Love at first sight does not guarantee long-term bliss. Do your homework to find a great romantic partner the same way is true for business. Many buyers have been scammed by suppliers - or had contract disputes with them -- because they don't realize they needed to verify the supplier or didn't have the expertise or the resources to verify them properly.
It's simple. Before doing business with a China supplier, buyers need to verify that the supplier is a real company, that it is financially strong enough and technologically capable enough to fulfill your order, and that it can compensate you in case of a loss or dispute.
Here are some verification tips to bear in mind:
|1.||Do not use any supplier if it:|
|* sells copy-cat branded products at extremely low prices. (Check out the article Counterfeit Products and Scammers in China to learn why.)|
|* doesn't have its own website, only a presence on a free B2B website. Even if they are a real company, then they are badly outdated.|
|* accepts payment only through a personal account or Western Union. (Check out the article China Company Inspection Guide to learn more about this issue.)|
|Note: Companies that exhibit at the Canton Fair and East China Fair are generally trustworthy. However, make sure they have attended those fairs on their own, not as sub-renters from other companies. Remember, big Canton Fair exhibitors may not be the best for your needs since they can be slow in responding to small buyers. What's more, you still have to check their production capacity, financial standing and service level. Your best supplier choices are those you meet on the sites of industry associations.|
|2.||Be sure to compare price/service levels to narrow down your list of potential suppliers.|
|Eliminate those with the highest prices and those that you may have communications problems with. Try to shortlist to three suppliers maximum. Also be aware that suppliers offering extremely low prices can be considered "fishy,: since they may be cutting product quality to bring prices down.|
|3.||Request samples or place a trial order first in order to judge price, quality, and service standards.|
After completing all of the steps above, you should also perform a proper verification, including:
|1.||A visit to the company to check that it actually exists at its stated business address, to estimate its production capacity and technology level, to review company assets (number of building, employees, etc.) and to determine the registered capital of the company.|
|It will be risky to sign a US$10 million contract with a company that only has registered capital of US$300,000 and fixed assets of US$300,000. If a contract dispute erupts, the supplier can easily file for bankruptcy, but you won't be compensated for even 1/10 of your loss.|
|2.||A visit to the local governing body (for example, the department of industry or commerce that is in charge of company registration) to confirm the accuracy of the information the supplier has provided.|
|3.||Finally, a brief online background check to see if there are any complaints - or other information about the company.|
Steven Chow is the founder of chinawhy.net, which provides china sourcing related services to overseas SME.