Hi all,
Since Im still very new to this forum I figured it might be a good idea for me to contribute something. I have an extensive background in e-commerce, both as a developer on the technical side, and now a company executive.
I am asked frequently by people wishing to procure and subsequently sell goods or services online, of the risks involved. Reading this forum, I see similar questions being asked. I know many of you will know a lot of this, but there just might be something you didnt know, so stick with it
I've oriented it around the UK, but much of it applies elsewhere. I hope it's of some use.
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Tips for Buyers
If the company is limited use
http://wck2.companieshouse.gov.uk/ to check their basic details. Note the type of business they are registered as, is it relevant to the produce they are trying to sell you?
Is the company web site listed in any reputable directories such as
http://dmoz.org, this directory has highly dedicated editors and much verification is done before a submission is accepted, so it's a good start. Is the business listed in the Yellow Pages or any other terrestrial publication, look for paid advertisements rather than free ones.
Does the domain (web address) of the site you are using have an entry in the WHOIS database of any registrars (try
http://www.whois.net/)? The WHOIS record should match the address shown in the Companies House records although a different address for technical contact is quite normal. If you are unsure of the authenticity of an address, call the domain owner and ask politely if they are aware of the business.
Does the company have a secure server to accept online payments or do they limit you to using easily obtainable merchant services such as Paypal or NOCHEX. If using Paypal, are they VERIFIED (preferably with several hundred transactions showing)? This is important as it ties the company to a physical bank account. Without that check, Paypal I believe will not insure a transaction.
Internet Merchant Accounts are difficult to obtain and subject to strict checks. The way to tell is that if the company has a merchant account, you will never leave their web site. Note the web address and the secure certificate details, do they change when you checkout or stay the same?
A company using only paypal would set alarm bells ringing for me (except perhaps on eBay), especially in wholesale where volumes are high. Paypal can freeze funds on a whim which could put a wholesaler out of business, so as a business payment system, it's limited and risk prone. Don't forget, they are not a bank and are not subject to banking laws (See:
http://www.paypalsucks.com).
Ensure that a secure certificate matches the actual domain of the web site you are purchasing from and that it is valid. To do this double-click on the padlock in your web browser and check the information. If the addresses do not match, find out who owns the address shown on the certificate. If it's a hosting provider, it may be OK, but it may be worth checking the hosting providers business too, just to be sure.
Avoid affiliate companies and pyramid schemes. Again
http://dmoz.org is good for this as rigorous checks are made to ensure affiliate sites do not get listed. Keep an eye out for odd codes when you mouse over a link, does it have any parameters similar to referrer=xyz123 or rid=1234, if so, chances are it may be an affiliate site. With practice, they are easy to spot. Another tactic is to copy a line of promotional text from the site and paste it into Google. You'll be surprised how often the exact same text appears elsewhere! Try to pick a phrase that is not generic, however.
Avoid anyone who uses free email account to conduct online business. Any trader worth his/her salt can afford the £10/mo or less it costs to obtain their own REAL email account from a hosting provider. Hotmail, gmail, yahoo, juno and others are spam and scammer magnets so avoid like the plague. Look up the domain name on Google to see if the address matches a free (anonymous) service.
Wherever possible use a reputable payment method. Bank transfer is safe providing the company checks out properly, however, ensure your bank can insure the transaction and only use it when reputation has been establised. Money transfer services are magnets for scammers, the main one being Western Union. Never ever pay for goods online through this service unless you know the seller well as fraud is rife.
For initial transactions with unknown sellers I highly recommend an escrow service. This protects both the buyer and seller by holding funds until the transaction has been verified as complete by both parties. There are many reputable services available for reasonable fees, ask around.
Be extremely wary of ordering from any web site which has a brand name as part of the domain.
www.nikegreatoffers.com or
www.lovenike.com are highly unlikely to be authorised by the manufacturer. Companies protect their trade marks so be immediately suspicious if you see one in a URL, unless it is obviously their home page!
Keep initial purchases from suppliers down to manageable levels. Investing £10,000 with a new supplier because their products seem cheap may seem like a good idea now, but in the long term it could go sour. Any good supplier will not hesitate to allow a low volume purchase to a potential new customer. They want the business as much as you want to buy. If they don't co-operate, don't trade with them.
Remember, as a customer you are at an advantage. The seller should be treating you like royalty. Whether talking about wholesale or not, the customer is always right. Reputable companies know this and will bend over backwards to help you.
Avoid trading with sellers in Africa, Eastern Europe and Asia unless you know them and can verify credentials. Fraud rates tend to be extremely high from these areas and credentials are very difficult to verify. Unless you are absolutely sure who you are trading with, don't. It's not fair to tar everyone with the same brush, but unfortunately, as we all know, online trading is about managing risk as much as it is making profit. This advice applies to sellers also.
The type of product you are buying is a good indicator of the risks involved. PSP's, XBOX, Wii, mobile phone, laptops and other small but high value items are the number one target of fraudsters because they are easy to ship, and there is a huge black market for them. Use extreme caution when purchasing such items from unknown sellers offering huge discounts, especially in quantity.
As with anything, exercise good common sense. Is a seller really going to allow something worth £250 to sell for £150? It's so easy for them to list the item on eBay, why not do it if their cost price was so low?
In closing, caveat emptor.
Tips for sellers
When trading with another business there is one golden rule, verification.
I do now know of any legitimate supplier/wholesaler which allows just anyone to open accounts and trade with them. All require the provision of some actual details prior to trading. Asking someone for documentation to verify their identify is a natural business process, anyone trying to avoid this would worry me.
We use a combination of evidence to verify identify. First, after collecting the users submitted details we request either a faxed or emailed copy of a land line telephone bill dated within the last three months and a copy of the company VAT certificate or recent bank statement if not VAT registered. For high volume transactions we also request a copy of the companies business plan if they are resellers, and also financial forecasts, which show substance and real dedication to selling. The above is not exhaustive, but at least gives a seller some assurance that the buyer is genuine.
Always ensure that when you send goods out that cleared payment has actually been received. Just because you have an email saying it has, does not mean this is the case. Could the buyer have sent the email themself? It's possible, as is spoofing and email address (pretending to be someone else).
If the customer pays by credit card, never ship to anywhere but the cardholder address and ENSURE that the goods must be signed for. This makes it a lot more difficult for scammers to operate.
Never allow payment by Western Union or other anonymous money transfer services. They are highly prone to fraud, as other posts in this forum have demonstrated. Use escrow services where ever possible, especially for larger transactions. The fee's are worth it for the peace of mind.
Avoid paypal where possible. It is prone to fraud and the risk of charge backs is very high. This is especially true when selling high value items such as laptops. Buyer accounts are not always subject to verification and even if they are, they can be hijacked.
Do not ship goods to Eastern Europe or other non-EEC countries known for fraud such as Nigeria for example. Use common sense, would someone in Latvia, with it's huge black market, ever buy a UK laptop at our prices? No way. A new Mercedes SL AMG only costs USD $25,000 (£155,000 in the UK) in Georgia, they aren't going to pay $1,000 for a laptop! This is absolutely true, I've seen it personally.
If you use OSCommerce to sell your products or any other ecommerce software, beware of payment services such as paypal, nochex etc that redirect the buyer from your site to their secure pages. There are very simple hacks which mean the buyer can complete the transaction without paying. As per point 3, ensure cleared funds have been received to your bank or payment processor before shipping!
cont..
My top tips for buying and selling online
Linear Mode
November 2008
