How to lose £20,000 in one day

I’m sure a lot of you guys who come across my blog are searching online for intuitive posts on how to make thousands of pounds or (Chinese RMB) in one day? That’s what we are all using Google for right?

It’s important to remember that while you’re looking for these answers you also look out for how to avoid losing the same amount of money. I recall before I came here I would sit in my office in the UK Googling my little socks off with searches like “How to make money importing from china”, “How to get rich in china” I don’t think I ever searched “How to avoid getting scammed losing my money in China”. Lets face it, if China can make you it can also break you and that’s just as likely, if not more likely to happen, especially when you combine China with the Internet and Exporting.

Along with sourcing and helping people manufacture their goods here I have also been helping customers outside China liaise with suppliers and safely complete their transactions. This is an essential part of doing business in any part of the world, closing the deal is where the issues often arise. I was contacted a couple of months ago by a customer who wanted me to check out and make a payment on an order he was about to complete. This customer has been dealing with a supplier in China for a few months buying and selling external hard drives. He went on to tell me that he has been buying the hard drives in small batches of 100 at a time and now wants to increase his margin by ordering them in bulk. This is common practice as many buyers want to test the water on products both from a sales and trust perspective. This buyer, lets call him John, was happy for me to share this story with you.

John and I have exchanged a lot of emails both about business and his general interest on China as a whole. He has become one of the many great friends I have made via this blog and that’s one of the great parts of this business, meeting interesting characters from all over the world. I have helped him source a few goods but the hard drives are something he had been buying previously. As John now wanted to increase his order he wanted me to visit and check out his supplier – a factory based about an hour from where I live in China. I was happy to do so and fitted it in with another factory visit I had in that area. I made an appointment to visit the girl he had been dealing with and headed down to her office.

Through various broken communications I ended up meeting her away from her factory and she brought me 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 here as a lot of the younger generation spearhead the sales teams here as they have a richer knowledge of the online sales platforms used for selling. I explained to her that we required the 1000 units to the same specification as the sample which is the same model John has buying for the last few months and we required it within a week. This was to be a repeat order John would need every 6 weeks and I explained that i would need to visit the factory and satisfy myself with its operation before I could make the first order. She was a little resistant to this but i said it had to happen and as I was in the area today it would be better to do it now. She made some phone calls and we then headed to a factory.

The factory visit here is always a grey area as its difficult to know who owns the factory. Many times I have been taken to a factory by a salesperson who claims to own it but I find out later this is not the case. I suppose it’s not too important who owns the factory after all it’s not a showing off contest we are in, we are just interested in the product quality being up to scratch and the price providing the margin we require. Factories are usually solely focused on producing and its often more beneficial to buy from a third-party anyway. This particular factory looked good and although the particular model was nowhere to be seen this again is not unusual as most orders are made to order anyway. I explained that i would collect the stock in person the following week and would pay when I collected the goods. I always, always do this and its my best advantage here. I’m in China so why not absolutely minimise any risks by physically checking the stock myself? She was uncomfortable with this as she explained that a deposit would be required before production. This again is normal and I can see her point, last thing anyone wants is to produce 1000 units for an order that never gets paid. I negotiated the deposit amount and the deal was done.

About 12 days later after some typical “delays” the goods were ready for collection and I headed down to make the pickup and inspect the goods. I was given an address for the office which again was away from the factory. I had made my own decision that this girl was not a factory owner or employee simply a trading agent but she had good pricing (to be honest the pricing she offered was really cheap), perhaps better than I could get direct from the factory for just 1000 units so I was happy to work with her. I arrive and the goods are there boxed with some samples ready on the table for me to check. Again the samples were good and I was impressed with the quality. I then do my usual checks on the remaining stock, I begin opening boxes and looking at the rest of the stock, again all looks good, all stock is there and random checks booting up the hard drives is good, all showing correct memory and no issues. The boxes and hard drive case carry Johns own branding logo and all looks really pro. I had opened up maybe half of the stock and this is when things got a little strange.

She was very uncomfortable with me making these checks as she apparently has another meeting, the goods had been securely packed and she had not got the time. Not really my problem as my concern is the goods, not her schedule. I decide to open up a hard drive and that’s when it got interesting.

fake hard drive from china
The girls face was a look of disappointment, not shock, no excuses. Just a look that let me know I was right to make the extra checks. The hard drives were using a chip to make my 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. This is common practice for memory here in China and something I have experienced before. To make the weight seem legit heavy fixing bolts had been glued into the casing. I opened up several more, all the same.

For those of you who don’t know each of these should sell for about 50 GBP and this is whats supposed to be inside the casing of an external hard drive, an actual hard drive like this:

Realistically this girl has lost a good solid customer and all to make a short-term gain on one order instead of a steady income for a good time to come. This seems to be the mentality of a lot of sellers here and it leads to this kind of thing happening often.

This is not the first time this has happened to me, nor will it be the last. The unusual thing was the way this girl 100% did not believe I would find out the goods were fraudulent. She was so bare faced it surprised me. It made me think that you never can take your eye of the ball here, even when you think you have all your bases covered you must double-check everything. At 1000 units the order was around £20,000 GBP and the retail value of these goods would be something like £40,000 GBP. Had these goods arrived with John he could not have sold them and would have been heavily out of product losing all the profit he has made from the last years eBay selling.

Luckily i was able to nip this in the bud and protect John from losing that investment. I have since found him an alternative supplier and he can move forwards with his business.

It is absolute key to get every product you source form China as cheaply as possible but that does not mean you should put yourself at risk just to save a few pounds. Remember on each transaction you are always at risk especially with a new seller or a large quantity. What do you know about the person your buying from apart from what they have told you on msn? China is not our back garden so we cannot treat it as such.

Couple of lessons to learn – none of which are ground breaking…… If the price seems to good to be true it probably is. Always check your stock, at every interval to cover all your bases. Only buy from people that you wholeheartedly trust. Remember that your sending these people equivalents of years and years worth of salary and the could just vanish.

People lose thousands upon thousands of pounds here every day, don’t let it be you.

37 thoughts on “How to lose £20,000 in one day

  1. Hello Daniel, nice blog and nice article (s)…i`ve been in china at the start of this year in guangzhou …very interesting…im from uk…can you please leave me your email address because i want to ask for soe advice fro you …thanks a lot see ya

  2. “The factory visit here is always a grey area as its difficult to know who owns the factory. Many times I have been taken to a factory by a salesperson who claims to own it but I find out later this is not the case. I suppose it’s not too important who owns the factory after all it’s not a showing off contest we are in, we are just interested in the product quality being up to scratch and the price providing the margin we require.”

    I would say in my experience it is VERY important to meet who owns the factory. Seems you have a business mind, but doing in business in China involves doing it in the “Chinese way”. You need to become buddies with the factory owners, and this will minimize any problems you experience throughout production. Also, if a problem arises the boss will make it his priority to get the problem fixed so he doesn’t lose face any type of face.

    Dealing with narrow minded 22 year old office girls will get you no where. They will constantly try and cover or hide any problems from you, and yes, also their boss, so they dont lose any type of face.

    • Hi,

      Yes your right, it is imperative to forge relationships and build rappour. I simply mean that a lot of Chinese sales people try to impress by saying they own the factory and in reality it makes no odds. China is one big showing off game, no need to get caught up in it.

      Thanks

  3. Hi Daniel,
    This is my first time to follow up your post after dropping by several times,
    Well done!
    But in other hand, as one of your suppliers,
    I shall feel shame at this girl and the trick she played,
    She deserved that.
    Some of our Chinese just too eager to quick success and instant profit.
    I hoped that the products that you bought from me hadn’t made you feel same way on me.
    BTW, If you want to verify any of your suppliers before you place the order next time,
    I would like to help.

    • Hey kelvin,

      Thanks for stopping by, hope your good.

      Yeah karma will get them in the end but it is scary how often this problem arises.

      No, so far none of the goods you sell me have had metal bolts inside. Well apart from the ones that are supposed to be there.

      Take care

      Daniel

  4. Excellent article, Thank you for sharing. I attended Canton fair last year and visited a few factories as well. You can easily loose a lot of money in China especially if you are from UK, because the culture is very different. I would highly recommend your services to anyone due to my experience.

  5. Were these supposed to be hard drives as in platter hard disks? If so, wow, I’d question their reliability! Remember, people are risking their data on these generic devices that might crash at any moment.

    (Speaking as a victim of hard drive data crash!)

    • Yeah really surprising how blatant it is.

      Packaging box , manual and everything was such high quality though.

      I cant help but feel it would have been less hassle to just make a real drive!?

      I had to edit your comment though, please don’t swear on here – small children might want to import from china too. Ha ha.

      Thanks

  6. All I can say is WOW that’s Insane. Ive been scammed a couple of times not a good feeling when you worked hard to make the money for the investment. Good thing you checked that order! I’m also looking for some new things on the market I can provide here in the US let me know if you have good leads on products I can get my hands on for a good price.

    Thanks YMC

    P.S
    I love the name and the logo! Great work :)

    • Thanks,

      Logo and name was literally a 5 min photo shop session before i came here.

      Loads of great products here, get in touch and we can bounce some ideas around for what might work for you, I have some great customers over in the US.

      Take it easy,

      Daniel

      • Yeah it reminds me of runs house haha and youngmoney haha but that sounds great man I will send you an email and we can keep in touch let me know what you have and we can set something up soon. Thanks good to hear from you :)

  7. Great Article,
    I am looking to start importing from china, however the suppliers that I have been in touch with all give high prices. Any help would be greatly appreciated.
    Adam

  8. Lol @ doing it in 24 hours!

    I guess the 12 days actually supports their case in making it look ‘genuine’, as if they would have completed the order in 24 hours you would have been suspicious!

    I think the key here is trust as a ‘default characteristic’ inherenet within people. I’ve lived in the UK all my life and we generally have an honest and trusting attitude. However, until people prove themselves, then I guess we have to consider that absolutely anyone can be a potential shark!

    Truly inspirational and priceless blog, so all due credit for making the effort to enlighten prospective traders.

    Micky

    • Thanks Micky, Kind words.

      Maybe they ran out of glue sticks for the glue gun, this could have lead to production delays? i have not seen a shop selling them here to date…. ha ha

      I ordered some mobile phones last week with fully customised casings and the front screen glass modified with customers logo on.

      Order was turner around in about 12 hours and all stock was spot on.

      They can be good here when they want to believe me, just got to do your bit.

  9. wow, well done Daniel!!!

    Fake memory is norm when dealing with Chinese suppliers but I have never seen such a creativity by them using bolts etc. to make it look/feel like the real thing.

    Did you get back all the deposit? I’m sure there was some payment made prior production starts.

    • Thanks Andrew,

      Was a dramatic day to say the least. On this occasion i did get the deposit back but it could have gone ether way, i was just lucky that i had built a little rappour with the girl and kept cool with her in order to best resolve the situation.

      They sure are creative though, but 12 days to glue bolts into plastic cases? i could have done that in 24 hours.

      Ha Ha.

  10. I tend to stay away from these sorts of products for this very reason – memory is often fraudulently declared in China, especially in things like memory sticks, memory cards etc.

    I have bought them from ebay for my own personal use – 4GB and it turns out that I cannot store more than a few photos on it – crazy.

    But as you say – she and the factory could have made a continuous income from repeat orders if they had done it correctly – rather than trying to be greedy in one go.

    Great article Daniel, and I will be sure to post it to my blog http://www.SellingGuru.info with your credits if ok.

    • Hi Richard,

      Yes memory is a funny market and perhaps has been one of the hardest ones for me to nail down. I have a nice collection of SD cards in my office that’s for sure!

      Seems crazy to me also to lose a long term business buyer but i guess the hit they could make on that initial scam was too good to miss and would have got them on the way to a nice new Merc I’m sure.

      Thanks for your continued support of my blog, i appreciate it.

      Take care.

  11. Brilliant Read, I currently import products from China, I use Aliexpress for the Escrow system which protects me as I get the goods before the money is released, plus all my products are non electronic and more paper and crafts so I guess there are less checks for me to make.

    Bit of an eye opener to doing business with anyone overseas that you cant meet in person!

    • Hi Manish

      Thank you for the comment.

      You are playing safe with Escrow but i can see problems in the future with it as even genuine sellers here will bee funny about using it in case they in-turn get scammed.

      The internet is a hard place to be both a seller and buyer these days.

      Look at paypal and ebay “Item not as described cases for example, overly manipulated by fraudulent buyers making the whole system a nightmare.

      There are honest people still in this world though, just be careful while you find yours.

      Thanks

      • Totally agree on that, I sold a few odd items on ebay when i was younger and got stung on that whole ‘disputed sale’ thing from one person who just wanted to scam me just because they felt like it, then over the years i heard more and more stories which is why this year I just set up my website and sell from there instead whilst importing from china for the products.

        Lets hope my suppliers in Yiwu are as honest long term as they have been so far.

        Oh btw, I got here from TWF a few months back, (if thats of any interested to you) :)

        Thanks

        • I really wonder how much longer eBay can go on the way it is, i mean sure its a great platform but something that volatile makes me lose sleep at night.

          The buyers now have way too much power and take advantage of this, i have read countless posts on forums from buyers advising others on ways to play the system. Its just wrong.

          Still no good complaining you have to dust yourself off and get back in the game, like you have done by the sounds of it.

          You made a good move going to your own eCommerce store, i wish you the best of luck with it.

          Thanks

  12. Wow that’s a really interesting read and a very close call. I wonder how many people would have checked as thoroughly as you did especially as you had connected a few of too and they showed ok. I’m pretty confident I’d have been satisfied by that but luckily you went a stage further and opened one.

Any comments or questions? I'd love to hear them.