Avoiding Wholesale Electronics Scams
by Carrie Hinkel on October 22nd, 2007
Home-based businesses are now a multi-billion dollar industry–piquing the interests of both new entrepreneurs and the scammers trying to take their money. The wholesale electronics industry is ripe with unsavory business people, ready to take the money of unsuspecting buyers. Wholesale electronics is a popular sector for scammers because the products they claim to sell are well-known (ipod , xbox , etc.) and when purchased in lots, require a significant amount of money from the buyer. However, once you know what warning signs to look for, avoiding these less-than-honest companies is simple.
Telltale signs of a scammer:
1. Upfront payments required to be made via Western Union or Bank Wire (TT). Unscrupulous companies love these forms of payment because it allows them to quickly abscond with your money without leaving a trace. These types of payments are unsecure and offer no protection to the payment sender. You should only do business with electronic wholesalers that accept secure payment options, such as credit cards, Letter of Credit (LC) or escrow–these types of payment offer you security and protection of your money in case the goods you order don’t arrive or aren’t what they were claimed to be.
2. Wholesale prices seem too high. Many companies claiming to be wholesalers of electronics are really just middlemen purchasing products from the manufacturer’s factory-authorized distributor and then marking the prices up to unsuspecting buyers. Always call the manufacturer whose products you wish to sell and ask them who their factory-authorized distributors are. Ordering through the manufacturer’s distributors will ensure you are getting the very lowest prices.
3. Wholesale prices seem too low. If you have already called the factory-authorized distributor and received a price list, then you know what the lowest prices are. Unless you are a well-known store purchasing in quantities of 10,000 units or more, the distributors price list is the lowest you will be able to get. Profit margins are low on electronics to begin with; depending on the item, you should expect a 10%-20% discount off of the retail price. There are plenty of eBay auctions listing electronics at seemingly discounted prices. Most likely these listings are fake and will send you nothing after receiving your money (don’t trust positive feedback, as many eBay accounts are temporarily hijacked each day for this purpose).
4. Charging upfront or monthly fees to be your drop-shipper. In the electronics industry, it’s doubtful you would ever find a manufacturer or factory-authorized distributor willing to drop ship for you. However, there are plenty of middlemen companies that are. Because you’re paying a higher price for the products (by not going to the factory-authorized distributor yourself), it’s truly doubtful you’ll be able to find a buyer for the merchandise. So rather than wait for sales that probably won’t happen, these companies require upfront or monthly fees.
Is there any recourse once I’ve been scammed?
There are several consumer protection agencies that you can file a complaint with. It’s best not to get your hopes up in their ability to actually get your money back; however they will take your complaint seriously and investigate if necessary.
* DC Attorney Generals Office: (www.oag.dc.gov )
* Federal Trade Commission: (www.ftc.gov )
* Better Business Bureau: (www.bbb.org )
* National Association of Consumer Agency Administrators (NACAA): (www.consumeraction.gov/state )
Electronic wholesale scammers prey on people who want to "get rich quick" by selling electronics at a discount. The truth is, name brand electronics’ prices are controlled by the industry manufacturers and there just aren’t any "dirt cheap" prices to be had on new, name brand electronics. It just takes a step back and some thoughts of common sense to think through the problem: "Why would Apple let some no-name distributor sell their Ipod Nanos on eBay?" It’s unfortunate, but many buyers never take the time to do that and wire hundreds or thousands of dollars to the seller (usually from another country)–never to see their merchandise or money.