eComPreneur™

Archive for the 'eBiz' Category

12 1st, 2007

How to Identify Fake Suppliers: Avoiding the Middleman

Author: Colette

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If you want to start your home-based online business on a shoestring budget, you need to find wholesale suppliers that will drop ship products for you. Why? Because working with drop shippers eliminates many of your start-up costs like carrying inventory, renting storage space, and stocking shipping supplies. You can sell brand name products from your home computer for a nice profit too.

When you pass your customers orders on to your wholesale drop shipper, they turn around and send the ordered products directly from their warehouse to your customers, with your business name on them. The difference between your wholesale cost and your customers retail cost is your profit.

Unfortunately, there are many dishonest people who will try to convince you that they’re wholesale drop shippers, when they’re really just middlemen, getting in between you and the true wholesalers. They set up accounts, as retailers, with real drop ship suppliers, create their own web sites calling themselves something like SuperEZProducts.com, and claim to be the real drop shippers.

The scenario usually plays out like this:

SuperEZProducts.com plasters ads across the Internet, touting themselves as wholesale drop shippers.

You get excited because you can populate your web site with popular brand name products, and quickly sign up with SuperEZProducts.com.

SuperEZProducts.com charges you an account setup fee, to cover processing costs. (Note: Real wholesale suppliers almost never charge account setup fees.)

SuperEZProducts.com sends you a list of products, and provides you with product images and descriptions to place on your site.

You put the products on your site, setting your retail prices so you can make a profit over what SuperEZProducts.com charged you.

You launch your site. Nothing sells.

Confused and discouraged, you begin studying other web sites selling the same products and discover that their prices are lower much lower.

You’ve been ripped off by one of the Internet’s most popular scams.SuperEZProducts.com took you for a few hundred dollars, and may have even locked you into a contract charging you a monthly account maintenance fee. And all they do for that money is give your orders to the real wholesale supplier, and pass the wholesale costs on to you plus a nice profit for themselves. By the time you mark up the prices you got from SuperEZProducts.com, so you can make a profit, your retail prices are too high for you to compete online. This leaves you with two options:

Drop your prices to match your competition, and net a few cents on every sale.

Sidestep the middlemen, and go straight to the real source.

You can’t sidestep the middleman unless you recognize him. Watch out for these tell-tale signs that a supplier might not be legitimate:

If a company wants to set up your entire web site and provide the products you sell, rest assured that using them won’t make you rich. Your setup and hosting fees will make them rich, while you putter along with their other customers, trying to sell the same products at the same inflated prices.(NOTE: This doesn’t mean that companies who just want to set up your eCommerce web site are bad. There are some terrific services that can build and host a site for you. It’s when a company requires you to sell the products that they provide that you need to cover your wallet.)

Any supplier who charges a membership or setup fee probably isn’t a true wholesaler.

If it sounds too good to be true, it is.

Finding real sources can be just as challenging as dodging all the fake ones. Established wholesale companies who’ve been supplying big chains stores for years don’t market themselves as Internet wholesale suppliers. Many of them won’t work with eCommerce sellers or small home businesses. The good news is that some of them are starting to realize the increasing power of Internet retail, and setting up drop ship and light bulk wholesale programs. A few big name manufacturers are even beginning to sell directly to home-based Internet businesses.

But how do you locate these real wholesalers? If you won’t find them online, then where do you look? Your best bet is to call the manufacturer of the products you want to sell. They know who their wholesalers are after all, they’re the ones who factory-authorized them. Tell them you’re a retailer interested in carrying their products, and that you’re looking for a list of their authorized wholesalers. Then start calling the suppliers on that list to see which ones are willing to drop ship.

Starting an Internet store can be an exciting venture. If you do your research and find true wholesaler suppliers, you’ll be well on your way to running a truly profitable eCommerce business.