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How to lose £20,000 in one day
The question as to whether to hire the services of an overseas sourcing / quality control agent usually comes down to money. How much can you afford to lose? I will go into this in more detail in future posts but for now I want to share with you a real life story that shows what lengths some Suppliers will take in order to scam an importer.
This comes courtesy of a friend of mine – Daniel Cassidy, who moved to China from the UK early in 2012 to make his millions, which through pure hard work he is certainly on his way to doing.
So, what happened?
Along with product sourcing and manufacture, Daniel helps customers outside China liaise with suppliers and safely complete their transactions. He was contacted by a client who wanted him to check an order before payment was submitted to the Supplier.
This customer had been dealing with a supplier in China for a few months buying and selling external hard drives in relatively small batches and wanted to increase his margins by ordering in bulk. Having had successful transactions with the supplier already he felt that they could be trusted, but due to the amount of money involved wanted to add an element of protection just in case.
For those of you like me that don’t know a hard drive from a banana – this is what one should look like inside the casing:
They asked Daniel to visit and check out his supplier, who agreed, and made an appointment to visit the girl he had been dealing with and headed down to her office.
Through various broken communications he ended up meeting her away from her factory and she brought a sample to check the quality of her goods. The sample was spot on and she seemed like a lovely girl, happy to help. She was quite young, about 22 but that’s pretty normal in China as a lot of the younger generation spearhead the sales teams as they have a richer knowledge of the online sales platforms used for selling.
It was explained to her that 1000 units were required to the same specification as the sample. This was to be a repeat order every 6 weeks and Daniel advised that he would need to visit the factory before the first bulk order could be confirmed. She was a little resistant to this but it was suggested that as they were in the area they should do it now. She made some phone calls and they headed to the factory.
A factory visit in China is always a grey area as it’s often difficult to establish exactly who owns the factory. Many ‘middle men’ will say they do when in fact they simply buy from there themselves – Not a problem in itself as they are usually just trying to save face by acting as if its theirs and it’s often cheaper to buy smaller quantities from middle men, but sometimes it would be nice to get a straight answer.
This particular factory looked good and although the particular model was nowhere to be seen, this again is not unusual as goods are made to order anyway. It was explained that Daniel would collect the stock in person the following week and would pay on collection. This is one advantage of being on the ground in China. She was uncomfortable with this as she explained that a deposit would be required before production. This again is normal – last thing anyone wants is to produce 1000 units for an order that never gets paid.
A week or so later the goods were ready for collection and DanieI headed down to make the pickup and inspect the goods. The address given was that of the office rather than the factory. It was pretty obvious at this point that the girl was not a factory owner or employee, simply a trading agent, but as mentioned this is not an issue.
The goods are there, boxed up with some unboxed samples ready on the table to be checked. Again the samples were good quality. A few random checks were made on the boxed items and all also looked good.
When buying anything related to electronic storage it is very important to check that it does what it says on the tin. Memory costs money and it is a relatively common scam to order one size, but what you actually get has far less storage capacity than is stated. Daniel booted up some of the devices and used his laptop to plug into the hard drives to test the memory – all exactly as ordered.
The girl was starting to act a little odd – a little uncomfortable while these checks were being made. She explained she has another meeting and had no more time. Daniel felt something was not right and decided to open up a hard drive. This is where it got interesting:
The girls face was apparently a look of disappointment, not shock, no excuses. The hard drives were using a chip to make the laptop think that they contained 500 GB memory when in reality they were using a 128 MB SD card and would only ever hold a fraction of what they were intended for. To make the weight seem legit heavy fixing bolts had been glued into the casing. On opening a few more it appeared that all of the boxed items were the same. The goods were worthless.
Realistically this girl lost a good solid customer all to make a short-term gain on one order instead of a steady income for a good time to come. This order was worth around £20,000 which would probably have been over a year’s salary to her, with a UK retail value of double that. This shows that large amounts of money can be made from buying from places like China, but if you take your eye off the ball money can be lost too. It is just a few button clicks away on a computer but a million miles away should something go wrong.
Scammers make up a tiny percentage of the International transactions that take place every day. Don’t be put off – Just be sensible. As with this case, if you cannot afford to lose £20,000, use an overseas sourcing/QC agent. If you want some recommendations as to who to use get in touch.
Do take a look at Daniels Blog if you get the chance.
http://www.youngmoneychina.com/
