Is Alibaba Legitimate? Determine What’s Fraud and What’s Not

One of the biggest reasons people are scared when using Alibaba is because it is full of frauds.

Their due diligence process is non-existent and I have heard plenty of horror stories when people realize they’ve been interacting with a fake manufacturer. Though there are some legit manufacturers listed on Alibaba, the hard part is figuring out which one is legit and which one is a fraud.

With millions of manufacturers on their database covering almost every product vertical, Alibaba focused more on quantity, rather than quality. This could be a fatal flaw in their business model, as people tend to use their platform, usually do so only once. Unfortunately for users, that one time tends to be a bad experience and therefore they don’t become repeat users.

When you are on their website, you may notice their rating system and high revenue claims from potential manufacturing partners. As much as I wish these were all true, there have been case studies detailing the amount of fraud some manufacturers commit.

Below we dive into the type of fraud these “manufacturers” commit:

Payments Fraud:

The principle of this type of fraud is simple: The scammer hacks the suppliers email account and determines which orders are going to be paid soon. From the supplier’s sent email box, they download recently issued Proforma Invoices and make their own versions. It looks exactly like the “real” Proforma Invoice, yet the only difference being the beneficiary details.

This type of scam has been on the rise in the last few years. It’s easy for the Scammer as they simply replace the bank account beneficiary and the bank account number. What happens next is that the buyer makes the transaction, to a bank account not owned by the supplier. The scammers bank is typically located in Hong Kong.

The supplier you are working with doesn’t receive a single dollar. By the time you realize what happened, the scammer is gone and pretty much impossible to track down.

This is why we always verify the suppliers legal status and bank accounts before accepting them into our database.

Delivery of Defective Goods

While avoiding payment fraud is one thing, paying for defective goods is another. The key to avoiding defective goods is always getting a production ready sample. The sample you receive, should be what you expect to produce.

Though there are some cases of manufacturers delivering defective goods even with a production sample, the chances of this happen are much less when you confirm every detail of the product you’re manufacturing.

With that said, if you have the budget and want to really verify your goods before they are delivered, it is best to have a Quality Assurance process. This can be done remotely, if you’ve established a strong relationship with your manufacturer.

Though these are two types of fraud, Alibaba is full of dozens of different types of fraud. That is why we typically steer clear of Alibaba; or, if we use them, we utilize our existing connections, due diligence process, and communication skills to make sure the manufacturer we work with is legit.

Interested in learning how to find legit manufacturers on Alibaba? Sign up below to find out!