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Insider’s look at Alibaba Inspection Services

Sorry for the long blog post, but I am passionate about helping buyers understand their options in China.

While walking a trade show in China, I was handed a brochure about the inspection services offered by Alibaba.com.

To the uninitiated, the marketing message on the brochure is very appealing, especially to a new-to-China buyer who doesn’t yet have the experience of dealing with China/Alibaba and/or a buyer who is unable to read between the lines of this slick marketing message. Perhaps I have grown too cynical during my 12 years sourcing in China, but here are my comments inserted into their marketing message.

Stressed about the Quality of Your Product?

Be sure with Inspection Service on Alibaba.com!

I’m still pissed off about “Ali-scam” where Alibaba staff were in collusion with Chinese crooks to trick foreign buyers into placing orders with suppliers that didn’t exist in exchange for a piece of the take. See this link to the Wall Street Journal about the Alibaba.com fraud. Here are some blog posts I contributed to which explain What buyers should learn from the recent scandal at Alibaba .

In short, until they get some more reputable companies at the top of their list, Alibaba are the last people I am going to trust to inspect my products!

Why use inspections service on Alibaba.com?

That’s obvious- because I don’t trust suppliers I find online until their trust has been earned. And I trust Alibaba suppliers the least. Sourcing expert Renaud Anjoran does a great job explaining why in his post The real Alibaba fraud: not the one everyone talks about .

Reliable Inspectors

Every inspector is pre-qualified by Alibaba.com

I immediately asked myself, if Alibaba has a hard time qualifying their vendors how are they going to qualify inspectors? Maybe if they have some famous inspection agents I can feel safe. To the contrary, the inspection agents found at http://inspection.alibaba.com/ are far from famous. Not a single major inspection agency is on the first page of this list at the time of writing (5.16.2012). There are some big companies on the list if you dig past the first few pages. But those companies appear not to have any active projects in the Alibaba system. I hope some professional companies join the top of the list because the real scary part is that many of the inspection agents on the current list are not even companies. They are individuals doing freelance work. Unbelievable! If these guys screw up, they are doing to disappear and leave the buyer hanging. Using these freewheeling freelancers goes against my core principles. My blog posts How to find a QC partner and Finding a good employee explain why in great detail.

Secure Escrow Payment

Payment is held released to the inspector only after you confirm receipt of the inspection report.

That does add a level of safety. But in so many words it really means they don’t even trust the inspectors in their system.

Affordable Service

Wide price range from different types of inspectors to satisfy your specific service requirements.

Pardon the profanity, but I read this to mean, cheap-ass services for cheap-ass buyers who don’t really care about quality. The major inspection agencies (SGS, Intertek, BV) and even the mid- sized inspection firms (Asia Inspection, Asia Quality Focus, Pro QC) all charge at least 290 USD per man-day for inspection, inclusive of transport. I don’t know a single professional buyer (meaning the buyers who care about quality AND price) who use the bottom-of-the barrel inspection agents charging below 100 USD like some at Alibaba.com. I honestly believe you get what you pay for.

Maybe this is a new service at Alibaba and I am being too harsh. But I’m afraid in China we need to assume the worst until proven otherwise.

Quality Inspection Guaranteed

Compensation up to 20 times the inspection cost in the case of a false or faulty inspection.

Let’s say you pay your inspector from Alibaba.com 200 USD for the inspection. Let’s say you order a container load of pink underwear and blue underwear shows up. 20X sounded safe at first, but $200 x 20 is only $4000 in maximum liability. Your order could be 100,000 USD or 100 USD and the liability of the inspector is the same. So these services are very much geared to the lower end of buyers. I often joke that Alibaba is the flea market of global sourcing. And don’t get me wrong, flea markets can be fun. But just what you are getting into. Suggest you read the blog post Directories of Chinese suppliers & manufacturers to get another buyer’s view on how the online directories stack up.

Now to be fair, liability limited to a multiple of the day rate is indeed the standard practice across the inspection industry, from the small individual freelance inspectors to the big boys. BUT, if you really want to protect yourself and find a good inspection partner, you should not focus on the amount of liability they offer but rather focus on finding a professional agent from day 1. A legit firm with small liability is much safer than a fake company promising a massive guarantee. Guess what happens when that small company screws up. I’ll tell you what happens- freelancer Joe Wang just closes his website (no company to close) and starts over the next day under a new name and new URL. Big inspection companies can’t do that. Good luck getting any compensation from Mr. Wang (probably a fake name to begin with).

Here are some tips to find legit service providers.

Do a good search under the key words of “China + inspection + audit” and you will find plenty of options. Then ask the following questions:

Are they a legitimate company? If they ask you to pay to a personal account, this is a big red flag.

Do they have a clear track record of performance? If they can’t give you some client references, run away.

Are they focused on a certain set of services (inspection only) or do they try to everything for everybody (inspection and engineering and sourcing)? Yes, even the 3rd party service providers have been known to outsource to others just like some factories outsource production without telling the buyer. If an inspection company is also a trading company- that is a big conflict of interest.

Is their pricing structure and service agreement well defined and transparent?

It is a major pitfall to do business with a 3PQC service provider without a clear contract in place that outlines the service, costs, time frame and other desired attributes of the partnership. If something goes wrong, you want to know in advance how the company is going to stand behind their services.

The golden rule of China sourcing is to inspect the products before you make final payment before the goods leave China. So I highly encourage you to conduct inspection independent of the factory, but find the professional inspection agents or you are just wasting you money.

Related videos and blog posts:

Wishing you successful China sourcing!

About the blogger

Written by Mike Bellamy – author of, “The Essential Reference Guide to China Sourcing” (http://chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (http://www.PSSchina.com)



Mike Bellamy

Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). Author of “The Essential Reference Guide to China Sourcing” and founder of PassageMaker Sourcing Solutions. Mike is co-founder of CSA, the China Sourcing Academy.


13 thoughts on “Insider’s look at Alibaba Inspection Services

  1. admin

    Yves,
    Glad you enjoyed the article. To be fair, the article was written back in 2012 and Alibaba has made some improvements since then but I still have reservations about many of the so called inspection firms listed.

  2. yves

    Dear Mike,

    What a stunning article!

    I was actually looking to get more information about this AliBaba Inspection Service – I own a QC, Sourcing & SCM company in China, and we offer such services.

    One of my suppliers told me “no worries, no need for audit, AliBaba Inspection Services come here often” and since I never heard about this I had to google and you opened my eyes a bit further with this article…

    Thanks for this!

    Keep up the good job and warm regards from Shanghai,
    Yves

  3. yves

    Dear Mike,

    What a stunning article!

    I was actually looking to get more information about this AliBaba Inspection Service – I own a QC, Sourcing & SCM company in China, and we offer such services.

    One of my suppliers told me “no worries, no need for audit, AliBaba Inspection Services come here often” and since I never heard about this I had to google and you opened my eyes a bit further with this article…

    Thanks for this!

    Keep up the good job and warm regards from Shanghai,
    Yves

  4. seo

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  5. Mike Bellamy, with CSICMike Bellamy, with CSIC Post author

    Hi Rebecca,
    Thanks for your feedback on behalf of Alibaba. I am happy to post your comments for our reader to review.

    Perhaps I have grown jaded during my 12 years sourcing in China and tend to assume the worst until proven otherwise, so I appreciate your suggestion to reach out to users of the service and get their feedback before passing judgment.

    You mentioned the “escrow payment service” as part of the inspection offerings. I also understand you offer that escrow service for buyers-sellers using your website. I have a few questions that I would like to ask you about that service as it sounds great to be able to have a 3rd party hold the funds and provide protection to the buyer in the event the supplier fails to perform.

    Kindly give me your thoughts on the following:

    1. what types of buyers use the escrow service? For example, is it aimed at buyers of “off the shell” goods or can it be applied to highly customized products as well. I ask because from the suppliers point of view, there is much more risk when doing customized products.

    2. Can you provide any data in terms of how much transactions utilize this service and avg value of the amount in escrow per order. I suspect it is a good fit for small orders where the risk to either party is limited, but I was wondering if large buyers who place orders of hundreds or millions of USD per order use your escrow services.

    3. when there is a dispute, how does Alibaba decide who is right and wrong- in other words, when there is a problem how do you decide if the buyer or seller gets the money? So often it is not black and white. For example, if a buyer gives an unclear spec, it is not really the supplier’s fault.

    Thanks for you feedback.

    Best Regards,
    Mike Bellamy

  6. David De Clercq

    Hi Mike,

    Great article and summary of the Alibaba scams :)
    Its unfortunate but many first time buyers fall for the “Ali-scam”. We come across a lot of inquiries mentioning they already had “factories” from Alibaba… and its only later that they get a nasty surprised.

    Have you seen my father’s post about the Alibaba scandals? Have a read here and let me know what you think! http://www.chinaperformancegroup.com/2011/07/sourcing-in-china-and-alibaba/

    Dave

  7. Camphor Oil

    Hi,
    Very efficiently written information. It will be helpful to everyone who usess it, as well as me. Keep doing what you are doing – i will definitely read more posts.

  8. Cornelius Mueller

    Great post, as usual, deserves a wide distribution. On the other hand, those buyers I encounter who got hurt by AB probably will see this most recent add-on to the company’s ‘services’ as an improvement. As much as many AB suppliers (and now inspection companies) are ‘bottom of the barrel’, so are many of their customers, for many reasons.

  9. Rebecca Lui

    Mike:

    We agree with you wholeheartedly on many of the points you make in this post.

    It is imperative to do your due diligence when embarking on a business partnership with a manufacturer in China or anywhere in the world. That includes, as you point out, ensuring that you don’t put significant money upfront before your goods have been inspected.

    We offer our customers the Inspection Service precisely for this reason. All our inspectors are carefully vetted before being accepted by Alibaba.

    Most importantly, not one of the several hundred deals on our inspection platform has triggered a dispute or a complaint. We believe that’s because of the high quality both of the inspectors and our Escrow payment protection service. Customers are also encouraged to write reviews of the inspections on the Alibaba site, and these are uniformly positive.

    We encourage you to speak with buyers who have used Alibaba’s Inspection and Escrow service before rushing to judgment.

    Rebecca Lui
    International Corporate Affairs
    Alibaba.com, Inc.
    Santa Clara, California

  10. Renaud

    I agree 100%.
    The 2 things that are most shocking to me:
    #1. No care in selecting service providers. Many of them are freelancers pretending to represent a company. The provider that performed the highest number of jobs on this platform got very strong inspiration from its competitor Intertek when it designed its logo!
    #2. No professional evaluation of the inspectors’ job. The ratings are given by the clients when they receive the reports… not when they receive the products.

  11. John Lockyer

    Mike, excellent dissection of the Alibaba inspection service. Glad to hear what you really think and I can tell there is passion in your writting.

    Please check the date given in the article:
    “…at the time of writing (5.16.2011). …”
    I think you mean 2012.

    Cheers, John

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