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    1. Matildasmom is offline

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      #1

      Why do some wholesale suppliers also sell at retail?

      I have just started a reselling business but am finding that some of my wholesale suppliers are also my retail competitors. How is that so?

      Isnít it illegal for a wholesale guy to sell retail? And wonít this affect my business?
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    2. Green devil is offline

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      #2
      Many wholesale suppliers have retail divisions – some known and some kept under wraps. But before I answer your question you need to understand how the traditional supply chain works.

      Companies have something that they call wholesale pricing which they offer to large distributors that carry and distribute inventory on their behalf down the supply chain. In addition to this pricing, they offer backend bonuses and benefits for meeting and exceeding targets as well as developing the market for the said product, events and other support. So, in effect, the wholesale guy has a wide margin within which he sells further down the chain. There is however, a company referred retail price not to mention market dynamics which ensure that goods are transferred to the next dealer/sub distributor within a fairly narrow price range. When these guidelines are adhered to, everybody makes a profit – when they’re not, many sellers make losses, throwing the chain out of gear.

      Now, if wholesale suppliers abide by retail guidelines (or prices) then everybody goes home happy; but if they use the extra margin to discount products then everybody has to follow suit to sell their products to the point where they even go into loss making. This is not good for the supply chain health and is viewed very strictly by the manufacturers or main company brand and will lead to disciplinary action which could result in their removal.

      So your issue should be, `Is the guy selling at below the company referred price?’ rather than `why do wholesale suppliers get to do retail?’

      Licensed wholesale suppliers are not supposed to be doing retail business. But it is easily possibly to register a new company and do retail under that brand name which allows the same person to get wholesale and retail benefits. It is very difficult to keep track of this or even prove it legally; so most companies turn a blind eye until it starts affecting their business.

      If you see a company employing a twin status and misusing it, immediately report them.
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    3. Whizkid's Avatar
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      #3
      But that is so unfair. A person who is enjoying wholesale discounting will make so much more money and can afford to offer free stuff while staying within the retail recommended price. I mean they could give free shipping, more listings, advertise more or just bundle a free gift with everything they sell.

      That in effect will render competitors ineffective without their dropping the price by a dollar. I don’t get it.

    4. John's Avatar
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      #4
      Most companies will draw the line at any tactic that disturbs free competition. They don’t have to have any legal reason to withdraw distributorship rights so most wholesale suppliers will be careful not to discount in the open market in any way that will cause other retailers to complain or even draw attention to themselves. They may cut a deal or two privately but will not get into head on competition in most cases. It’s just not their major line of money making – when a guy has spent so much money on building a wholesale business, winning a few retail sales is small change.

      I think you should just wait and watch before doing anything in a hurry.

    5. Green devil is offline

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      #5
      Also the wholesale suppliers have no real reason to discount. They will try and make the extra money rather than pass it on to the customer and risk their entire business. They may of course, choose to discount for specific bulk orders…etc but you need to understand that the profits in a wholesale model are enough for them to not necessarily compete very strongly in the retail area. It is more like a natural expansion or attempt at better control rather than an attempt to compete for end customers.

      There are situations in which companies also directly sell products to customers via their site (direct model) as well as engage in the traditional supply chain (indirect model). The attempt is to either keep the deals restricted by area / large corporate accounts or by a special line of products that are then not available in the indirect chain. Any company or distributor that tries to challenge the competitiveness of the other retailers by using wholesale discounts is being dumb. Why would customers buy a product at 5 dollars from the retailer if they can get it from the company at 3? Companies are dependent on every person in the supply chain and will and do anything to upset anybody.

    6. John's Avatar
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      #6
      Plus, companies don’t like their products getting discounted or what they see as undervalued in the market. It hurts their image and they are likely to come down very hard on the wholesale suppliers that cut prices in this manner. Just report them if you think they are playing dirty – I’m sure somebody will do something.

    7. Hugh's Avatar
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      #7
      Many companies actually support their key distributors establishing a retail presence since it allows them direct customer contact for the time that they cannot do it. It helps them in all sorts of sampling, research and other programs that require customer interaction that they would not be able to do otherwise.

      But the pricing should not disturb the market and definitely not the profitability of others concerned. If it happens, you have a right to complain about the relevant wholesale suppliers.

    8. Lyons is offline

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      #8

      Quote:

      Originally Posted by Hugh View Post
      Many companies actually support their key distributors establishing a retail presence since it allows them direct customer contact for the time that they cannot do it. It helps them in all sorts of sampling, research and other programs that require customer interaction that they would not be able to do otherwise.

      But the pricing should not disturb the market and definitely not the profitability of others concerned. If it happens, you have a right to complain about the relevant wholesale suppliers.
      yes, i totally agree with Hugh. As wholesalers,they must build a stable and mutually beneficial relationship with their distributors and help them expand sales.The wholesaler faces the distributors,and the distributors faces final comsumers.It's not a rational way for wholesalers to go into the retail market to disturb the regular retail market,especially The situation wi'll be worse if the retail price from wholesalers is much cheaper than the distributors (it's easy for them to set a lower price). However, by doing so wholesalers will ruin the whole profit chain and distory the cooperative basis for both ends.

    9. akihabaracosplay is offline

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      #9
      This is an enormous problem for me - especially on Ebay.

      Several of my own manufacturers/suppliers are on Ebay selling to the public. I am actually not making any profit at my costume trade because I'm constantly getting undercut.

      Unfortunately, my suppliers are in China, Hong Kong, and Japan. However, wouldn't Ebay have to legally not allow wholesalers to sell to the public unless it was strictly a Bid/Auction? My suppliers have the "Buy It Now" function for manufacturer price. I'm heart broken. How do I report these people?

    10. akihabaracosplay is offline

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      #10
      This is an illegal practice known as "dumping" - if you can prove that they are selling below "fair value" - you can report them to the International Trade Commission.

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