For the first few deals, it is better to go on a "per-deal" basis as both parties are still new to each other. Letters are normally used for "per-deal" cases while formal agreements are usually used for longer-term cases.

After completing a few deals and if you are comfortable with them (and vice versa) then you can start to ask them about doing a time-based consulting agreement with you. At this stage it will be easier to tackle this touchy subject as both parties are already familiar with each other. You know that you can trust them and they know that you are able to bring them good buyers on a regular basis. The scales are already tipped in your favor at this stage.



So this is how we normally do it in the office. You can find this tactic in the "Advanced Series Volume 10 - The Secret of the Monkey’s Fist". This is how we do it.

We tell them that we will do it step-by step. Then we make this offer to them.

Tell them that as a goodwill gesture we will bring 2 new buyers to them. For each of the buyer the deal will be will be a one-off deal, no repeat payments yet. Tell them that instead of a formal agreement, it is enough for you if they can just issue a formal fee-authorization letter. Show them the sample letter in the 300K Manual - page 73, Sample Letter 6. The important points to be mentioned in that letter are
1) how much they will pay you(the percentage) and when they will pay you
2) how they will pay you


You are effectively baiting them to agree to pay you. It doesn't matter that the two deals are just one-off deals. We want to show them what we can do and we want things to start moving.

After the two deals are done then we can approach the supplier again. This time we already have a track record with them. They know that we can do the job for them but most importantly we also know that THEY can also perform and do their job well.

This is the time to ask for repeat payments for other buyers which you are going to bring to them in the future. And this is also the time to use the formal agreement included in the GPC Full Course.

If you look at the steps in the 300K Manual we started with just formal letters to make it easier for those who are new to GPC. This is to simplify things. The second stage will be to get a formal agreement with the supplier. But by all means if you can get to the formal agreement directly then go for it. It depends a lot on your supplier. You must also do your homework on your supplier.

Soal supplier dah asyik tanya2 takda buyer ke - just tell the supplier we are looking for a good buyer for him and this takes time. Tell him that we also have to do our homework because we do not want to waste his time with unreliable buyers.

Atau kalau nak buat style Nabil masa dptkan first client dulu tu pun boleh jugak.

Ask the supplier TWO(2) questions

1) If we can bring a buyer to you how much(% of the contract value) are you comfortable to share with us?

2) If we can get you a buyer who is willing to commit to a long-term contract(2,3 or 4 years) how much(% of the contract value) are you willing to share with us?

The answers/figures should be different for those two different situations.


Notice the word "share" here. Never ask for a fixed figure or ask them how much they can give us. It gives them an upperhand/advantage. By "sharing" we are positioning ourselves as an equal partner in this venture. Banyak psychology kan dalam GPC ni? We learn about people, approaches, tactics, buying triggers, etc so that things move in our direction and to our advantage. This is why GPC consultants make more money than agents or brokers. But you need to read a lot to learn these things. Those who don't like to read can never do GPC, as simple as that


Continue Reading

Qualifying supplier

#########################################################

Quote:

Originally Posted by ismael Hehe... saya pun terlupa untuk renew tahun lepas... huhuhu...kena la bayar penalti dekat RM60 kalau tak silap... PS: nak minta opinion abg. bear kalau nak filter our supplier as you mention.. ask for license, BL apa lagi ye jika kita nak lebih confident that they is not scammer....

Boleh mintak company profile dgn customer list. Dalam customer list tu mintak dia org list out details utk 3 customers je - company name , contact name/position and phone number/skype ID, contact punya email address, produk yg dibeli. Bagitau pada supplier yg kita akan contact 3 customers ni utk verification purposes.

############################################################# Continue Reading