The risks of sourcing on alibaba

As much as I like Jack Ma I really have to question sometimes how effective it is to source product on alibaba. A case in point: a company in Vienna asked me recently to help them locate a supplier in China. The company has bought some health products from someone they met on alibaba but the orders have not gone too well and the Viennese company now realizes that it has been dealing with an agent and not the manufacturer itself. So they have asked me to help.

And this is one of the risks in using alibaba, namely that you really have no idea who you are dealing with. Many agents in China set up on alibaba and use the names of the companies whose products they are selling but in fact they have no association with the company. So you think you are buying direct from the factory in China when in fact you are not. For this particular project, I looked up the Chinese company in question and I found 5-6 alibaba sites for them all with different contact people listed. It looks like agents or individuals in China are selling the Chinese company’s products on alibaba simply using the company name. It is very confusing to say the least and I can understand how the company in Vienna could have been misled. But this is SOP in China so you have to be careful.

One clue that the Viennese company has not been dealing with the original manufacturer was that they had been making payments to an individual and not a company. This does not necessarily mean that one is not dealing with the vendor itself for small companies may sometimes have payment arrangements like this. I had another project recently where I was asked to pay a sample fee to an individual’s Western Union account in China which I thought was strange. But the vendor explained to me that if paying a sample fee to the bank, the service charge really offsets the sample charge. It made plenty of sense and it was not worth worrying about for a sample fee. But if you are asked to make a sizeable payment for an order to an individual you should at least try to obtain proof that the person is affiliated with the company you think are buying from. You can do this by running a credit check on the company in question and then using the contact info on the credit check to contact the company to verify who you have been dealing with. A credit check on a Chinese company will cost you a few hundred dollars but you have to see it as doing your due diligence. And in China sourcing you have to do your due diligence. Make no mistake about it.

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