Without using a professional sourcing company, it can be difficult navigating the various risks of international imports. Below, Tactical Sourcing has outlined 5 risks of using Alibaba and importing directly from suppliers that you should consider when importing in 2023.
1. Payment fraudsters
Being the victim of a ‘payment fraud’ can be a nightmare for importers. It’s unlikely you’ll see your money again. This is where a scammer somehow gains access to a supplier’s email address and discovers which orders are about to receive payment from an importer. All this requires is waiting for a purchase order to arrive in the supplier’s inbox.
Once they receive a purchase order from you, the scam artist will then typically download the previous month’s ‘proforma invoice’, make a new invoice look extremely similar – the only real difference being the bank account numbers – and then issue the invoice to you.
Your finance personnel (if they don’t double-check the bank account details) will then wire the money to the fraudster’s account. These fraudsters could be anybody – low-level employees who have an ax to grind, or someone looking for a big payday. The money could be sent to China, Hong Kong, India, the Philippines, Eastern Europe – anywhere.
2. Getting the wrong (or poor quality) goods
Sometimes a supplier makes a mistake. But others will simply accept your money with full intentions of delivering you a poor-quality product. When you start asking for a replacement or a refund, the supplier will typically stop responding to your messages. There might be a slim chance you could get your money back if they’re a genuine company, but only if you’re willing to go the extra mile and put in the time. You’ll probably have to write off the loss.
But what if you’ve lost too much money to forget? You could pursue your case through the courts or through arbitration, but this process is costly, time-consuming with no guarantees of success.
Just take a look at this January 2021 report of swathes of adulterated honey coming out of China, including from Alibaba, placing honey importers and beekeepers at financial risk. There is also the case of one man in around September 2020 who purchased an electric supercar off Alibaba for $31,000. What turned up at his doorstep was some type of pink and white microcar. He reportedly received a partial refund, but only after a war of words.
Also read: How To Manage Risks In Your Supply Chain
3. Bait-and-switch
This is a sub-set of the risk we explained above. We’ve seen this technique being used on Alibaba recently. A scam artist will lure in an importer by advertising a high-quality or popular product, only to “switch” the good with another good entirely, a shoddy version of the original or simply being told that the goods are no longer available.
Observe the recent case of the Route Werks Handlebar Bag. This was a debut cycling handlebar bag launched in October 2020 which hit its Kickstarter funding goal in a matter of six hours. Unfortunately, somebody on Alibaba stole the image from the campaign and set up an AliExpress e-commerce page, claiming they had the handlebar bag for sale at a lower price. This was before production had even started on the real product.
Of course, that supplier ‘switched’ his product advertised, and provided customers with substandard handlebar bags that were nothing like the Route Werks bag. Other “suppliers” emerged across the internet with new ads and pages too. The owners of the design tried to fight the scammers as they came up – but their lawyer told them ‘you’re just going to play whack-a-mole forever’.
4. Employee sub-contracting
As we said above, some employees are disgruntled – working long hours every week with poor pay, with a commission if they get lucky. They may hate their boss and want to divert the payments made for their own benefit.
Typically, you would pay your supplier directly, and the salesperson who is in charge of taking payments would either pocket the money or divert the payment to a different, cheaper factory (and pocket the difference). The salesperson may even receive a higher commission from their friends at the other manufacturer.
5. Raising costs after quoting
An importer may go onto Alibaba, create an order – only to have the price of their order unexpectedly double. The supplier might apologize and say there was a mistake in the initial price listing or say that the price advertised did not include shipping costs. It’s a type of ‘clickbait’ trap that importers may fall into.
Due to Alibaba’s nature as a retail website, you will receive a specific price for the order you request. A supplier will give you a favorable quote, encouraging you to increase your order. But after you choose your specific packaging and sampling requirements, and you pay a deposit, the supplier may then ask you for a higher price. Importers may feel like they have no choice but to pay it, as they don’t want to go through the time and effort to source yet another supplier and repeat the whole process again.
How to avoid being scammed by a supplier?
The best way to mitigate the risks of importing directly from suppliers, or by using Alibaba, is to engage a professional sourcing company who specializes in finding the right suppliers and manufacturers for your products. The best sourcing companies use their connections across the world and highly developed business acumen to ensure importers receive reliable, timely and high-quality service that helps their business operate efficiently and cost-effectively.
As a leading sourcing company across the Asia-Pacific, Tactical Sourcing has built strong partnerships with suppliers in China, Vietnam and Taiwan and now serves some of the world’s largest corporations. We’ve fine-tuned our business model at The Sourcing Co to ensure we carefully choose ethically-accredited, reliable suppliers who don’t cheat their customers and are compliant with modern slavery laws.
Please get in touch with us today to discuss how your business can avoid the risks of engaging with suppliers directly.
