Are you being scammed? New traders please Read.

mipod · 28-05-2006, 09:02 PM

Having been involved in an entertaining thread about Alibaba I thought it was time I posted my views on the subject of being scammed.

I have never suffered at the hands of scammers, I hope I never do.

For those newbies out there I thought I would post some of my own do's and don'ts so that you have something to think about and may hopefully avoid being caught out through lack of experience.

Rule 1

Initially trust no-one. This might sound ridiculous but when you first get in to the idea of wholesaling you will receive a myriad of offers and so called one off offers. It is better to miss out on all of these whilst your learn your market, than to get striped and lose your hard earned cash before you've blinked.

Rule 2

Decide your market and spend a long time understanding the products you want to deal in. What the market is for them, where you will sell them and what your costs will be in doing so then you can begin to understand what your buying prices should be.

Rule 3

Understand the price levels in the market.

Most of us are simply low volume dealers. The way we are going to steal a margin on the likes of the major resellers is beacause we don't have the overhead or distribution networks that they have and so our markups should be less.

I do not believe that there is some golden supplier out there who will offer you an ipod or a psp (or is even able to obtain one themselves)at a better price than the major distributors. If they can you have to think why. Its probably fake, stolen or even refurbished.

I have see several wholesalers who supposedly deal in branded consumer goods bidding on certain websites for customer returns and graded goods. These can easily be reboxed and made to look new so you need to be very careful.

So first you need to establish what the price is for your product at the highest level in the distribution. That way with a bit of thought you can establish if the prices you are being quoted are likely to be genuine or not. You will not do this without extensive research but it is worth it in the long run.

Rule 4

Once you engage with a potential supplier, you need to carry out a number of checks and I suggest as a minimum

1. Address check, check that the address for their business is legitimate and checks out to be associated with them.
2. Ask for evidence of incorporation as a business, some may not have this but its worth asking.
3. Ask them for a bank reference and do not just assume that the bank they give you is genuine, check that as well. be wary of anyone who gives you different payment details to the business name they trade as.
4. For overseas companies, trade consulars in the national Embassies can be very informative.
5. Check the payment terms, never, repeat never pay anybody by T/T, wire or other unsecure method unless you have cast iron proof that they are legitimate and have the capability to supply. even then I would never use wire (western union) unless it was a very small amount may be less than £50.
6. Ask for customer references from previous deals.
7. Never launch straight in to a large deal without conducting a trial order first.
8. If you can, and I always would, consider visiting the supplier even if they are overseas. The cost of this pails to insignificance when you consider what you might be spending.

A lot of this will seem like a load of hard work for some people.

Even the above won't give you cast iron proof that someone is legit but it will mean you have done your homework.

Off course you may not be able to substantiate everything in points 1 to 7 and that doesn't mean the supplier is a scammer but at least your exposing some areas that help you understand the risk better.

Any supplier that gets peeved with you doing this should be treated with suspicion.

A genuine supplier would not mind at all, the fact you were being so inquisitive should give them comfort you are a genuine buyer.

If anybody thinks a visit to a supplier is going to far then let me give you my experience.

I started looking for unbranded consumer electricals around a year ago and eventually concentrated my search on Shenzhen in China. I homed in on 4 out of probably 200 suppliers that first contacted me and after a lot of correspondence (around 4 months worth)I went to see them.

What I discovered was nothing more than an elaborate street market. Most of these guys claiming to be manufacturers were in fact simply agents and brokers hot footing from one dealer to the next. I would liken it to the night market in Jalan Petaling KL (if anybody knows it) or similar. However of the four I had selected two proved to be very useful.

Slightly more advanced than the rest I saw, they had established businesses and were keen to develop relationships with me. They now act as agent between me and factories. I know the risk in dealing with them, they take my payment (which goes in to their business accounts) and broker the deal between me and the factory. I always get my goods and have not been let down yet. I buy around £2,000/month and it nets me a good profit. So my £800 expense on my visit was paid for in my first month!!!!!!! And if anybody was wondering, I found them on Alibaba.

Most established business Men and Women will tell you that you don't get anything for nothing. I know some people don't want to do the research but in my opinion you have to.

I hope this helps some people and gives a clue as to what level of pre work you have to if you want to be secure in your dealings.

I would welcome any feedback.