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1. Authentic is not cheap:
If you think you are going to buy an iPhone for £300 and resell it on eBay for £1000 you are wrong! Think of it this way, if you were the guy with the iPhones, would you sell them that cheap? Always put the shoe on the other foot. A lot of prices offered by these scammers are also ridiculously low. There have been studies for some of the popular models of phones estimating what they cost to manufacture (though we never really know for sure, but it’s in the ballpark). Quality phones aren’t cheap to make. It’s not like apple makes an iPhone for £50 and then sells it to you for £400. Use your brain.
2. New branded electronics can’t be bought cheaply from China:
China in particular is a HUGE scam area when it comes to consumer electronics. My advice to you, DON’T ATTEMPT TO BUY BRANDED FROM CHINA. You will be much better off, let’s leave it at that.
3. Profit margins are small:
In this industry profit margins are small. If you think you are going to buy something for £200 and sell it for £400, get out of the business before you western union all your money away to China, Nigeria or some other god forsaken scammers paradise. From wholesale to the end buyer, for the most part it is under 10%. For example, if you can buy a mobile phone for £500 and resell for £550, you are DOING PHENOMENAL!!!! Usually on a £500 phone, you probably will make AT MOST £50, with the norm probably closer to the £30 range.
4. Money Is Made On Volume:
WHY?!?!?! Because a wholesale mobile phones supplier like me can’t give you a good price if you only buy 10 units. BY THE WAY A BULK ORDER IS NOT 10 pieces. You don’t know how many emails I get asking me “well what is the price for 1, 5, 10 units??? Um let me see… If you buy 1 its £500, 5 its £475, and 10 its £450. NOT!!!! GET REAL PEOPLE!!! Don’t expect “bulk” pricing if you don’t buy a “bulk” order. In mobiles, bulk start to begin at around 100 pieces. Why? Because legitimate sellers will have a hard time making ANY MONEY on small orders. Let’s break it down by example. Say you have a phone that retails for £100. A wholesale price at LOWEST will probably be £80 (which would leave an amazing 25% margin for the buyer). That being said, someone who is selling wholesale for the most part his price is probably £75. The wholesaler is not sitting on a £50 per phone cost in this example and marking it up 50% to you with a £25 mark up. Usually wholesale mark ups are in the 1-3% range. That being said, on this transaction if the wholesaler’s cost is £75 and sells to you at £80, his profit is £5/phone. Now if you only buy 10 phones that leaves only a £50 profit for the wholesaler. Then he has to still pack, ship, insure, etc. which will eat up all his profits. Even worse if he has to pay PayPal it’s not worth it at all. Now if the same scenario occurred where you bought 100 pcs instead of 10 (and paid via a bank wire to minimize payment processing fees), now through economies of scale it may be worth it for the wholesaler (i.e. cheaper per unit cost on shipping etc.). Now on the flip side of the coin, the wholesaler could just raise his price to you, however if he does that YOU WON’T BUY. So as you can see, it becomes a struggle on small orders to make the sale MUTUALLY BENEFICIAL. And usually for the most part that is not possible as outlined by the example above when the volume is low.
5. PayPal is not safe:
Whenever I am asked “if I accept PayPal” I know I am dealing with a Newbie. Why? Because PAYPAL IS NOT SAFE! Seriously, just bank transfer the money and save the 3% processing fee, you are protected just about the same. Let me explain to you why. Say I was a dishonest seller. You pay by PayPal. I withdraw the money and close the PayPal account. YOU ARE THEN SCREWED. The end. PayPal is only safe when you are using it in conjunction with eBay, and even then you have guidelines to follow. Outside of eBay you are basically unprotected. Let’s go back to the above example. Say I withdrew all the money and closed the PayPal account. By the time you realized you were scammed, probably a week has gone by already (and scammer is long gone). Thinking you are protected by PayPal, you will file a claim with them. After a month or so, PayPal will come back and say “You won your claim however there is no money to recover, sorry”. That is fact.
6. Bank transfer is the norm:
YES BANK TRANSFER IS THE NORM. Why? BECAUSE OF FEES!!! If a wholesaler is legitimate, his mark up to you will be in the 1-3% range. That being said, how can he operate if his profit is 1-3% but he has to pay PayPal 3% and that’s even before shipping? Now I am not saying you go and bank transfer everyone, as bank transfer is used by a lot of scammers. Bank transfer should only be used after trust has been established. However don’t be quick to judge a company because they only accept bank transfer. In this industry where margins are small, wire is really the only practical way of payment. For example, a wire transfer of £50,000 may only cost the buyer £40 at the bank, however £50,000 through PayPal will cost close to £1500. It’s just not practical.
7. Escrow and L/Cs are not practical for larger orders:
Yes I said it! And let me explain why! I get a lot of people asking “well can you send the order through escrow?” NOPE! Let me explain from the seller’s prospective. Aside from the 1% fee, I understand a lot of buyers want escrow because of seller fraud, but what about BUYER FRAUD? Why should I send someone I never met £50,000 worth of merchandise half way across the world, and PRAY that he is honest and tells escrow.com (or whatever service) that I sent LEGIT GOODS? Bait and switches happen more often than you
think. On the flip side of the coin, what if I sent you a box of rocks instead of your mobile phones and told escrow.com that you are lying and I sent you the goods??? It becomes a he said / she said game (I’ve seen it happen), and that’s just not pretty. Our suggestion to customers who request these services is to start with small orders. It really is safer for both parties involved. Now with regards to L/Cs, I particularly write these because of all the Bogus Production runs being touted out there. For LARGE ORDERS (with regards to mobiles), L/C is HARDLY IF EVER USED BY LEGIT COMPANIES. Why? Because it is HUGE risk to the seller. Even with irrevocable POs etc. the full risk is placed on the seller. Why? Because the seller is the one fronting the money for the merchandise. The buyer can do all he can to wiggle out of the agreement from refusing shipments, lying, breaking contract etc. If somebody really wants 10k units, we tell them to start small and work your way up. When L/Cs are used, it’s usually in the case where the seller is in possession of the units already, as he is more willing to do an L/C because he has already made the cash outlay for the goods. But even in that case, he will probably do a fly and buy and just have the buyer come down and pick the units up as L/Cs are rather labour intensive to create. SO FOR THE MOST PART, FOR LARGE ORDERS ESCROW AND L/C IS NOT USED. EVEN AT THESE LEVELS BANK WIRES ARE THE NORM.
8. Wholesale mobile phones can be profitable:
Yes despite everything I say electronics can be profitable! How? Well if you have realistic expectations, a little bit of money, and some channels of distribution you will make money. Even though profit margins are small, they are there, and they are constant. If you can find authentic goods cheap enough, you should always be able to make a small profit. Just have realistic expectations, use common sense, and don’t be greedy and you will go far.