7 Tips to Using Alibaba Correctly So You Don’t Get Scammed

by / ⠀Startup Advice / December 12, 2011

Money_TrapWhere can you get products to resell on eBay and make a 200% profit? Where can you find a supplier without having to worry about having physical store location? Alibaba, the world’s largest B2B online trading marketplace for small businesses, is your answer. Finding a market for products you want to sell is only half the battle (a great book about that is Rich20Something). You have to make sure that you have a reliable, price friendly, supplier of goods in the first place. Although Alibaba is a fantastic way to find a wholesaler, distributor, or manufacturer, its message boards are filled with buyers who got scammed by the suppliers it featured. Alibaba is a trading platform which brings sellers and resellers together, meaning there will always be scammers trying to rip buyers off, despite Alibaba’s best efforts.

Here are the top 7 ways to get scammed by suppliers on Alibaba…

Buy something brand name

iPods, Nike shoes, Samsung digital cameras are all available for purchase from Alibaba. However, your “purchase” will result either in you getting a counterfeit product or not getting any product at all. Your only real chance of re-selling these products is if you buy these at a retail store and sell them to someone on the street for the “convenience” factor. Aside from that, forget about profiting from brand name goods bought from Alibaba.

Manufacturers like Samsung, Apple, Sony, etc, already have strict arrangements with select manufacturers, distributors, and wholesalers. Even if one of those was on Alibaba, you’d need to buy a minimum order quantity (MOQ) in the million dollar range.

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Buy Sub-Par Quality Electronics

There are a lot of Gold Suppliers on Alibaba who sell everything from music players to car navigation systems. Before making a significant order from one supplier, buy small orders of their product and test them out for a significant period of time. You don’t want to buy $5,000 worth of LCD screens and realize, 6 months after you sell them to your customers, that half of them don’t work.

The more “simple” a product is (like a pillow), the less chance you have of it breaking down. Even if a manufacturer claims that they have a warranty, if 15% of your purchased products fail (a very real possibility), no warranty can compensate for the opportunity cost of you buying working products. Furthermore, if your products are quickly breaking down, your manufacturer may simply refuse to honor your warranty.

Purchase a Supplier’s Minimum Order Quantity (MOQ) Immediately

If you buy in increasing increments, rather than going all out with your first order, you will figure out whether the products are the quality you expect. Furthermore, you will realize whether selling them is a good idea in the first place.

Although many suppliers tell you that they have a MOQ in their advertised product pages, most will work with you on smaller orders in order to build your trust. Make a small order and keep on increasing the order size at intervals that work for you.

Believing that Gold Suppliers Are Scam Free

A Time article noted that 1% of Gold Suppliers engaged in fraudulent transactions for the year 2009. This isn’t to say that Gold Suppliers don’t come with an extra level of trust. You should simply be aware that they are not perfect. Alibaba makes thousands of dollars off of those who apply for its gold supplier membership.  A crafty scammer can pose as a supplier to Alibaba, sign up for its Gold Supplier membership, and scam for a lot more money than the cost of the membership.

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Getting Samples

Some scammers can be generous and send a sample of their product, maybe for free or at an increased unit price. For example, they may send you a brand new iPhone, trying to make you believe that they have a whole stock of them. Or, they may send you quality office furniture before sending you thousands of dollars worth of junk when you place your big order. To avoid being duped, simply don’t buy brand name electronics and gradually increase the size of your orders rather than going from a one piece $100 sample order to a ten piece $1,000 order.

Not Doing Your Due Diligence

Check the company’s website. How long has it been around? Check the Alibaba forums. Are there any scams relating to the particular company or products they are selling?

Talk to your supplier on the phone and/or on Skype; maybe even visit them in China if your order size warrants the trip. Keep in mind, however, that no amount of investigation can completely eliminate scams or your not being happy with an order.

Not Using Escrow Service

Rather than paying the supplier of goods, you pay Alibaba, which will hold the money until you receive the order. If you are not happy with what you received or did not receive anything at all, Alibaba will hold the funds and refund the money back.

Nickolay Lamm protects consumers from online scams at InventHelp Scam Watch and invention company scams at InventHelp Invention Scams.

About The Author

Matt Wilson

Matt Wilson is Co-Founder of Under30Experiences, a travel company for young people ages 21-35. He is the original Co-founder of Under30CEO (Acquired 2016). Matt is the Host of the Live Different Podcast and has 50+ Five Star iTunes Ratings on Health, Fitness, Business and Travel. He brings a unique, uncensored approach to his interviews and writing. His work is published on Under30CEO.com, Forbes, Inc. Magazine, Huffington Post, Reuters, and many others. Matt hosts yoga and fitness retreats in his free time and buys all his food from an organic farm in the jungle of Costa Rica where he lives. He is a shareholder of the Green Bay Packers.


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