Expert: Marvinator - 7/1/2006

Question
Hi Marvinator!

I read up on one of your answers to one guy about "drop shipping and wholesale which is best to do."

I am new to the whole ebay thing and I want to sell pet supplies on there, but some of the wholesale providers dont need my tax number, now should I be weary of them?

Some of them ask for me to just fill out this excel spread sheet that says I am giving them permission to take money out of my credit card when purchases come in. Most of the drop shippers sent me something similar, some more detailed than others.

Now two other questions,
Can you tell me in detail exactly what is Wholesale Prices, and what is Wholesale Drop Ship Prices?

I know that sounds so crazy to ask, but for example, one lady told me after my first 250.00 minimum order there are no minimum fees after that, I can buy one item or 1,000 for the same wholesale price. And she told me that it was wholesale prices thats why she requires a minimum purchase, then after that there are no minimums.
Then another person told me that they had a minimum purchase for New accounts on Drop shipping. Does it just vary from dealer to dealer?
Im just really comfused about wholesale prices and drop shipping prices.

Now should I sign up for a drop shipping account and a wholesale account with each dealer? Cause I know what I am going to do when my guest order products, I am going to wait 3 days then place one big order all at once. And use the drop shipping program every now and then, like when someone wants it over night, cause the shipping and handling is pretty high with each dealer. And they all charge a drop shipping fee on each order sent to an address.

Also, One last question.

Is there a web site other than the BBB.com to see how legit a company is?

Thank you,
Nina

Answer
  Let's start with the definitions.  Wholesale is defined on Dictionary.net as "Sale of goods by the piece or large quantity, as distinguished from retail."  Duh.  ok, let's try Princeton.edu.  Their definition is the closest I've found.  "selling or related to selling goods in large quantities for resale to the consumer; "wholesale prices"; "a wholesale produce market".  Wholesale by definition, is the sale of goods for retail, and thereby also selling in such a way as the retailer can buy in larger quantities and also make a profit.  If someone want to say they sell at "Wholesale" prices, they are trying to say that they are selling low enough for someone ELSE to buy and make a profit.  There is no hard and fast rule on this, and basically anyone can say they sell at wholesale pricing.  You have no way of knowing if this is the lowest price on the item, unless you know for sure that the manufacturer will sell to you for less.  That brings us to the subject of JOBBERS.  
  A Jobber is a company which can buy in HUGE amounts from the manufacturer and then supply his own customers by offering items at "wholesale" pricing.  Usually the manufacturer will only sell to their jobbers or to their recognized or licensed dealers.  Take as an example FORD.  YOU as a consumer cannot go to Ford and buy a car at wholesale pricing.  A FORD Dealership has a contract with the Ford Company and  usually buys in quantity sufficient to keep their dealership license and sell low enough to get customers.  Lots of other companies sell the same way.  If you have found some 'person' who is selling at "Wholesale" pricing this means that they have found a source where they can get the items cheap enough to a) sell cheap and b) make you feel you are getting a deal at that price.  They are a Jobber  or middleman. And since they are a middleman, and not a huge corporation, they may have more lax rules in how they deal with their clients.  I have used my credit card to buy from some jobbers and done well.  This is by no means a rule of thumb, nor is it a guarantee that all jobbers or middlemen or people who set themselves up to APPEAR as Jobbers will be honest folks to work with.  I will point out that many companies use the credit card first order as a way of getting credit established with new customers.  (I would read any form carefully for vague wording before I signed, and I would also track the purchase almost daily with my credit card to make sure that no impropriety occurs on the first transactions.  Hopefully you are careful enough with your credit to know this already.)
  (The BBB is a recognized source for respectiblity, but is by no means the answer to any and all.  Many times a good company has no BBB rating. This is becuase they did not pay the BBB fees to be listed.  You see, a company must pay membership fees be a member of the BBB in order to be listed and many small companies just dont' want to pay the fees.) Now, since this is a person you're dealing with, who is not BBB registered, you are going to have to use your own judgement as to whether they are selling you a pig in a poke or a really good deal.   A general rule of thumb for the beginner is this: If you can sell it and make a profit, then it's a good starting point for you.  Later, you can assess whether you can also find a way to buy cheaper.  Meaning: chances are that with a bit of effort you can find the same type of source and buy even cheaper.  It's possible.  I won't guarantee it, but let's face it, if they can, surely you can too.
  That's about it on Jobbers and wholesale pricing.  I'd like to also address your concerns about companies who charge fees for drop shipping and any other hidden fees.  I hate a company who charges a fee for this and a fee for that.  It's a way to hide profit.  I fully understand that when they ship an item out that I will be paying for shipping whether I am sending it to a client of my own, or having the item sent to me. There is no difference in the way they should pack or ship, so a fee for this is merely hidden profit.  As I've stated before, Drop Shippers are a dangerous way to work on Ebay.  I've received a lot of flack from different people about Drop Shippers. Many tell me that's how they run their business and have no problems at all.  I'm glad to hear it.  But people don't come to me to hear about the good things. They want the WHOLE story and thats what I'm trying to provide.  There are more people out there with Drop Shipper problems than without.  There is NO GUARANTEE That the Drop Shipping company will have the item in stock when you sell it, and there is NO RULE for them to have to ship the item out in timely fashion.  Look over your paperwork with these companies and you will see nothing which states that they will guarantee that any item is in stock at the time you sell it.  They can't.  And this is the one rule which can hurt your business one day.  
  Here's why:  When YOU sell on Ebay, you're tied into a 30 day time frame.  The FTC says you MUST ship the item within 30 days of payment.  The client pays you and you then order the item from the Drop shipper. Uh oh - the Drop Shipper is out of that item.  Now here's the point where the Drop Shipper takes away your respectibility.  Since they are out of the item in question, YOU ARE NOT BILLED.  This alone is not a bad way to deal, after all, why charge you for an item they do not have in stock.  BUT, since you have not paid, there is no time frame for the Drop Shipper to either get the item or to ship.  Regardless of how long it takes them to get the item,  the Drop Shipper is NOT in violation of any FTC rules! They can take their own sweet time in getting the item in, and fulfilling your order.  They don't have to tell you when they run out, they don't have to tell you when they will get more in and they are not governed by any rule which says they must go out of their way to get the item back in.  YOu are at their mercy!  AND you're paying them fees for this?  
  You would do better to get a few items in stock in your house, begin selling them and reorder as you need to fulfill your own burgeoning business.  Dealing with a jobber who will sell you 6-12 of an item is much better than paying inflated prices on shipping and "fees" just to be able to Drop ship to a customer.  Save Drop Shipping for when a customer want more than one of an item and is willing to pay the shipping and hidden fees to get them.  In the meantime, set aside a closet in your home or a set of shelves in your garage and begin building your stock.