Frequently people contact me to operate rescue mission related to scamming happening after ordering products on Alibaba. In this blog post I will give a few tips about how to avoid to get scammed on Alibaba or any other B2B platform. Those are small tricks I have developed over the time and which I use to save time when sourcing suppliers in China or in Asia.
# Does the supplier sell a wide range of different products or do they focus on one type of product
If a potential supplier sell many different product from different family, then it is very unlikely that they will be a factory and a serious supplier. In best case scenario, they will be a trading company and in the worst case scenario they will be a scammer. Why ? Well just think about it: most of serious company try to focus on producing one type of product because it is already enough difficult to manufacture properly one type of product so having several type of product on the Alibaba showroom may means that some of them are not produced in house at best or are not produced at all at worst.
Also, you have to know that in China, industries are usually grouped by regions. So, for example, toys are mostly manufactured in Shantou and electronics mostly in Shenzhen, machinery in Shanghai area, appliances in Guangzhou area and in Ningbo and Cixi etc... Some area have specificities.
# Does the supplier ask you to pay on a bank account which the beneficiary name is different that company name.
This is a very big red flag. If a company named "ABC" ask you to pay on a bank account which the beneficiary name is "XYZ" already you should be careful. In some circumstances, they will tell you this their agent capable to receive foreign currency and which will change them to the factory. This particularly happen with companies based in Zhejiang and this is not very good because you sign a contract with "ABC" but you send money to "XYZ" which is not in the contract... In case the company ABC disappear, you have a contract with ABC but this is XYZ who got you money without having a contract with them, so how do you get back your money in this case ?
Second, even worse if the beneficiary name is not a company name it means you may wire money to an individual. Again here, your contract is with a company but you send some money to someone else. This is risky because in case of the people disappearing with the money, you will never find them anymore. Sometimes, they will tell you "we want to receive money on personal bank account to avoid pay taxes". Just run away, those business are not legitimate enough for you to take the risk to loose your money
# Ask to see the business license
Every business in China got a business license. If a company is legally register, they will have this document which you should be able to get and to read to verify they are really existing. On the business license is usually indicated the name of the company , the date of registration, the address, and the nature of the business. If you buy electronics but the business license indicate textile, then watch out.
Check the registered capital. Is it only 10 000 USD or rather 100 0000 USD....
# Don't wire money via Western union
If a supplier ask you to wire money via Western Union methodology, you better refuse this payment method as you have no control on anything. Once payment is done via Western Union you can not get it back anymore.
Try to use Paypal instead or an escrow payment method. Alibaba got one for some suppliers.
# Ask the supplier to take picture of its company right now
If you are unsure this business is genuine or not, then ask the people you are talking to take pictures of their company right now with themselves on the picture so you can make sure they took the photo now and not two weeks ago. To date the time you can ask them to take a news paper in back ground or something similar so you can make sure they take the picture now.
# Don't get confident because they are in gold supplier status
The reality is that to get gold supplier from Alibaba you just need to pay. To get gold supplier, Alibaba doesn't even visit your company.
# Verify they have a landline phone number
Most of reliable company got a landline in their office. A landline phone number in China start like this +86 XXX where XXX is usually the code related to the city. In Shenzhen the code is 755, in Shanghai 021, etc... make a small search online what is the code of the city where the supplier is supposed to be then verify the code match this pattern.
# Verify they have a website but don't get blind about it
Today, it is very easy to get a website being setup in few hours so having a website is not a guarantee. In the same time, in China many small factories or local oriented one don't have a website at all and use Alibaba as website. Yet some sign can help to increase probably that your contact is a potential reliable supplier:
- When the website was opened :verify the whois using whois.net to check when the domain name was registered. If not long time then watch out
- Is there any company adress on it, if not then watch out
- Is there phone number on it, if not then watch out (chinese company almost always put their phone number)
- Does the website is already appearing in several results in Google or not
# Perform a quick supplier evaluation or audit to verify they are really registered
If your order is substantial, once you have already removed a part of the doubt by narrowing down the field, it is recommended to make a quick visit to your potential supplier by performing a supplier assessment. Your supplier may be small or big doesn't matter, what is important is they are existing and stable.
I hope those few advices can help you.
Anything else I forgot, feel free to comment.