12+ Common Supplier Scams // How to Avoids Sourcing Scams and Fraud
In today's interconnected global economy, sourcing products from overseas suppliers has become a staple for businesses seeking competitive pricing and unique products. However, this international landscape is not without its pitfalls. Among the most significant challenges importers face are the scams by unscrupulous suppliers. These scams can range from financial fraud to non-delivery of goods, severely impacting a business's financial health and reputation.
This article is designed to shed light on the common scams orchestrated by some overseas suppliers. As businesses increasingly turn to international markets for their sourcing needs, being aware of and understanding these scams is crucial for risk mitigation. The aim is not to discourage international trade but to equip businesses with the knowledge to navigate these waters safely and effectively.
We will investigate various scams businesses might encounter, such as bait-and-switch schemes, fraudulent companies, substandard product delivery, and advance fee fraud. By understanding the mechanics of these scams and the red flags to watch out for, businesses can take proactive steps to protect themselves.
Furthermore, this article will provide practical strategies for due diligence, secure payment methods, and establishing reliable communication channels. We'll also touch upon the importance of legal safeguards and the role of international trade agreements in providing a safety net.
Whether you're a small start-up or a seasoned international trader, this article aims to be an essential tool against fraud, helping you build successful and secure relationships with overseas suppliers. Let's embark on this journey of awareness and empowerment, ensuring your foray into international sourcing is profitable and safe.
Most Common Scams By Suppliers List
If you are looking for products on Alibaba or one of its many alternatives, then there is a high likelihood that you will come across someone trying to rip you off. They love to target first-time buyers who do not know any better. We wrote this guide so you know the most common ones. We also have a more in-depth guide on how to spot scams and verify suppliers.
001 // Changing the payment recipient at the last minute
Changing payment info is one of the most common and frustrating scams that Cosmo and most FBA sellers encounter, and it’s hard to detect until the last minute. Since the person you’re talking to lies about who they are, they often pass a basic test when searching for the factory’s authenticity. So it’s not until the very end that you are ready to pay that you find out. The best way to avoid this is to get payment details early and not budge if they change it later.
002 // Asking for additional payments for customs clearance
This isn’t a deal-breaker but a way for a supplier to make a quick buck off you. It would be best to always have the customs clearance cost included in your price. When negotiating your product’s price, you need to clarify the shipping terms and be aware of which party (between the seller and you, the buyer) is responsible for which. Shipping is a complicated topic, so we wrote an in-depth guide!
003 // Only accepting payment through Western Union or T/T
Under no circumstances should you make a wire transfer to a supplier. Western Union leaves almost no paper trail, the most common way scammers accept payments. PayPal and most other payment services diligently look out for fraud. There is a good chance that they may have sued these services in the past but are now banned for life. These services also heavily vet suppliers. Please see our guide to paying a Chinese supplier: What is the best way to pay a Chinese Supplier?
004 // Counterfeit products
If you are an FBA seller, you should never buy counterfeit brand-name products and never work with a factory that sells counterfeit products. What stops them from ripping you off if they are willing to ignore copyrights? Further, Amazon is Very aggressive about clamping down on counterfeit goods, and you will be banned, potentially for life. Counterfeit goods are widespread when sourcing and selling, so you may be tempted, but do not do it. Cosmo Sourcing refuses to work with counterfeit goods and will ensure you have full design rights before working with you.
005 // Poor quality products and products less than your standards
Unfortunately, Asian cultures (notably China and Vietnam) tend to be ‘yes men’ in that they will almost always say yes when you ask them about customizations. As a result, overpromising and underdelivering are very common. If you want to ensure that your product is legit and up to your standards, it may be in your best interest to hire a sourcing company to help you.
006 // Chabuduo, AKA the art of Corner Cutting
‘Chabuduo’ is a Chinese word that roughly translates as “close enough,” The concept is all too prevalent in Chinese manufacturing. When you source products, you must be extremely vigilant, ensure that the product isn’t made cheaper than expected, and cut corners. Commonly, suppliers will only do what is necessary, not one bit more, to make your product. There are many ways this concept manifests itself in an end product. For instance, you may get a sample made of one material and the final product made of another or have internal components that are not what they should be.
We’re comparing a factory production unit (left) to samples the client (right) prepared. Unfortunately, this one wasn’t up to our standards, and we had to create a new sample before we went to production.
007 // Products not matching the Samples
Sometimes, the final product does not match the sample. This might occur for a few reasons: sometimes a different process was used (such as hand stitching for the sample and mass machine stitching in the final product), or worse, they bought the sample from the store. The best way to avoid this is to hire an independent third-party inspection service to inspect your goods before they are shipped. We can connect you with 3rd party inspection services that can supervise shipments.
008 // Payment info that does not match the factory
They will always have a legitimate bank account if they are a legitimate factory or supplier. There are four major banks in China that they almost certainly will use: Industrial And Commercial Bank of China (aka ICBC), China Construction Bank, Agricultural Bank of China, and Bank of China. The account name should match the business name. There are cases, though, where they will have a Hong Kong Office and manufacturing in the mainland if they give you an HK company to pay to be diligent and make sure you double and triple-check everything.
009 // Having a payment go to a personal Account
This builds on the previous post, but it’s a fraud if they ask you to pay an account directly connected to a personal account. Make sure you are paying into an account directly attached to a business. At no point should you ever make a payment to a personal account when buying products from China or Vietnam!
010 // Selling products that do not exist or they do not have access to
Many fake suppliers will create an entire storefront of the products that you are looking for. The catch? The supplier does not have the product and is just trying to get your money. The best way to detect these people is to ask for additional verification through photos or ordering samples, which we cover in the next section.
011 // Refusing to send Samples
This scam is annoyingly common. Before you place a full order, you should ALWAYS get samples shipped. Any company capable of making your product will be able and willing to send you a sample. If they insist they cannot send a sample and must place a full order, you should cease contact with them and move on to another supplier.
012 // Unverified profile on Alibaba
Alibaba has a supplier verification system that checks to ensure they have proper business licenses, bank accounts, and dedicated contact persons. In truth, it’s quite easy to get verified on Alibaba. As a result, if they are not verified, it is a huge red flag that they cannot even complete a basic check from Alibaba. Therefore, when searching for factories, make sure that you select Gold Suppliers and Suppliers with Trade Assurance. This won’t protect you from fraud but will help a little.
013 // A Trading company posing as a factory
When talking to potential suppliers, it’s essential to understand what a trading company is and what they do. Trading companies are NOT manufacturers, but they often have relationships with the factory; that said, you are dealing with a middleman and not directly with the factory. Therefore, we wrote a guide to find out what type of company you are dealing with.
How to protect yourself from Scams when Sourcing
Unfortunately, most “suppliers” you talk to on Alibaba and other sourcing websites fall into scammers. Fortunately, most of this guide covers figuring out and weeding these people. Most are easy to detect, but for many, they will be harder to detect. If you want to read more on scams and how to protect yourself, see our in-depth guide covering techniques to protect yourself from fraudsters and scammers.
Cosmo Sourcing // Go Straight To The Souce
Do you want our team to find great manufacturers, get quotes, and introduce you directly to great suppliers?
Our Simple Sourcing service is designed to turn your idea into a shipped product. Our services are designed to take your idea, turn it into a product, and ship it to the final destination. Cosmo can do everything from creating a product spec sheet to validating, sourcing, ordering, evaluating samples, arranging inspections, finding freight forwarders, quality assurance, negotiations, and shipping. We aim to handle every single step of your business in Vietnam for you.
If you start a new business, finding products and suppliers for your products is one of many things you need to handle. Our services are designed to handle every part of your business in China and Vietnam so you can focus on the rest of growing your own business.
We have helped clients from Fortune 500 companies, brick-and-mortar stores, FBA sellers, and brand-new businesses. So don’t hesitate to contact us and let us know how we can help you.