Scams have been around since long before the days of eBay and the Internet. However, the Internet certainly makes it easier to get away with fraud. Crooks and scam artists can now trick innocent people into handing over their money and then disappear into cyberspace for good.
And that's essentially what a wholesale scam is: Someone poses as a wholesale supplier and when you place an order with them, they take your money and run. Of course, there are some variations to how it works, but that is the general format.
What a scam is not
It's also important that we talk about what a scam is not. It's too easy to throw around the "s" word when you don't get the service you expect, or a supplier is late sending you items, or maybe they make an honest mistake and send you the wrong order. A scam is also not a wholesale company that sells items for prices that are higher than what you might be able to find on eBay.
I could write an entire piece on this subject alone, but in a nutshell: Sometimes you might see an item listed on eBay for a lower price than what you can get from a wholesaler. This doesn't mean that the supplier is trying to rip you off. eBay is one of the most competitive marketplaces in the world and it's a common tactic to sell items for well below their cost price in order to attract buyers. These sellers are not making money on these sales. Instead, they bank on this method to attract long term customers who will pay full price for other items they buy in the future.
Scam #1: The hot product scam
This scam occurs when "suppliers" lure you in with extremely low-priced hot products like PlayStation and Xbox consoles, designer handbags, iPods, and laptops. Scammers list these items on their website for ridiculously low prices as bait to hook you in.
They do this because they know it is exactly what new sellers are looking for: Low wholesale prices on goods that sell like hotcakes on eBay. Experienced sellers can spot these scams from a mile away: They know these prices aren't real for these items. New sellers, however, can fall prey to this scam.
How to avoid this scam
Your best defense against this scam is understanding that wholesale prices are usually 5 percent to 30 percent less than retail prices. If you see "suppliers" offering greater wholesale prices than that, you might just be looking at a scam.
Scam #2: The drop shipping blunder
This scam is just plain stupid. The scammer doesn't even end up making a lot of money, and of course, you are left out of pocket, too. I'm surprised at how common this scam still is.
How it works: You find a drop shipping supplier that you want to work with. You run a few background checks on them and decide they seem OK. You might even order a sample to check their quality. You're happy, so you start listing and selling their items.
Everything will go smoothly until you start getting angry emails from customers. You might end up with some bad feedback next to your name as well. You'll do a little digging and you find out that one or both of the following situations has occurred:
- Your supplier is taking your money, but not sending items out to your customers.
- Your supplier is sending inferior quality products to your customers. The sample you received was a high-quality version to make you think you were on the right track.
Either way, you've been conned. You will lose out on sales and you might have your eBay/other marketplace account shut down.
How to avoid this scam
This scam just comes down to picking the right supplier and doing thorough background research on them. Search their business name in Google or on the SaleHoo forum and see whether anything bad comes up. Beware, however: these scams often start under new business names, so they can be hard to trace. Working only with suppliers from trusted directories such as SaleHoo is your best defense, as all suppliers go through a strict verification process before they are added to the directory.
Scam #3: The replicas and fakes fiasco
The name pretty much says it all: This scam involves ordering goods you believe are genuine and authentic, but you receive cheap-looking fakes.
Luckily, this scam doesn't occur as often these days. People are beginning to understand the dangers of buying and selling fakes. However, this scam still claims victims on an everyday basis.
When you end up at the short end of this scam, there are a few potential outcomes:
- You might get conned the simple way — the supplier just never sends you anything. You might be better off in this scenario than in #2 below.
- Your package might be opened at random by customs when it enters your home country. Customs workers are very savvy at spotting fakes and they have an obligation to brand owners to report you. In this case, you could be prosecuted.
- If you manage to clear customs and list your products on eBay, you are very likely to get caught by eBay's VERO program, which works hard to prevent fake goods from being sold on eBay.
The one thing you can count on is this: You won't be making a lot of money when you sell fakes and replicas.
Your best protection against any wholesale scam
There are plenty of steps you can take to help protect yourself from wholesale scams, but without a doubt, the easiest and most fool-proof way is to work solely with suppliers listed in trusted directories such as the SaleHoo Wholesale Supplier Directory.
All suppliers in the SaleHoo Directory undergo a strict verification process before being approved, thus saving you weeks of legwork searching for the best, most reliable suppliers. Before we add a supplier to the directory, we check that the following minimum requirements are met:
- A real wholesale supplier offering real wholesale prices.
- Secure payment options that keep you and your money safe.
- A good track record with past and current customers.
- Full contact details available (that we verify) so that you can easily make contact with them at any time.
- Sells only legitimate brand names.
We run all these checks because our years of experience tell us that these points are crucial for establishing trust with suppliers. In truth, it takes us a lot of time to run these background checks and verify that these suppliers are safe for you to use. And we're experienced at it! So, if you want to save yourself the time involved with determining whether a supplier is legitimate, and eliminate the risk of being scammed, do yourself a favor and join SaleHoo.
Skip the Scams. Join SaleHoo.
