Due Diligience Checklist, Verifying Wholesale Distributors, Wholesale Suppliers, | Blog of Asia

Due Diligience Checklist - 8 Steps for Verifying your Online Supplier

Posted on Friday, 12th September 2008 by Lee

Why make a simple guide for checking out suppliers? It has to be one of the most common questions I’ve seen asked in person, on forums, or in emails; small businesses or entrepreneurs just starting out usually have to spend countless hours on the internet doing this research and putting together a plan of action. My hope is to answer these questions and save you time, or at least give you a better picture of what you need to do.

What you need to know before you buy

Once you’ve located your suppliers online, what follows next is commonly known as “Due Diligence”, and will involve further research on your suppliers. Your aim is to figure out whether your suppliers meet your standards regarding reliability, quality, and numerous other factors. What follows is a basic step-by-step guideline you can use to check out a supplier yourself, which will help minimize the chance of dealing with “lemons” or outright scammers. Don’t scratch a supplier off the list if it fails one of the guidelines below, you should consider it only part of the overall evaluation of the supplier. More importantly, don’t ignore “Due Diligence” just because the supplier is a “gold member” you found on Alibaba, such status can be bought, and does not guarantee reliability or trustworthiness.

1) Collect company details – Find out their company name, what type of company they are (sole proprietor, LLC, corporation, Ltd, etc), where they are based, their address, and their contact details (Phone, fax, email). All are important for the following steps.

2) Check Company Registration - If the supplier claims to be a registered company, such as a LLC, INC, or Ltd etc, go to http://www.companieshouse.gov.uk/links/introduction.shtml#reg , which contains a list of company registries worldwide. Look up the company’s registration information and see if it matches the information the company gives you.

3) Check Domain Registration - Go to http://www.whois.net/ and check their domain to see if it is registered under similar details as information they have provided, such as address, company name, and contact details. This information will also reveal how long their website has been around.

4) Google them – use http://www.google.com/ , while this is an obvious step, it is a powerful tool to find extra info about the company. Look up the company’s website and business name to see what information you can come up with. You’re looking for consistency in information, any reviews, or disgruntled customers on forums.

5) Examine their products – Are the prices too low, are they branded, could they be fake? While they questions could apply to all products, those looking for branded goods should be particularly careful. Electronics like Ipods and Sony Playstations; or Fashion like Gucci and Tiffany; buyers for these products are especially susceptible to being scammed by fake goods. Distributions of branded goods, especially popular ones, are controlled by the brand holders. The best place to find a distributor of these products is to check with the brand holders themselves (assuming they allow outside distribution, which they may not).

6) Payment terms – while not indicative of whether a company is trustworthy, specific payment methods can offer the buyer an added level of security when they’re making their first purchase. Examples are companies that offer transactions by credit cards, paypal, or other third party checkout that accepts credit cards, which gives you the ability to do a chargeback should you get cheated. While not guranteed to work, this is likely better than nothing. You may run into a problem here when using suppliers outside of the U.S., who may not offer purchase by paypal or credit card. Sign up for paypal at http://www.paypal.com . Learn how to do a chargeback here: http://www.ehow.com/how_2191250_make-chargeback.html

7) Contact them – Not as great as a face to face meeting, but getting in touch by email or phone will help you get to know the company. Conversing with the company about the products and services they offer will reveal their level of expertise, and how quickly they respond to queries, and generally how accessible their customer service is.

8) Place Sample Order – The only way to find out whether your supplier can deliver the goods is to place an order with them. Place a small one that meets their minimum order requirements to examine the service and quality of products. If you want to be extra cautious, you can place several of these small orders to get a better idea of reliability.

Here is a summary and quick checklist:

Collect Company Details
Look up company registration at http://www.companieshouse.gov.uk/links/introduction.shtml#reg
Look up domain details at http://www.whois.net/
Google them for more info at http://www.google.com/
Examine products
Check if they offer transaction by credit card or Paypal.
Contact them and chat to test quality communication and service.
Place sample order(s)

Learn more about importing and buying wholesale at Wholesale of Asia.

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