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a lot of advertisements both within the opportunity magazine world and
the Internet promising to provide you with great selling products at extreme
discounts for you to resell for profit. These advertisements claim to
offer "hot-selling" products at deep discounts for the eager entrepreneurs
to buy and resell. It sounds easy - just buy the products for wholesale,
mark them up a few bucks, and sell them online. So why isn't everyone
doing it? What's the catch?
let's take a look at how it works… An
eager entrepreneur sees an advertisement that says something to the likes
Money on the Internet... Distributors Needed for Our Unique Products!
Provide You with the Hottest-Selling Products at Rock Bottom Wholesale
entrepreneur then clicks on the ad for more information. Usually the information
consists of a lengthy advertisement describing the huge sums of money
that can be made by reselling the company's wholesale products. The wholesale
company will further entice the entrepreneur by providing a showcase of
their products (books, computer programs, knick-knacks, etc.) that claim
to all be hot sellers. Alongside each product the entrepreneur will usually
find a suggested retail price and a "wholesale" price.
good, huh? Well, before we answer that, let's follow the process through.
Let's say the entrepreneur takes the company up on their offer (and many
do). The entrepreneur will likely be required to purchase a bulk order
of the product(s) and/or a membership fee to be paid before products can
be purchased at the discount level.
let me say this, everything that we covered up to this point can be very
legitimate! However, the problem is, many of the companies advertising
wholesale products are NOT legitimate wholesale companies. In fact, they’re
far from it. I’ve found that most of all the wholesale promotions you
see kicked around the Internet fall into one of the following three scenarios:
discounts (wholesale prices) offered on the products are not low
enough for you to make a profit, and the products are either outdated
or have very little demand
discounts (wholesale prices) offered on the products are low, but
the products are either outdated or have very little demand
products are actually in demand, but the discounts (wholesale prices)
are by no means low enough for you to make a profit
this is my opinion, but I found that the above three scenarios just about
sums up 99% of every wholesale product purchasing program you can find
throughout the opportunity magazines and Internet marketplaces. Let us
examine each one of the above scenarios individually…
Scenario A:You are given an insignificant discount on products
with little to no demand. Unfortunately, this is the most common
scenario. In just about every instance, the company which is offering
the products markets itself as a wholesale provider for the product,
but in fact they are just a middleman in the middleman-chain
handling the transaction between you and the product source (or
another middleman). As a result the discount will not be significant,
probably in the 20% range, which is simply not enough of a discount
even if the products had a high demand.
this case, the discount rate in which you receive means nothing,
because the products have no market demand. Your wholesalers (middlemen
in your chain), however, will make a profit. Each level of wholesaler,
including the manufacture, will make a percentage of the profit
off of your initial bulk purchase. Or if the vender doesn’t require
a bulk purchase, but instead requires a membership fee, then that
membership fee is usually divided up the chain as well. They are
fully aware that once they sell you a given quantity or membership,
you will not be back because of the low product demand.
Your discount rate is significant, but the products have little
to no demand. This is another common scenario that is usually the
result of dealing with fewer middlemen (wholesalers).
company providing the products may actually be a legitimate level-1
wholesaler, meaning, it purchases products directly from the product
manufacture, however, the wholesaler knows the products have been
around for years and already marketed to the point where there is
very little demand for the products. The best thing for the wholesaler
to do is take what it can get for them by selling them for extreme
discounts to inexperienced resellers.
the goal of the wholesaler is to sell you a bulk purchase. As in
the first scenario, the wholesaler is fully aware that the likelihood
of you coming back as a repeat customer is very low, so the goal
is to make a profit once and to get rid of slow moving products.
Scenario C: The products offered are in high demand, but
the discount rate is insignificant. This scenario is almost always
the case with products that are in high demand. Here you will likely
find the company offering the product to be a high-level (level-3
or higher) wholesaler, or the actual product producer, which is
not a true manufacture. The term high-level wholesaler is the term
used to describe the number of middlemen between the wholesaler
and the product manufacture. A level-3 wholesaler indicates that
there are two middlemen between the level-3 wholesaler and the product
manufacture. (see the middleman-chaining
article for description of the wholesale levels)
are many high-level wholesalers that are offering products that
are in high demand for resale. However, as discussed in the middleman-chaining
article, a high-level wholesaler simply cannot provide a significant
discount to you; therefore you cannot make any profit on the resale.
producers are not true product manufactures. A true product manufacture
is dedicated exclusively to manufacturing products and distributing
those products to wholesale companies, which in turn distribute
the product to distributors. A product producer likely sells the
same products to the general public (retail). In essence, they compete
against you, and since they control the product and price, they
will always win.
lure in Scenario-C is the demand of the product. You already know
the products sell well, you have probably seen them marketed for
a little while and there may be some industry buzz going around
about how good they are.
this scenario, the wholesaler (or product producer) will typically
offer a low 10% - 15% discount on the product for bulk purchases
claiming this is an excellent opportunity to jump on board and make
a killing off the high demand. Entrepreneur's usually buy into this
and end up purchasing several units to find that once they add in
their operational cost of advertising the products they, at the
very best, break even with a bunch of lost time.
see, there are costs associated with doing business including: advertising,
support, handling orders, etc. As a result of these costs, in most
cases, you simply cannot make money with a 10% - 15% discount, even
if the product is in high demand. Even an experienced entrepreneur
would not make a sufficient profit at the 10% - 15% discount rate;
they likely wouldn't waste their time with that rate.
conclusion, the underlying problem with any of these scenarios is that
the products are not being purchased from a true product manufacture or
level-1 wholesaler. Instead the products are being purchased from middlemen,
or the products are being purchased at a low discount rate from a company
that is competing against you for sales. In either case, you will be unsuccessful.
avoid these situations, you absolutely must avoid the middleman-chaining
effect, and be sure that you are getting quality products that are in
demand, up-to-date and have good profit margins. You can protect yourself
to a great degree by thoroughly examining the company you intend to do
business with. For example, whenever you run into a product dealer requesting
a bulk order or membership fee, make sure you have solid answers to as
many of the following 10 questions as possible:
- How long
has the company been in business?
- Does the
company buy directly from the product manufacture (no middlemen)?
- Is the
company a member of the BBB or BBBOnline?
is the volume of products they move each month?
- What is
the demand of the products (sales statistics)?
- Is there
a product guarantee?
- Is there
a delivery guarantee?
- What are
the delivery options?
- Is there
a guarantee the products will always be available when ordered?
- What is
the return policy?
responses you get from the above 10 questions will almost always filter
out the product dealers that simply do not have quality products or simply
cannot perform to your standards. This filtering process is quick and
will save you major headaches in the future.
Author - Michael Ellis (Email: firstname.lastname@example.org)
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