We know that our most active members are the real experts in this industry, so we interviewed a few of them and asked them to share their tips for safe trading.
Due Diligence: Ask for References, Check Feedback
Every trader we've talked to checks references on companies before doing business with them for the first time. Maneli Rezvani from Ollycom ApS in Denmark told us, “You can never be 100% sure. There have been times when working with a new company that a trader seems like a real gentleman, very professional, but we never receive the goods. We check references for every company.”
While some traders just ask around for feedback from their group of trusted contacts to find out if they have heard of a company and whether it's good, others have a formal process for verifying a new business partner. Krzysztof Wadowski from Action S.A. in Poland says his company has a strict policy requiring that each new business partner complete an application, including listing two business references. Checking a company's chamber of commerce and VAT certificates is also a common practice amongst our traders. These background checks generally take a day or so to complete, but are an important step in protecting yourself against fraudulent trades.
Finally, many of our members rely on their gsmExchange account managers for information about other companies. “I trust my account manager, Chris, for advice on companies,” said Riyaz Ahmed of Universal Mobile Trading Ltd in England. Our feedback feature is also a favourite tool for traders, Tom Van Eijk from FM Wholesale BV in Holland says he uses gsmExchange feedback to find out which companies have a good reputation on gsmExchange and in the industry.
Deposits and Payments
When dealing with a new business partner Mr Van Eijk (FM Wholesale) says he “starts with a small deal” to minimize risk. Carefully handling the negotiation of payment terms is another important step in protecting yourself from fraud. “We always ask for a 10% deposit before shipping because without a deposit you can't be sure that the customer will take the stock. A serious customer will never say no to giving a deposit. We'd never work with someone who refused to pay a deposit,” said Ms Rezvani (Ollycom). Our other traders agree, adding that a deposit is a sign of good faith on behalf of the buyer and also serves to cover freight costs if a customer decides not to take the stock at the last minute.
Verification and Inspection of Stock
A reliable freight forwarder will ensure a smooth transaction and provide additional security for traders. No one knows this better than Fernando Caeiro from IT2U GmbH in Germany, whose company once used a freight forwarder they didn't know, and the forwarder released the stock without warning and without approval. Mr Caeiro's company was never paid in full for the phones—the other company got 1,000 handsets for 10% of the cost, and Mr Caeiro learned an important lesson. Now he only works with freight forwarders he knows well, and when there is stock on hold, he demands “written confirmation that the forwarder will only release the stock when they receive his written authorization.”
Ms Rezvani (Ollycom) confirms the importance of freight forwarders to her business. She said “We visit the freight forwarders, to meet them, talk to them personally and to get a sense of the security of the warehouse. The freight forwarders inspect the stock for us and send us photos and ID numbers.” When the freight forwarder has provided an inspection report, then the rest of the payment can be made. These companies also offer insurance to help protect you while trading.
Final Thoughts
“You must be careful because nothing is 100% safe in this business. The deal is done when the money is in the account,” said Mr Caeiro (IT2U). The next step is building up a good network of contacts, including trustworthy traders and freight forwarders. Apart from meeting up with partners at trade fairs, many of our traders visit each other personally to build the productive relationships that they count on to keep their businesses strong. Mr Van Eijk (FM Wholesale) said they look for long-term partnerships with companies, not just one deal. He said “We have good relationships with a small group of European partners. By building these relationships, we won't get scammed.”
When in doubt, call or email your gsmExchange account manager for background information on a company and suggestions for trading. We're more than happy to help you double check whether a company is good to do business with.
If you have your own tips for avoiding fraud, please share them with us in the comments.