How to Avoid Common & Overseas Scams

Recently, I sat down with someone that’s been running businesses and buying products overseas for over 40 years. I picked his brain about all the ways scammers can get you.

The first thing you need to know about a scam is that it is essentially someone pretending to be or make something that they’re not. With a little investigation, anyone that is pretending will normally display some red flags.

Across the board, the best ways to avoid scams are: get samples, ask for references, Google and research both the company and its employees. Meet the person or company in person and see if you feel comfortable. Thanks to the internet, it’s growing harder and harder to run scams without getting caught.

Paying a portion of your payments in installments is sensible, and it’s suggested that you only make final payments once you are 100% satisfied.

Common areas to get scammed as a Maker include: suppliers, insurance and people posing as a government entity.  

Official Looking Mail or Calls

When you get a bill, call or scary voicemail, find out if these are legitimate. These may be from a “Federal” or “State” department, or the “IRS” asking for money for special certificates or licenses. A simple Google search of the phone number and/or message should reveal a lot. Also, always review the fine print of any emails or letters received.

How to avoid: Never pay a bill you don’t recognize. Google the name of the company and call someone reputable in your city to see if it’s a scam. Never pay tax bills over the phone or give out personal data unless you have called a reputable company.

Search Engine Results

There are times, like trying to get a business license renewed, that you search for how to do this using a search engine and get a top result that looks legitimate and real, but is not.

How to avoid: Make sure the web address has a .gov email address or is your city’s official web address. If you are looking to file for government permits and register your company, www.MyCompanyWorks.com is a reputable company to help you file forms.

Awards

A common scam is that you may be contacted and told you’ve won a “Best of” award. When you look further, it’s from a trophy company and they’re simply trying to sell you a trophy. That’s fine, if you want a trophy for your wall!

How to avoid: Recognize if it’s a legitimate company you’ve heard of in your town or nationally. Ask around and do your due diligence before accepting any awards.

Using Overseas Companies

The most common scams you’ll encounter are from overseas companies. It’s one of the reasons Alibaba has become incredibly popular. Alibaba is a supply website that will let you rate a company as well as only release the funds when you are 100% satisfied with your products.

Using an overseas company can be vital to the expansion, success and profit margin of your company. I’m a supporter of trading with other countries because sometimes producing a product in the US or locally can be 2-3x more expensive and you cannot compete with your competitors otherwise.

You’ll be hard-pressed to find a t-shirt that wasn’t made overseas when you’re printing t-shirts or jars for candles made in the US. One has to support a global economy to help local economies, this is part of the whole ecosystem.

Here are a few common ways to be scammed from overseas companies:

  • Products Ripped Off Overseas – Some companies will take your mold or product and start selling it all over the world. Or they might use your photos to represent their products. Sadly, this is quite common, but remember they don’t have the same customers or skills as you.
  • Knock-Offs – Companies can sell a product as a knock-off of another,  that is made of materials that aren’t real or are of low quality. The person knocking off the product might be trying to take advantage of a sales opportunity, or they may view their products as the same quality.
  • The Supplier Doesn’t Exist – Yikes. I know of many people who have had this happen to them. One ran a successful Kickstarter campaign, only to be forced to refund all of his sales AND lose all of the money he sent to the “supplier.”
  • “Trophy” Samples – In this scam, you get a high quality sample and it’s great, but the sample is nothing like the low quality goods you will receive later.

Here are a few ways to avoid these scams:

  • Get an overseas agent that you trust. It’s good to have one person that knows you well, looks for new products for you, can translate, and even drive when you visit!
  • Work with QIMA – a quality inspection company. They’ll make sure the company is there, watch production lines while products are being made and inspect the product going out to you. Hiring QIMA is like having insurance on your products.
  • Get Samples Shipped – It’s worth the extra money to get a sample shipped to you. At a minimum, they should be able to send products similar to yours to see the quality. Sometimes if you need a plastic mold made, you can see other products that have already gone through the process without having to shell out a lot of money to get a mold created.
  • Test Your Products – Especially in electronics, you will want to get your products tested. More recently, scams of face masks having certain certifications have been fake.

Overseas Agents

An Overseas Agent is a person to help you find and manage your products overseas. There are a few pros and cons to consider when working with an overseas agent.

  • PRO: If you have an account contact at a factory you’ve found, they may change regularly and not know your company well. An agent can help you as they will learn all about your industry and aren’t loyal to one particular company, only you.
  • PRO: They can normally get your pricing down MUCH lower than if you reached out to the supplier yourself.
  • PRO: Agents normally work on a percentage basis. A normal agent commission depends on how much work is needed, how large the order is, and how steady the work is. They normally ask about 3-5% commission, no higher than 10% depending on how much work and quantity of goods you need.

    If for some reason you’re going to buy $1,000+ a month every month, an agent normally gets paid between 3-5%. However, if your orders go up to $10,000+ a month, you may not have to pay them nearly as much.

    Remember, the bulk of the work is in finding a supplier; managing them can be much easier.

  • CON: Sometimes they’ll fudge the numbers. Ask for the factory quote and get it verified by the factory.  Sometimes you can find an “honest” agent, who will say “Tell me what you want and give me your target price.” They’ll find the product and sell it to you at a higher than true cost.
  • CON: Some agents will markup products. They will ask the question, “How many are you looking for and what is your target price?” Do not answer this question. What can happen is that if you’re looking for a jar, and your target price is $2 but they find it for $1, many agents will tell you they found the jar at $2. That’s a markup of the product at 100%!

If You Decide Not to Get an Agent

Learn About Cultures 

  • Many Cultures Like to Negotiate –  The first price you get is normally the top price. When I visited China, it took walking away from a potential agent to get the best price. If they let you walk away, then go ask others for quotes and see if they come down on pricing.
  • Some Cultures Are “Yes” Cultures –  One of my favorite stories was of my dad traveling to a country and asking someone at the hotel if they happened to have a cigar shop so he could buy some Cuban cigars. The man said “Yes, of course, sir,” in perfect English, and “right this way.” And he brought him to the bathroom.
    There are some cultures where it’s bad manners to tell someone they’ve misunderstood you. So when you ask for products and someone says “Yes, of course,” make sure they really understand you.
  • Travel to the Factory or to a Trade Show – In college, I got the opportunity to travel to China to check out factories. The agent met us, helped translate and found us a driver. It was a great experience! This is always a great idea if you’re about to invest tens of thousands of dollars into products.

Resources

(Free) The Import Bible 

Have you ever encountered a scam? Let us know below in the comments!

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