Middlemen and Scammers

When you�re looking for Wholesalers so that you CAN have a steady stream of wholesale products to sell online you�re going to find a tremendous number of people who are perched on the search engines like a flock of vultures, just waiting to swoop down on your head.

There is a whole subset of Get Rich Quick schemes aimed at Product Sourcing. An entire industry on the Internet that makes its money by fooling you into thinking you�re getting something you�re not.

They break down into three major categories:

• Product Sourcing Middlemen

• Product Sourcing MLMs (Multi-Level Marketers)

• Junk Product Sourcing Information

Let�s take them one by one, shall we?

Product Sourcing Middlemen

We�ve mentioned Middlemen before, so let�s understand exactly what that means now.

The Product Supply Chain, from manufacturer to retailer, is supposed to go like this:

Manufacturer >> Wholesaler >> Retailer >> Consumer

Many people have the mistaken impression that the second link in the Chain, the wholesaler, is a Middleman, because they are in the middle, between the manufacturer, and you, the retailer.

That�s not true. The Wholesaler, the second link in the Product Supply Chain is there for a very important reason; manufacturers don�t have the infrastructure to actually sell and deliver small numbers of their products directly to you, the retailer. Real wholesalers provide that infrastructure (warehouses, order systems, delivery trucks, account representatives, etc.) for the manufacturer.

So, link two, the wholesaler, is a legitimate wholesale supplier, not a Middleman.

Here�s an example of where an illegitimate Middleman fits into that Supply Chain:

A Middleman is someone who takes your place in the Product Supply Chain, and bumps you down a link. They try to make you believe they are Link Two in the Chain (a wholesaler), when they are really Link Three (a retailer). Sometimes, it�s worse than that. You could end up dealing with a fake supplier who is actually three or four links down the Chain.
How does that affect you? It hits you where it hurts. Right in the profit margin. For every link you drop down in that Chain, your �wholesale� prices go up.

To be successful online you�ve got to buy your products from the Factory Authorized Wholesaler that works directly with the Manufacturer. Otherwise, your profit margin will suffer.

Another favorite Product Sourcing scheme used by the unscrupulous and unprincipled is the Multi-Level Marketing plan.

Let�s talk about that.

Product Sourcing Multi-Level Marketing Schemes

Earlier, we talked about the fact that it�s bad to be bumped from the third (retail) link of the Product Supply Chain down to the fourth link, by allowing a Middleman to get in between you and the real wholesaler. We also mentioned that you could find yourself two or three links below that level on the Chain. Taking you for that ride way down to the lower links is the specialty of the Product Sourcing MLM (Multi-Level Marketer).

People have been falling for this kind of thing forever. They talk about it on the News, everybody from 20/20 to 60 Minutes exposes them, and yet still people fall for it every day.

Whether it�s the old �Airplane Game�, where everyone puts $200 in the pot, and then you each get four others to do the same, and so on, until you advance to the �Pilot�s Seat� and get all the money, or it�s the multi-level �wholesale suppliers� on the Internet, it�s all based on the same thing.

An MLM scheme is a food chain. When you enter it, you are on the bottom of that food chain. Ask any amoeba, small insect, or bit of plankton floating around the ocean, and they�ll tell you that the bottom of a food chain is not a good place to be!

Here�s an example of a wide-spread MLM operation on the Internet: Let�s pretend that there is a big supplier of imported off-brand merchandise in the U.S. They sell some decent products. You won't find any well-known brand names there. Their line consists of several thousand widely varying products, mostly decorative figurines, home accents and giftware. Again, you won't recognize any of the brand names ... it's all imported merchandise, probably mostly from China and the Pacific Rim. We'll call this pretend company "XYZ Wholesalers".

You can sign up with "XYZ Wholesalers" directly and sell their merchandise on your web site, for a hefty monthly account maintenance fee. You will find the products difficult to sell, for one very good reason. They already have TENS OF THOUSANDS of people who are all trying to sell this exact same merchandise on the Internet.

That kind of competition, plus the fact that there are so many more people (millions of people!) already trying to sell giftware in general on the 'Net, will make it impossible for you to make any real money. Here's the interesting part, though, which makes this situation an MLM scheme.

Joe Reseller comes along and signs up with "XYZ Wholesalers" as a retailer, and now has the right to sell their products on the Internet.

XYZ Wholesalers knows that Joe is not going to make all that much money trying to buck all the competition on their relatively few products on the Internet. So, they send Joe three �wholesale� price sheets.

The �Amber� Price Sheet contains the prices that JOE can buy products for, and resell them online. These are the lowest prices available from XYZ Wholesalers. Joe sets up his own Web Site, and sells the products directly to the public using the amber price sheet as his wholesale pricing.

The �Hunter Green� Price Sheet contains all the same products, but they�re marked up considerably in price. XYZ tells Joe that HE can bring in his OWN Internet retailers, claiming to actually BE a wholesaler himself, and sell the products to them for the prices on the �Hunter Green� Price Sheet. XYZ Wholesalers actually encourages the kind of unethical behavior displayed in our previous example of Middlemen.

In other words, XYZ gives Joe permission to pretend to be a real wholesale supplier, and gather his own little army of unsuspecting worker-bees to sell for him.

Joe�s worker-bees go out and set up their own Web Sites, thinking that Joe is a REAL wholesale supplier, and they send their orders to Joe. Joe simply turns around and sends his worker-bees� orders directly to XYZ, and they fill the orders.
Once again, it�s like a soap opera; Joe is not a real wholesaler, but he plays one on the Internet.

The �Baby Blue� Price Sheet is the third one that Joe got from XYZ, and it has even higher prices. Guess what Joe does with this one? He passes the �Baby Blue� Price Sheet on to the �worker-bees� who think he is the real wholesaler, and tells them that they can bring in their own resellers, and claim to be wholesalers themselves!

Joe�s unsuspecting worker-bees recruit their own unsuspecting worker-bees. That second level of worker-bees under Joe�s worker-bees all create their own Auctions to sell all these same wonderful products, never knowing that they are buying from a fake wholesaler under Joe, and those fake wholesalers are buying from Joe, who is a fake wholesaler himself.
Joe is the only one buying from the real Wholesaler. He�s collecting orders from two levels of worker-bees underneath him, and passing them all on to XYZ, who fills the orders.

So, the more worker-bees Joe gathers, the more worker-bees those worker-bees gather, and it all passes upward along the chain to Joe, and finally to the real Wholesaler.

That�s what�s known in Multi-Level Marketing (MLM) as an �Upline� and a �Downline�.

In this situation, here are the �Downlines�:

Joe and both levels of worker-bees under him are XYZ�s �Downline.�

The two levels of worker-bees under Joe, who use the hunter green and baby blue price sheets from Joe, are Joe�s �Downline.�

The worker-bees who use the baby blue price sheet are the �Downline� for those who use the hunter green price sheet they got from Joe.

Now, here are the �Uplines�:

XYZ Wholesalers sits at the very top of this �pyramid�, and collect membership fees and product orders from everyone. They are the only real Wholesaler in this picture, although all the lower-level worker-bees think that they are also buying from real wholesalers.

Joe has XYZ Wholesalers as his �Upline�.

The hunter green price sheet users have Joe and XYZ in their �Upline�.

The worker-bees who use the baby blue price sheet are at the absolute bottom of this food chain. The hunter green price sheet users, Joe, and XYZ are all in the baby blue worker-bees� �Upline�.

There are tens of thousands of these downline worker-bees out there on the Internet, all creating sites that claim to be real wholesale sources, trying to put you on their Product Sourcing downline. They all want you to believe that they are real wholesale suppliers, and some of them are very good liars with very convincing sites.

You need to stay away from these people!

Junk Product Sourcing Information

When you�re looking for information on Product Sourcing, there are people out there who are more than willing to lie to your face, promise you riches beyond your wildest dreams, and then leave you with information that will actually damage your business. Bad information can actually cause your business to fail completely.

Many of the people who do this are outright scam artists who are actively and purposely trying to cheat you. Some of them are simply lazy, and are looking to make a fast buck selling substandard, outdated information, not caring who they hurt in the process.

Some others actually think it's "ok" to cheat you, because "everybody else does it."

Then there are a very few of these small operations in Product Sourcing Information (only two or three, actually) who do try to put together halfway decent information, but they don't have the time and manpower to maintain that information, and it quickly becomes outdated and useless. That cheats you and your business as well, although it�s not malicious, it�s just irresponsible.

How can bad information damage your business?

Mostly in the form of lost time. The money you spend on the information isn�t really the thing to worry about here. Most of the bad information is cheap to begin with.

The problem, as we said, is lost time. When you buy Product Sourcing information, you need to look through it to find contact information for the Wholesalers you want to deal with. In Junk Product Sourcing information, you could spend days, weeks, or even months trying to contact suppliers that don�t exist, are no longer in business, or won�t work with you in the first place.

Losing that kind of time in your business stalls your progress, brings your profits to a standstill, and can actually destroy your business.

Recognize the Bad Guys

Whenever and wherever you find the name of a company that is supposed to be a wholesaler, be very careful. Learn to recognize the signs of a Middleman or MLM:

• Any wholesale web site that does not give you a full company name, address and phone number to call, which they answer.

• Any supposed wholesaler that does not ask you for a Business License and Sales Tax ID (which we will discuss in the next chapter)

• Any wholesale web site that makes claims about how much money you can make using their services.

• Any wholesale web site that makes claims about how much money they have made with their products.

• Any wholesale web site that you notice is marketing the same products as another supposed wholesale web site.

• Any web site that tries to sell you other services besides strictly wholesale products.

If you come across a wholesaler that you�re not sure about, there are some things you can do to help you decide if they are legitimate: