Another Case Study on How to Avoid Alibaba.com Scams

Alibaba.com is a massive site, and to be honest, somewhat poorly organized when it comes to searching for information on how to prepare yourself:  to buy items while avoiding scams and fraud.

So from time to time, I'll sift through the site and pull out what I hope are some helpful nuggets of information that help you become a smarter buyer - or supplier - on the site and not have to use mediation, or at the end of the line, the Alibaba Fair Play Fund.

So here's another case study from Alibaba.com:

Description: 

Case study on how to avoid scams on Alibaba.com

This company cheated me out of $2000 USD. Our terms were $200 USD for shipping, $1000 USD once the tracking info was verified and the balance of $1460 USD paid once the package was received. This guy said that he was going to use a local courier. He gave the website and tracking number for checking. When it showed "package now on hold in London", I sent $1000 USD as per the agreement. After that the company demanded the balance right away. He said his superiors wanted payment in full due to something about an audit and not being allowed to give credit to people from the USA.   He said I needed to send at least $800 more and he'd take care of the rest.  So I scraped up $800 more and sent it.  Then he came with a new excuse.  Something about a death in the family and if I wanted my package I needed to go ahead and pay the last $660!  So basically, he's made up some fake business and website and is using it to con people into believing that there package is on the way.  Then he puts the package "on hold" and says "if you want your package, I'm going to need more money". 

Analysis:

• Avoiding use unknown shipping websites. It is a risky to allow unknown shipping websites to deliver your products. Before you accept this delivery method, do your own due diligence, including searching the shipping website on search engines to see what others have to say. Or you can go to http://www.whois.com/ to search for registered information of this website. Be wary if the domain of this website was created less than three months ago. 

• When your supplier is making excuses about the delivery (or lack thereof) of products and asking for additional payment, it is generally a trick. 

• Search the company name on the forum or search engine to find something useful to you. Or you can contact Alibaba's service team.

Avoid Scams: Check Out Alibaba.com Blacklisted Suppliers

This is a truncated version of a longer post on my other blog:

Part of any good preparation for buying and then reselling items from an e-commerce platform is research, research, research.  You really need to do your homework before you dive in.  In my past post, I addressed some tips of how to get started (the positive), but it’s also important to know about the bad guys (the negative).  In addition to providing access to the Alibaba Fair Play Fund if you are defrauded, Alibaba.com provides an explanation of their blacklisting policy on their Web site.  

Oh – and note to Alibaba.com – it’s helpful to provide a link to the most current list of blacklisted suppliers on the site.  I found it here.

And remember:  DO YOUR HOMEWORK so you can avoid scams, fraud and never, ever have to get compensation for a loss on Alibaba.com.

Video: Alibaba Explains Fair Play Fund, Scams and Fraud

This is cross-posted from my other blog, but if you want to understand how to buy and sell safely on Alibaba.com, take the time to watch this video.

Alizila Editor Jim Erickson interviews Alibaba.com's Global Marketing Director Linda Kozlowski explains the company's Alibaba Fair Play Fund, a program that partially compensates users who lose money due to online fraud and scams. This is EXACTLY the sort of information that people need to have to verify suppliers, avoid fraud and scams, and if not, get compensated. The video is eight minutes, but if you buy or sell on Alibaba.com, this is worth every second.


 

Another Way for Alibaba to Avoid Scams: Inspection Service

This is cross-posted from my other blog.

I followed Alifest pretty closely over the weekend.  I've mentioned it here before, but it's the company's annual Internet conference at its Hangzhou, China, campus.  And by the way, if you like cool architecture, check out Bloomberg's video tour of the Hangzhou campus. I can't imagine how it is possible with millions of members, but during Alifest, the Alibaba Group announced "...an ambitious program calling for on-site inspections of all Chinese manufacturers and distributors selling through Alibaba.com's international website to ensure they are legitimate. "We're taking the existing authentication and verification process, and we're adding another layer to it," said Linda Kozlowski, Alibaba.com's director of global marketing and customer experience.." What is the Order Inspection Service? Well, always one to get forgiveness before permission, I have posted an article from Alizila that describes the program.  I don't know how they are going to pull it off, but it will go a long way towards helping users avoid fraud and scams - and not have to use the Alibaba Fair Play Fund.

Alibaba launches order inspection service

Quality assurance is a big issue for any overseas company that buys from Chinese manufacturers. Based on personal experience as a quality inspector, Renaud Anjoran, a blogger at QualityInspection.org, estimates that about 20% of all goods manufactured in China are "seriously inadequate." The problem is even worse for buyers that place small orders. "With a small order, factories are more likely to cut corners," Anjoran said. "If they piss a customer off, it's not a lot of money to them. So you have to be very flexible if you order a small quantity in China. You don't have a lot of weight to negotiate with the buyer." 

The antidote for buyers large and small has been to hire on-the-ground inspectors to ensure goods are up to snuff before they are loaded into containers for overseas delivery. The problem for small buyers is cost and quality of service. "Local inspection firms' prices are all over the place," Anjoran said. "And their service and reliability are sometimes terrible."  

Enter Alibaba.com's newly launched Inspection Service, which is now in beta on the site. It's an online solution designed by the B2B e-commerce company to match small buyers with affordable and reliable inspection services. Alibaba hand-picked 20 China-based inspection companies, most of them based in the Pearl River Delta, China's manufacturing hub, to participate. "We vetted them by checking how many orders they handle per year, how many years they've been in the business and their experience dealing with foreigners," said Irina Gee, who runs the service for Alibaba.com. 

The companies are charging between $150 to $250 a day to carry out product inspections prior to shipping from the factories. Inspection Service is among a number of new measures Alibaba has introduced in the past 18 months to improve the experiences of small buyers using Alibaba.com and to curtail online fraud. All participating inspection companies are required to demonstrate their good faith by putting up a deposit which may be forfeited to buyers in the event of a dispute. 

Inspection complaints are handled by Alibaba's dispute-resolution team, which has the authority to pay up to $3,120 in compensation in the event of a faulty inspection. Alibaba also holds the buyers' payments for inspection services in an escrow account until they agree to release funds to the inspectors. Even with safety checks such as escrow, there's no guarantee that problems won't arise. Buyers and sellers do not always agree that the original product specifications have been met. 

"The spec of the product is very, very important," Anjoran said. "Sometimes buyers aren't very good at describing what they want." While no software can overcome that hurdle, Inspection Service includes a one-stop online communication system to improve transparency and make it easier to manage transactions. Buyers use this system to select inspectors and upload their requirements. Inspectors use the same system to upload their reports. Buyers then use the site to release funds to the inspectors. 

Memomark Inspection Services in Guangzhou was one of the first inspection companies selected for the new program. The company has eight full-time employees and caters to small and medium-sized buyers in Europe and North America. Jim Huang, the company's owner says he's already seen an uptick in business since the platform launched. He's landed two new clients and is negotiating with several others. Inspection Service currently covers only shipments from China, although Alibaba officials say they hope to expand to other countries in the future.

What's New With Alibaba: Steps to Continue Fighting Fraud and Scams

As I mentioned earlier in the week, last weekend was Alifest, the company's annual Internet conference at its Hangzhou, China, campus. By the way, I have a good video with an architect taking people through the amazing buildings on the Alibaba campus. It's amazing.

One of the more interesting articles I have read on Alizila mentioned Alibaba's ongoing efforts to fight fraud and scams - no easy taks considering that the site has more than 50 million users!

This is the article that appeared on Alizila:

Alibaba.com Unveils New Services, Programs For Safer Trading 

Alibaba.com introduces new steps to help combat fraud and scams

Alibaba.com today announced new initiatives and products designed to make the international business-to-business website safer and more valuable to small and medium-sized businesses that use the site to source products. Among the new programs announced at Alifest, the company's annual Internet conference at its Hangzhou, China, campus, is an ambitious program calling for on-site inspections of all Chinese manufacturers and distributors selling through Alibaba.com's international website to ensure they are legitimate. 

"We're taking the existing authentication and verification process, and we're adding another layer to it," said Linda Kozlowski, Alibaba.com's director of global marketing and customer experience. 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. 

Kozlowski said a recent increase in membership fees will cover the cost of the labor and time-intensive inspections. The company also announced an expanded escrow program; an online sourcing concierge service called Custom Sourcing; and elaborated on its new Inspection Service, an online solution that allows overseas buyers to hire inspectors in China to verify that goods ordered are shipped as promised. The announcements are part of a continuing campaign to combat fraud committed by Chinese sellers operating on Alibaba.com who were taking money from overseas buyers for a wide range of products without delivering any merchandise. The illegal activity came to a head in February when Alibaba.com CEO David Wei and COO Elvis Lee resigned in connection with an organized group of scammers that was discovered operating on the site, sometimes with the help of Alibaba employees. The executives were not involved but voluntarily stepped down to take responsibility for not being more aggressive in responding to fraud. 

About 100 of the website's workers were fired after the incident, and thousands of fraudulent sellers have been removed from the site. Alibaba.com has since taken many other steps to restore its reputation. Company officials said the measures appear to be getting results. According to Kozlowski, the monthly number of fraud complaints received by the website have fallen 77 percent since February. Customers have apparently not been deterred. Alibaba.com saw an 86 percent increase in monthly unique page views between July 2010 and June 2011. Another indication that the company’s campaign to clean house has been effective is that payouts from a special fund set up to compensate fraud victims have fallen 81% since the restitution program was introduced in March of 2010. When the company first created its Fair Play Fund to reimburse victims of fraud, the average monthly payout totaled $164,889. The most recent monthly payout totaled $32,049. "We're very happy with our progress," Kozlowski said.

Alibaba.com Chairman Jack Ma Addresses Fraud Issue

Interesting weekend out of China.

Alibaba held its annual "Alifest," to recognize and reward businesses who capture the imagination of customers around the world through e-Business."

The highlight of the weekend was a speech by Chairman Jack Ma, who recognized that the company had faced it share of scandals and claims of scams and fraud.  Loretta Chao, writing in the Wall Street Journal on September 11, noted:

Alibaba Group Chairman Jack Ma

Alibaba Group Holding Inc. hopes its efforts to repair its reputation among customers following a fraud scandal will also burnish its reputation with U.S. consumers, as it increasingly moves into territory claimed by rival eBay Inc.

China's dominant e-commerce company by transaction volume unveiled a number of moves Friday at its annual Alifest gathering for members that include a new on-site inspection program and escrow service.

Alibaba has been working to shore up its reputation following a scandal involving employees at Alibaba.com Ltd., its Hong Kong-listed online-trade unit. According to Alibaba.com, about 100 of its employees colluded with more than 2,300 sellers to create fraudulent listings in a scam that led to the resignation of Alibaba.com Chief Executive David Wei in February. Mr. Wei wasn't directly involved in the scandal, the company has said.

It's be interesting to see how this plays out in the weeks and months ahead.

Avoid the "Contract Trap" Scam on Alibaba.com

As I have stated in the past, much of the best information about how to avoid fraud and NOT have to use the Alibaba Fair Play Fund is to do your homework.  Prepare yourself in advance.

While it's a big Web site and info is hard to find, I have pulled out another case study from Alibaba.com that describes ways to avoid scams and fraud.  This one is called the "Contract Trap."

Have a read:

The Contract trap

Case description:

This company offered us a government project for the supply of wooden furniture to a Togo government agency. I even went to Togo to meet the principal and the people from this government department.

We had been tricked into paying the sum of USD 30.000 plus other expenses to the value of almost USD 40,000. The money our company paid was supposed to pay for the bidding/lawyer fee and legal fee for the contract.

They said they would pay us the money for the furniture immediately after the legal process, but to date, they have not dispatched the money for the said contract.

Analysis of this case:

1. Any unsolicited business proposal, especially large high-profit government projects from African countries should be carefully scrutinized. Most of them are too good to be true. Check with your embassy in that country if there is really such a government agency. Or consult with your bank, an attorney, or the police about the contract.

2. The con artists will always tell some stories to you, such as you need to register in some business agency to export your products to their country or something else. In this case, they asked for a bidding fee, a lawyer fee and legal fee for this contract. It is necessary to understand whether or not this is a normal process for a business contract in that country.  

3. In such a fraud case, you are not dealing with one scammer; you are fighting with a group of scammers. Someone will pretend to be an attorney and guide you to their trap step by step. Someone will pretend to be a government official and give you confidence in this contract. They are a professional scammer group instead of an individual scammer.

4. Search the company name or government agency via a search engine to find some useful information for your business