You Should Know These 5 Wholesaler Warning Signs

Here are five ways you can identify a wholesaler who is dishonest, who is merely running a subscription membership service, or who is simply a middleman operation pretending to be a wholesaler.

1. The Wholesaler is “Internet Only”

While some legitimate wholesalers do request that you conduct your business through their site, they should at least provide a phone number and street address to you. If they don’t, it’s very likely that you’re dealing with a middleman for a drop shipper who is operating out of their home. In most cases, middlemen like this will take the lions share of the profits, leaving you to act as a low commission salesperson for them.

If you can’t get their address or phone number at all, I would recommend not dealing with them. If they do provide an address you can use Google or MSN maps to discover if it is in a business or residential area. Also see if the address is in a strip mall where it may just be a mail drop like a UPS Store.

2. The Wholesaler Isn’t Professional on the Phone

If you do have a phone number for a distributor, give them a call. If they answer without giving a company name or it sounds like a home or cell phone you’ve reached, this is a sign that you’re probably dealing with a front.

Another warning sign is an answering machine system where you never get to talk to an actual person, particularly during normal business hours. This may also mean a front.

On the flip side, watch out for high pressure sales pitches. This may indicate a con job or an attempt to get you to sign up for a costly subscription service.

3. The Wholesaler Doesn’t Request Business Credentials

In most cases a legitimate wholesaler will require that you provide business license, sales tax registration, or other such documentation. If they don’t, chances are they’re not a real wholesaler but an operation that preys on people who’re looking to start a home business on a shoestring budget.

The best wholesale distributors usually won’t deal with individuals making small quantity purchases, typically meaning less than a few thousand units or about a $5000 order. Plus, they want to confirm that you’re a real business before they provide you with confidential information, such as their pricing structure. Some do have programs for smaller businesses but they will still require credentials. 

4. The Wholesaler Requests an Up Front Payment or Ongoing Membership Fees 

Some wholesalers do request small payments for product catalogs or samples. These are OK and are usually a minimal and obviously reasonable amount. However, if they’re wanting to sell you something like a “Gold Membership” or start hitting you up for this fee and that fee before allowing you to order or even see what they have to offer, stay away. In most cases such an operation makes their money off of selling novice business owners memberships and not from selling a lot of products.

5. The Wholesaler Requires Non-Secure Payment Methods

If they require that you pay for your goods via Western Union or other difficult to track methods this could indicate a con in action. Some distributors do prefer to have cash in hand before shipping to a new account, particularly a small one. However, they should be more than willing to accept credit/debit cards or other secure and traceable forms of payment. Unless you’re dealing with a very well known and established wholesaler be very cautious when it come to wiring money.

Do you have anything to add to this list? Any bad wholesaler experiences to relate? If so, please leave a comment.

 


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2 Comments »

2008-07-20 05:35:00

This is all very sensible advice … there are so many people trying to pull in newbies to “Start Selling on the Internet”, yet in so many cases it’s at best a very low-paying roll of the dice, and at worst an out & out scam.

 
Comment by SirNicolaus
2009-11-05 20:56:33

all true Nice Post

SirNicolaus

 
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