Selling wholesale international - need business advice!

Hey SaleHoo Community!

I am about to embark on a wholesaling/dropshipping business and thought some of your expertise might help if you would be willing to share some of your knowledge.

I am from the US and have a partner in North Africa that I am starting to work with. We have been developing a business structure so that he can legally resell products from America. He knows very little about American culture, authorized resellers, and would only want to deal with me and would pay me a fee for my services. However he knows some buyers that are interested in certain products that I can provide. Basically I would research and set him up with the proper supplier for his buyers (whether it be electronics, sneakers), he would pay the US supplier directly (I won't resell directly since I'm not authorized to) and he would pay me a separate fee for my service. If we order from an authorized reseller, and follow the brands rules, from my understanding my African partner can legally purchase and resell the products to other resellers in Africa. I have read court cases of lawsuits from resellers getting caught for doing this with unauthorized wholesalers (like the ones on this site?), which would obviously be more appealing since the goods are much cheaper. But I'm not trying to break the law.

I found one authorized supplier on my own of UnderArmour for example that gets goods directly from the manufacturer, can give me (my buyer) 60% off shipping to Africa and up to 40% retail price for 50 products or more ordered at a time. To avoid any issues with the reselling law, I plan to set up my business by not buying or selling goods, but just charging a fee per transaction based on the amount of stuff he orders from the connection I make. Ex. He wants 100 sneakers, my supplier can get it to him at $50 a pair including shipping. He plans to sell it at $100, and I charge him $25 per pair for my service, so we both would make $2500. I guess it would really come down to African laws about the reselling part of it. my income would solely be this service fee which would fluctuate depending on how much he orders. I am just still trying to figure out this whole reselling and authorized seller issue. Because some companies don't want their product being sold in certain areas.

I would really appreciate any advice you may have on my business idea.

Thanks,

Tyler

Hi Tyler,

Essentially you seem to be speaking about setting yourself up as a broker. Nothing wrong with that if you can find a market, but I'm not really clear what you mean by "unauthorized wholesalers", can you clarify that for me.

Here are examples of what brands point out to be authorized resellers. Basically wholesalers that aren't given permission from the brand to resell their products. I've ran into this with Apple authorized resellers after doing some research. If Apple doesn't want their ipods sold in Africa, and I use a wholesaler from this site that ships internationally to sell products there that wasn't authorized by Apple, I can get in trouble.

Even if it is a legitimate good from an authorized reseller, I wonder if I would get in trouble for being the broker for large amounts of goods that then go ahead and resell them in Africa. I would have to make a contract that states I have nothing to do with what they do with the products.

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This article discusses unauthorized dealers. Basically wholesalers that aren't given permission by the brands to resell their products.
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This one too discusses reselling from authorizes resellers
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OK, firstly, we do not have any suppliers in our directory that supply Apple products, so you couldn't use any of our suppliers to do that even if you wanted. Secondly, our suppliers are well vetted by our team before they are even approved to be listed in our directory. Thirdly, regarding Apple, NO Apple products are permitted to be sold in an open wholesale market. Apple strictly controls the distribution of their products through their own network only, so they are not available to any one, other than through an authorised Apple store.

If you are buying products from a wholesaler, then it's up to you what you do with the products you buy. Once you purchase them, then they are your legal property. However, if I understand you correctly, you're not even buying the products yourself, all you are doing is giving this person the contact information of the supplier to establish an account with them and then he will be ordering directly through them.

To be honest, I can't even work out why he would actually pay you anything once he has the account with the supplier. If you do all the ground work and then give him all the information on a plate, what makes you think he will then give you your fee when he already has everything he needs to get his products?

Thank you Marc for your response I really appreciate your feedback. I apologize for using Apple, it was a poor example. We can use Nike.
My partner in Africa has a buyer that want Nike Sneakers. He doesn't know how to go about buying them. He needs me for 2 reasons - their currency can't be used online (for suppliers that don't accept wires) so he would have to wire the buyer's cash it to me, and then I would deposit it and transfer it to his bank account so his customer can make a purchase. I wouldn't tell them who my supplier is, he would just tell me what they want (ex. Nike Airmax) and I research find the best deal, and then tell him the final price including shipping and my fee and where to pay with his international credit card or wire transfer (or maybe even the buyers direct credit card if my partner can get authorized to do so). So basically it would be a company in Africa who is my partner that represents his buyers and holds their accounts. If he doesn't pay the fee I would no longer work with him to get any more products for his buyers. If he did that it wouldn't be smart on his end, because he wouldn't have business either. Maybe just for the first product we do together. But still, I don't plan on telling him who my supplier is.

OK, it's still early for me and that's really hard to get my around at this time of the day lol.

Having said that, it seems to me that the easiest way to do this is for him to advertise the shoes, then when he gets and order, send you the money via wire or whatever you have agreed to. Once you have the wire, then you just process the order with the supplier yourself and have them send the order to you and then forward direct to his customer or to him if he doesn't want to give you his customers details.

I'll have to read through what you have written about more carefully later, but I've got all sorts of alarm bells going off with that payment structure. At worst it sounds like some scam, but at best it sounds like a lot of messing around that can be easily streamlined, as per my comment above.

Haha no problem! I really appreciate your time and expertise. I just wrote this and it's long, but please help if you can it's really important to me.

What you said was honestly my original simple plan until I hit some roadblocks.

1. I wanted to eliminate myself from the buying/selling process for 2 reasons. Since Nike doesn't authorize me to be buying and reselling their products internationally in Africa, I wanted to stay out of the process. I figured if I could connect the buyer and seller, and collect my fee as a service fee it would be MUCH simpler and safer than having my name on any of the purchasing if Nike decided to go after the Africans for reselling. I don't want to be responsible for buying or selling the goods out of my own safety. Also it makes it much simpler for tax purposes as well. Technically I am not "reselling" the products in Africa, but I am reslling Nike's goods from the US wholesale supplier to Africans. If the Wholesale Supplier sends products/receives payments directly to the African partner (or even one of his buyers directly), I believe I am in the clear for any legal issues.

2. You mentioned my partner advertising the shoes. This was another issue since we legally we are not allowed to use their images or trademarks of Nike's products. Another benefit of running it this way is that I could just list product names that I can provide and if he wants to, he can create a catalog for his buyers. I wont be responsible for that either. I am trying to run this in the simplest way without violating any of our US laws withing my business.

Based on that, here would be the simple structure of the payment (in my head, obviously I would need to speak with an accountant/attorney, but this is just what I'm thinking)

1. John, an African Buyer wants Nike shoes so he goes to African Partner
2. African Partner assists John setting up a free simple online Mastercard Account (Yes - it is rare there).
3. African Partner reaches out to me to find products to find the best/legit Nike supplier for John's needs
4. I locate the best deal and see that a supplier has ex. 100 sneakers for $50 each including shipping (I would calculate it out). I say that I can charge my partner $70 per sneaker with my fee including shipping. My partner will obviously be making a profit too, so he would maybe mark it up to $90 per sneaker for john. If the US supplier DOES accept a wire, super simple, John pays the supplier directly, $50 per sneaker but has to pay both of our service/broker fees of $20 per sneaker for each of us. John knows this, because Partner told John in the first place its $90. Or we can use my Partners Mastercard account so John won't find out who the supplier is. If the supplier doesn't accept a wire, John wires the cash to me, and I send into his mastercard account so it is ready for purchase (Or we can just use my partners account).

Now - If we did it your way - John wires me the $10,000 cash (if partner tells him its $100 per shoe), I buy the shoes with the $5000 to supplier with John's address. I pay Partner 2500, and keep 2500. Then that is more complicated all of those shoes would be my cost of goods sold, and I would have to subtract my partners profit as an expense and it gets more complicated with tax purposes. It would also be my name on the purchase and sale which I wanted to avoid.

OK, you are looking at this from the point of view of being a retailer. Nike (where shoes are involved) is like Apple, maintains very strict control over their own distribution channels and you have to apply to get into their network of resellers for this to be of any concern at all.

Your best avenue for Nike shoes I would suggest would be factory seconds through their outlets or liquidation suppliers. With liquidation you will quite often find the tags have been removed from the product for legal reasons. If you are purchasing through these avenues, then once you purchase the shoe, it's second hand, whether you take them out of the box or not and as such, you have no legal ramifications in selling them anywhere on the planet.

If buying from liquidation, your supplier will be able to tell you if there is any actual advertising restrictions, as there can quite often be with brands. That said, it's usually more aimed at not advertising the actual store name where the products were originally liquidated from, not so much the product brand itself.

Hey Marc -

You pointed out something to me that I have been mislead about. I must have been wrong - I thought that if I wanted to sell Nike shoes (or any brand's product) in Africa, I had to purchase them from an authorized supplier (ex Nike themselves or a Nike authorized reseller), or my African Buyer had to (use a US shipping forwarding address). From what you just explained, I now realize that I can go to a Nike outlet store just a wholesale company that has Nike products and legally resell those products to Africa. I thought this was illegal but I guess I was wrong.

I don't mind tags being removed, as long as they aren't fake Chinese products and they are the real deal. I just imagined if Nike traced back to me selling under their MAP from a wholesale company or something I would get caught. I assume that if I am doing the purchasing that I would need a reselling licence myself. But if I am just setting up the deals and taking a fee then I wouldn't.

Hi Tyler,

Yes, you've been looking at this as a NEW supplier and you were right, in that case you have to follow some very strict guidelines. In reality, what you are looking at is essentially becoming a SECOND HAND shoe seller. Once you purchase those shoes, either through a Nike outlet or liquidation supplier, they're legally your shoes and it doesn't matter if you have them for 30 years or 30 seconds, they are now consider to be second hand and not bound by any licensing agreements by Nike

Where you will have to be careful is how you market them, for example you can't say BRAND NEW, no matter if they've never been worn. What you can say is "in NEW condition, still in the carton and unused", that's perfectly accurate.

So my suggestion would be checking out some liquidators, I doubt you will find any selling straight Nike shoe loads, they will usually sell in mixed lots. What you can do is speak with them, give them a brief outline of what you are doing and I think you'll find most will try and work in with you, if they in fact have Nike lots available.

Just remember, with liquidation the chances are that you will be getting older models, maybe 2 or 3 years older than current. The main reason a product like Nike will end up liquidated is either customer returns or shelf pulls, shelf pulls are usually due to slow moving stock that has to be cleared for new season stock, hence the reason it's usually older models that end up in liquidation suppliers.

Keep your eye on Link hidden: Login to view as well, that is the type of load that just might turn up there that you can take advantage of and of course Nike factory outlets themselves, but I think liquidation suppliers is where I would be trying if I was doing this personally.

Cheers