Five Steps to Avoiding Fraud on Alibaba.com

Alibaba.com has been in the news a lot lately because of its upcoming vote to go private along with selling back shares to Yahoo!  Behind the news stories are the millions of transactions that go through monthly (daily?) that are successful and leave both the buyer and the seller happy.  When you have millions of transactions, some will go bad.  It's the law of averages.

Like shopping for about anything from a toaster to a car, you need to do some basic research in order to ensure that you'll end up happy with what you have purchased, and this is especially true when dealing with suppliers as far away as China.

So after having been at this blog for a while, I have come up with some tips that I think can help you avoid scams and fraud on Alibaba as well as having to make use of the Fair Play Fund, the turn of last resort if you have been defrauded.

Top Five Steps for Avoiding Fraud on Alibaba.com

1. Check the list of banned suppliers on Alibaba.com.  If a company is investigated and found to have defrauded a buyer, they will be banned from the site and their name will appear in this section, which is usually updated monthly.  So start here.
2. Google the company.  It's sounds simple, but if people are happy, they may say something on on the trade forums or their own blogs, but if they feel that they have been defrauded, you can be almost 100 percent certain that there will be an online trail of unhappy customers.  Conversely, if you find an Enlish-language Web site with information about the company that looks legitimate, all the better. 
3. Try calling the company.  I don't speak a word of Mandarin, but if a supplier is hoping to do business with the English-speaking public, you have to assume that there will be someone there who speaks passable English and who can converse with you.  And make sure you are calling a business, not some guy's cell phone.
4. If you are really serious, investigate the Verified Gold Suppliers on Alibaba.com.  If verified, Gold Suppliers (according to the Safety and Security Center on Alibaba.com) will have had one of these two:  "a) A&V Checked suppliers are Gold Suppliers who have passed authentication and verification inspection by Alibaba.com as well as a third-party verification company. All legal business licenses and contact persons are verified for those who have been A&V Checked, or b) Onsite Check is a verification process for China Gold Suppliers. Personnel from Alibaba.com visit suppliers’ premises to verify ownership of the premises. The suppliers’ legal status and other related information are then confirmed by a third party verification agency."
5. If you are ordering a large quantity of items, ask for a sample.  It's perfectly fine to pay for a sample, but if you are ordering 1,000 widgets, ask the company to send you five and test them out:  see how the process goes and how long it takes to get you what you asked for.

These five tips are not rocket science, but simply represent some simple, quick ways that you can take advantage of services that are available to you. 

Fair Play Fund: When to Blame, and When to Claim

I like reading Alizila, the blog that was created by Alibaba to give a pretty objective view on all things Alibaba.  Read it:  you will see that they do not pull punches and call it like they see it.  It's not a mouthpiece for the company.

This site, however, is dedicated to raising awareness of the Alibaba Fair Play Fund, a fund that helps buyers recoup a portion of their money when they are proven to have been defrauded on the Alibaba platform.

In his Alizila post, "Who is to Blame for E-commerce Fraud?," editor Jim Erickson points out that in a recent court case, Alibaba.com was cleared of liability for the sale of counterfeit products by a Chinese supplier using the website.  More information is here, but the court case reinforces the fact that Alibaba is simply a platform that connects buyers and sellers;  it's like eBay or Craig's List.

Although this court has recognized that Alibaba is not liable for misdeeds carried out by their suppliers, they still take their facilitation role seriously.  If buyers get ripped off or scammed, they can still get compensation through the Alibaba Fair Play Fund.  I have written about it extensively, but essentially if you are defrauded, go through the Alibaba arbitration process and can prove fraud, you can get back some of the money that you were scammed out of.

So if you are an Alibaba user, do your homework first to avoid scams and fraud.  And if by chance you fall victim, know the ins and outs of the Alibaba Fair Play Fund.  You can get money back.