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.

Avoiding Fraud on Alibaba.com: Alibaba Onsite Check

I am not sure who first said this, but someone once said "you can believe me, or you can believe your lying eyes."  I'd go with the eyes, thanks.

Onsite Check Icon

For people who are lacking experience in sourcing materials from other countries, especially China, it can be intimidating.  Alibaba.com has a wealth of information on how to do your homework and avoid fraud in the Safety and Security Center, but they too believe in "laying eyes" on a vendor's premises through their program, Onsite Check.

What is Onsite Check?

Onsite check is a verification program launched by Alibaba.com for Gold Suppliers in mainland China. Simply put, it means that an Alibaba.com representative has visited a supplier's place of business and many important aspects that prove that it is a legitimate business.  They check out the supplier's:

• Business license
• Main product lines/services  (up to five product lines/services)
• Business type (trading company, manufacturer or both)
• Company location
• Head of the department responsible for their company website on Alibaba.com
• Contact information  (e.g. telephone number, address, etc.)
• Certifications   (e.g. product certificates, export/import license, etc.)
• Bank account
• Factory location
• Premise size
• Number of employees
• Certifications of subsidiares, partners, and contractors

I am not in a position to offer advice (nor would I ever) on whom to source from on Alibaba.com, but if it were me, I would be much more inclined to trust a supplier whose business had been validated and verified.

More on Avoiding Scams on Alibaba.com

You don't buy something from someone who comes to your house with a sales pitch, do you (except maybe Girl Scout cookies, and those are just irresistible).  So if you would not buy something from someone who comes to your door, why would you buy an item (or thousands or items) from someone in China without doing your due diligence?

Alibaba.com is the world's largest e-commerce trading platform, but the key word in that sentence is "platform," as in "we build it and they come."  They have build a technology that connects buyers and sellers.  It's like eBay or any other web site that connects buyers and sellers.

Avoid fraud on Alibaba.com by trading safely

Fraud happens.  Online fraud happens.  Fraud from China happens.  With millions of customers, even if a small percent are scammers, you have a chance of being defrauded on Alibaba.com - if you don't do your homework and TRADE SAFELY.

The information on Alibaba.com changes frequently, but they have a new service whereby you can do some research and find out if you have encountered one of the bad guys:  their Alibaba Safe Trading Guide.   And understand that Alibaba is a company that metes out justice, but they have an investigation first.  So when a buyer complains and the claim is substantiated, the seller could be banned from the site and the fraud victim may in fact be eligible for a payout from the Alibaba.com Fair Play Fund.  A good FAQ on the Alibaba Fair Play Fund is on my other site.

Doing your homework and research first step in your fraud protection plan.

Top Ten Signs of Online Scams

Build it, and they will come.  Scammers, that is.

When you have a platform as big as Alibaba.com, as I have mentioned before, if even one percent of one percent are fraudsters, someone is going to get scammed.  Alibaba.com is a platform that connects people, not a store.  Note:  as I have said, if you have a dispute that cannot be resolved through normal means, you can always apply to the Alibaba Fair Play Fund.

From time to time, I'll hit the Alibaba.com Safety and Security Center to see what's new.  Recently, they posted their Top Ten Signs of Online Scams.  

The whole list is here, but it includes things like promises that seem too good to be true (they often are), agreements in which you have to pay up front, or someone being overtly friendly the first time they correspond with you ("Dearest Ernest...").

Have a read here.  It's worth getting smart knowing how to spot online fraud if you are on the Alibaba.com platform.

Alibaba's Next Scam Catcher Could Be... YOU!

The world's largest e-commerce platform, Alibaba.com does not cease to amaze me.  It hard - really hard -when you are simply a platform that connects buyers and sellers, yet your feet are held to the fire regarding millions of users.  Even if a small portion of them commit fraud or scams, it can come back to bite you.

Now they are looking for additional forum monitors.  I think it's cool, because few people know the forums better than the people who are on them constantly. Check this out:

2012 is coming, wish everybody in our forums Happy New Year!

Due to the rapid growth of our forums, we're looking for more moderators. We want to hear from members who have the expertise and time to ensure posting activities meet world-class business standards. The valid date is from 2012 to 2013) If you have such experience is better:

• More than 1 year business experience

• Familiar with our forums and your answers to other members is more than 6 and the quality is high

• Happy to help forum members out of their problems

If you're interested and qualified, please tell us a little bit about yourself and what sense of oversight you can bring to our discussion forums by clicking reply below. Suitable applicants will be contacted directly by Administrator (Carol). Alibaba.com Forum.

This is a really interesting development, and one that could help keep buyers and sellers informed as well as avoid fraud, scams and the Alibaba Fair Play Fund.

About the Alibaba.com Fair Play Fund

Cross-posted from Facts About the Alibaba Fair Play Fund.

I have said many times in this space that information can be hard to find on Alibaba.com.  For this reason, when I pluck out a few interesting nuggets, I like to share them, and sometimes, make them a little more intelligible. Let me stress a couple of things that will help simplify this:

• Alibaba.com is a platform.  It's software that like eBay, connects buyers and sellers.  In the grand scheme of things, it's zeros and ones in cyberspace.  That's it. When buyers and sellers get connected, if one percent of one percent of the suppliers are fraudsters, that's still a lot of people that can get ripped off.
• They are trying to do the right thing. Recognizing their responsibility (yet still acting as a platform), Alibaba has put in place procedures on the front end and back end to help ensure that people don't get ripped off.  On the front end, they have their Inspection Service to help verify that suppliers are legitimate, and on the back end, the Alibaba Fair Play Fund, that helps victims recover money when it has been proven that they have been defrauded.

A couple of points:

1. Pre-purchase: It's hard to weed through the Inspection Service page because it reads like a legal document, but here are some good links to the Alibaba.com Transaction Services Agreement and the Escrow Services Agreement.  They are long, boring legal documents but are worth reading if you are curious about how you may be impacted in the buyer-seller process.What's easier to understand is what Linda Kozlowski, Alibaba.com's director of global marketing and customer experience said September 2011, : "...Next month, Alibaba.com employees will begin visiting some 112,000 of the e-commerce platform's paid China Gold Suppliers in person to physically confirm that the factories exist and conform with members' registration documents, a process that is expected to take up to a year, Kozlowski said. A third-party inspection service will also conduct random, unannounced checks on an ongoing basis to make sure the manufacturers remain compliant."
2. Post purchase.  It's important to remember that like many successful companies, Alibaba presents vendors and suppliers with due process.  On their Alibaba Fair Play Fund page, it reads: "To be eligible for the Fair Play Fund payout, claimants must have presented a substantiated complaint before the Gold Supplier was removed from the site. Please note that Gold Suppliers are only removed from Alibaba.com after a complaint has been investigated and substantiated."

First, remember that it is a platform. Second, do your homework. Third, know your rights and responsibilities under the Alibaba Fair Play Fund.

Repost: Alibaba.com Member Advice on How to Avoid Fraud

This comes directly from the Alibaba.com Trade Forums: "How to check your Supplier before ordering."   I don't think that it comes from the company, rather from a member because of the detailed advice and links provided. It's good advice on how to verify suppliers, avoid fraud and scams, and NOT have to resort to the Alibaba Fair Play Fund. The English is not perfect, but no matter, it is good solid advice from someone who has clearly been there. Happy reading: =================================================

How do I get help to check a particular Supplier?

First, DO NOT BE LAZY ... please read the Tips further below and also look at this link to see what members say about being lazy ... http://resources.alibaba.com/topic/18839/STOP_BEING_LAZY_handle_your_own_due_diligence.htm

Second, DO NOT OPEN A NEW TOPIC. Post your query in this Topic after you read the below Tips.

Third, STATE WHAT CHECKS YOU HAVE DONE. Merely asking if Seller XYZ is okay is an invitation to howls of protest. Tell us what you yourself have done to check out your seller and then ask your question. Members are very generous if you are seen to be trying hard. Otherwise, your post will be deleted or you will receive little response if you show you are lazy.

Tips to Check out Chinese suppliers by yourself ...

The focus of this topic is to empower you to do an informal check of your potential supplier in China. The stated steps are by no means a "guarantee" that your supplier will be a legitimate business. However, by following the steps here you should be able to eliminate the majority of common techniques used for fraudulent activity. Education and information are your best protection against fraud.

This topic is not a substitute for physical inspection of the manufacturing site. The purpose is to provide buyers with a "first line of defense" against fraud and/or shoddy goods. If you've posted a buying lead you no doubt have received many replies to your inquiry. This discussion is about knowing your potential supplier before you get too deep into negotiations.

100's of frustrated potential buyers can be seen on this link ...

http://resources.alibaba.com/topic/122/How_to_verify_if_a_seller_is_serious_any_tips_.htm?va=0

Carefully do your Due Diligence before you get into serius negotiations in order to avoid frustrations and/or fraud and;or shoody goods.

Your initial sales enquiry ...

Every case is different, but broadly say little in your first communication. You don't want to arm potential scammers with too much information to play you like a hooked fish on a line. Stay in control from the very outset with something like this:

Dear Sales Manager,

We are interested in your Widgets, product numbers X, Y and Z plus more information about your good company. 

In the first instance we may look at a small trial shipment to test our home market.

Kindly provide both FOB MOQ price and price for larger volumes at your earliest convenience.   

Concerning your good company, please indicate if References or copy of any recent Factory Audit, or similar, can be provided if we proceed to serious discussions.

Yours sincerely, 

Accordingly from the outset, you reserve enough control to make firm due diligence requests, if necessary, as talks progress.

Alibaba company profile ...

Look at their profile on Alibaba. Remember, many scammers simply sign on as sellers with false profiles. You or I could do the the same in 10 minutes. Ask yourself, does this make sense?

• Are a manufacturer's products in the same category? (ie does a shoe company sell electronics or vice versa?)
• Is there a separate phone number for the fax and land line?
• Is there a separate website listed off Alibaba that you can check?
• How long have they been a member of Alibaba?
• Are they a Gold Supplier, Trust Pass or Free Member?
• Look at the Company profile. Does the paragraph look generic or copied? You can highlight all or part of the paragraph and place it in the google engine around quotes ("xx"). This allows you to search the web to see if it is original or copied?
• Search the forum to check this supplier. Are there any negative postings? Use both the contact name and the company name.

The initial profile check should give you a general overview of your potential supplier. Decide now if it's appropriate to continue verifying. If the answer is "yes" then it's time to dig a little deeper. Website & Domain Verification ... Do a google or yahoo search. Look for any information that looks out of place. First, try the company name and the word "scam" or "fraud" in quotations. For example "shanghai shoes scam". Then search the name alone but always in quotes like "shanghai shoes". Websites in China are not unlike the ones in the Western part of the world. Don't be distracted by grammar or non-English. Carefully check the website "about us" section and then cross match that information with all other. Check their domain information using the following links. Pay close attention to the registration date, Registrar name, phone number, and contact info including email. www.whois.org www.dnsstuff.com Verify the phone listing ... Remember a free member Alibaba profile stating the supplier is in China is meaningless until you verify it. The person behind it might reside in any country merely using China as a shield. Check country and geographic codes. A fraudulent western person could even raise a Chinese supplier profile (and use a Chinese based party to collect T/Ts). Some western scammers use a forwarding number or a VOIP number to disguise their location. Numbers beginning with the prefix +4470 or +4487 are forwarding numbers that are rarely used by legitimate companies and not used by Chinese either. Some numbers can be checked here .... http://www.numberingplans.com//?page=analysis&sub=phonenr Once again the goal should be to find a "geographic number" which means they have a physical land line. Eventually you want to call the number and speak with your contact and at least one other employee of the company. Receiving product listing and price quotes ... After you post your buying lead you will undoubtedly receive mass information from many companies. Look at the detail for the products and again ask yourself some questions.

• Are the prices overly high or low?
• Do they only accept Western Union or 100% TT?
• Is there an appropriate amount of contact information?
• Are they overly pushy for payment?
• Is there a sensation of being "rushed"?
• Are the stated lead times reasonable?
• Is the MOQ too high or too low for the particular circumstance?

Pick up your phone ... Finally, pick up your phone and ring China. Dial the supplier's number/s. Sure, Chinese language will answer, but just keep repeating the word "English" ... they will find somebody who can talk in broken English. These days it costs next to nothing to call China from most Western countries. Buy an applicable $10 phone card from a local shop for use on your land line ... it will give heaps of talking time. And, dial their fax number too ... did it give a fax ring tone? Remember you are doing Due Diligence ... avoiding the loss of precious money. Your TM is a surveillance weapon ... Add your potential supplier to your "Contacts" list. You know how it "flashes" when a contact comes on or goes off line:

• Work out Chinese business days / hours against your local time.
• Is the Chinese party "online" mostly during Chinese business hours, as should be the case?
• Or, does the party spend too much time online during USA or UK business hours?
• Does the Chinese party work the TM too much on Chinese Sundays?

Any Questions and/or Further Tips? Please post in this Topic and do not open a new Topic for enquiries about a particular Supplier company.

Whoa! Alibaba.com is Looking for Forum Monitors to Help Spot Fraud!

The world's largest e-commerce platform, Alibaba.com does not cease to amaze me.  It hard - really hard -when you are simply a platform that connects buyers and sellers, yet your feet are held to the fire regarding millions of users.  Even if a small portion of them commit fraud or scams, it can come back to bite you.

Now they are looking for additional forum monitors.  I think it's cool, because few people know the forums better than the people who are on them constantly. Check this out:

2012 is coming, wish everybody in our forums Happy New Year!  

Due to the rapid growth of our forums, we're looking for more moderators. We want to hear from members who have the expertise and time to ensure posting activities meet world-class business standards.
The valid date is from 2012 to 2013) If you have such experience is better: 

• More than 1 year business experience  

• Familiar with our forums and your answers to other members is more than 6 and the quality is high  

• Happy to help forum members out of their problems 

If you're interested and qualified, please tell us a little bit about yourself and what sense of oversight you can bring to our discussion forums by clicking reply below. Suitable applicants will be contacted directly by Administrator (Carol). Alibaba.com Forum.

This is a really interesting development, and one that could help keep buyers and sellers informed as well as avoid fraud, scams and the Alibaba Fair Play Fund.

Avoiding Scams on Alibaba.com Through Fake Gold Suppliers

I took a little break for the holidays. Hope you all either used Alibaba safely or spent some some learning about how to avoid scams and fraud on the world's largest e-commerce platform. I'm picking up where I left off. Below, I've provided some information from Alibaba.com that relates to spotting a fake verified gold supplier. Again, with millions of users on a platform, if even .001 percent of the users are frauds, you may end up being scammed - and hopefully not have to resort to the Alibaba Fair Play Fund. Anyway, here are some good tips on how to spot fake Alibaba.com suppliers.

Fake Verified Gold Supplier 

Case Study:

I received an email from a supplier called Mike from a company named Happy Electronics Co. He told me he could supply PS3 at a low price. I searched on Alibaba.com and found he was a Gold Supplier, so I was confident about this transaction. I placed an order for 10 pieces of PS3.

After payment, I lost contact with him and didn’t receive any goods. I reported Happy Electronics Co. to the Alibaba.com Service Team. After an investigation, they told me that the person I contacted is not really an employee of Happy Electronics Co.; in fact, he is a scammer posing as a representative of the company. Below is the email I received:

Case Analysis:This is a case of Gold Supplier identity theft. Scammers will pretend to be representatives of legitimate companies with the intent of cheating unsuspecting buyers. Please be aware that you should always:

1. Ask the suppliers to provide you with their company website on Alibaba.com. You can also use the company name that they provide to do a simple search online. Once found, compare the contact info that they provide with the information published online. If it’s different, please be very cautious. You can also use TradeManager to contact companies listed on Alibaba.com. Ask them to verify that the person you are in contact with is actually their representative. 
2. Be extra cautious if the price quoted is extremely low (50% lower or more than the market price). For instance, the quotation in the case above seems very good: one PS3 costs only US$188 per piece and you get an extra one free if you buy 5 pieces. This deal sounds too good to be true because it is. 
3. Use Alipay as your preferred payment method when you want to buy from Chinese Gold Suppliers. Alipay is safe because your money will only be released to the supplier after you confirm satisfactory delivery. If disputes arise, Alibaba.com will help mediate. Learn more about Alipay. Western Union and other direct payment methods are risky, especially for your first transaction with a supplier.
4. Email the Alibaba.com Service Team for help verifying suppliers found on Alibaba.com.

Good Alternative to the Fair Play Fund: Alibaba Rates Suppliers

As I have mentioned before, Alibaba.com has a great site (Alizila) that presents news and information,  about the company - in a pretty impartial manner.  That's unusual for a company to have a site that offers the unvarnished truth.

I found a good article this morning "Alibaba.com Adds Ratings for Inspectors."  This is valuable information because, as I have said in this space before, if you do your homework on the front end, so can find reliable, quality suppliers.  You can avoid scams and fraud.  And you can then avoid the path of last resort, the Alibaba Fair Play Fund.  And the Fair Play Fund is not a bad thing - it helps compensate users who have lost money - but avoiding it is critical.

So have a read:

Ensuring that products shipped from Chinese suppliers are of good quality and as advertised is an important consideration for businesses using Alibaba.com. To allow international buyers to hire on-the-ground shipping inspectors in China easily over the Internet, the B2B website four months ago added 38 Chinese inspection services to the platform. Through the site's Inspection Service, buyers can choose among these independent contractors and, at relatively low cost, hire one to physically visit suppliers all over China to confirm they are getting what they paid for before their orders are shipped overseas. 

But who watches the watchers?  

How can buyers be confident that the inspectors, who they are hiring sight unseen, are competent and trustworthy? That issue has been addressed with the addition of a customer feedback and rating system, which is live on the website. From now on buyers who have used the services of an inspector can leave behind a review and rank their inspector on a scale of one to five stars. Those ratings and reviews are displayed on the site so others can decide which services are reliable. Buyers who feel their inspection was conducted improperly have up to three months to dispute a transaction, and can receive up to 20 times the cost of the service if they win their case. Payments can also be protected by escrow. The feedback system was just launched so there aren't many reviews on the site yet, but to take a look at a typical feedback page for one of the top inspection services, click here.

Fraud and Scam Prevention on Alibaba.com

Just doing some basic research can help you avoid fraud. Would you buy a watch from a guy on the street? A car without doing some due diligence? So that's why it's important to check out who is legit and who is not by periodically reviewing the Alibaba.com Banned Paid Member List.

An ounce of research prevention is worth a pound of Alibaba Fair Play Fund cure. Trust me.