5 Ways to Identify a Dishonest Wholesaler

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Here are five ways to identify a dishonest wholesaler, a membership operation or a middleman operation masqurading as a wholesaler. By watching out for these warning signs you can avoid losing your profits and perhaps even all your hard earned seed capital.

1. If the wholesaler doesn’t provide a phone number or street address - This may mean that this is someone who is working out of their home themselves. They’re most likely a middle man for another wholesale or drop ship operation. Middlemen like this will eat up your profits since you’ll be acting as a nearly free salesperson for them. You can use Google Earth to see if the provided address is business or residential quickly and easily. Another tip off would be if the address points to a mail drop business, like a UPS Store. You can use Google to research this as well.

2. If the wholesaler does have a phone and, when you call it, they don’t sound professional - Like #1, this means that they’re probably a middleman. For example, if they answer without giving a company name or it’s obviously a cell phone, that’s a warning sign. If you always get an answering machine system where you can’t ever talk to a real person or if you always reach an answering service, particularly during normal business hours, this is also a warning sign.

3. If the wholesaler doesn’t request a business license or sales tax ID number up front. - This means that their prices may not be that good because the best wholesale distributors simply won’t deal with individuals making small quantity purchases, ie less than a few thousand units or $1000-5000. A good distributor wants to make sure that you’re really a business before they deal with you. They don’t want to waste their time with a small time retailer, particularly an online one. A bad one will want to reel you in for the kill so that they can get your money, which is what our next two items cover.

4. If the wholesaler requests a large up-front or membership payment - While some distributors may request a small payment for a product catalog, this will usually be a minimal amount in the $10-15 range. It they’re wanting more than than that for a ‘membership’ or ‘processing fee’ or ‘credit report fee’ before allowing you to order, or even see, products, stay away. They’re in the business of making money off novice business owners buying memberships, not from moving products in high volumes.

5. If the wholesaler requests all payments be made by wire transfer or Western Union - While some distributors prefer to have cash in hand before shipping to a new retailer, they should be more than willing to accept credit/debit cards or other secure forms of payment. Unless you’re dealing with a well known and established wholesaler be very careful about wiring them money.

This entry was posted on Monday, December 25th, 2017 at 8:49 pm and is filed under Wholesalers. You can follow any responses to this entry through the RSS 2.0 feed.

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