If you’re an e-commerce merchant planning to re-sell tangible products, law requires you to have a supplier’s agreement. This is an agreement that states the terms and conditions between you and your wholesale supplier. However, if you’re a start-up e-commerce merchant or you’re thinking about selling products online, you need to be aware of the wholesale supplier scam.

What Is a Wholesale Supplier Scam?

Just like any other type of scam, a wholesale supplier scam comes in different shapes and sizes. The most important thing you need to know is that the scammer created their website to trick you into thinking they’re going to offer you a great deal on wholesale products. Here are the top three most common wholesale supplier scams.

1. Replica Scam

Not all replica merchandise suppliers are trying to rip you off. However, there are several wholesale suppliers who claim they’re selling you an authentic product—Louis Vuitton handbags, Nike sneakers, Rolex watches—when it’s actually a replica. If you want to sell replica items, that’s fine, but make certain you’re advertising your goods as replicas to avoid any legal problems.

2. Pay First Scam

You call your wholesale supplier and ask for a shipment of Dell laptops, but they claim they’re out of stock. Before they can re-order their stock of Dell laptops for you, they ask you to pay first. If you run into a situation like this, you should definitely err on the side of caution. While you feel like you can trust the company, this may be a wholesale supplier scam trying to swindle you out of your money without delivering the goods.

3. Drop Ship Scam

It’s rare to find a wholesale supplier who will drop ship your products for you, but it’s not impossible. You find a supplier, receive a product sample of what you’ll be selling, and its quality is great. However, here’s where the scam kicks into play. When your supplier starts shipping items to your customers, the products they receive are of poor quality. As a merchant, you get stuck with a chargeback as well as having to pay your wholesale supplier for shipping your products.

Warning Signs of a Wholesale Supplier Scam

Spotting the warning signs of a wholesale supplier scam is easy, but takes a little investigative work. However, it’s worth the time and effort if you want to save your business money in the end. Warning signs include:

– No contact details on the website
– Fictitious contact details, such as a fake physical address, telephone number, or names
– They have stolen website content (text and images) from other wholesale supplier sites
– When you call the company, the person who answers the phone doesn’t state their name or their company name—proper etiquette practiced by all legitimate businesses
– The wholesale supplier doesn’t ask you for your business ID or tax ID number
– Your account manager stops all correspondence with you, and you can’t get in touch with anyone else at the company
– They deny your request for a product sample or begin acting suspiciously when you ask for one

How to Avoid a Wholesale Supplier Scam

Avoiding a scam is just as easy as spotting one. Here are some tips to help you prevent a wholesale supplier scam.

– Make sure your list of wholesale suppliers comes from a dependable source
– Look for a full business name on the company’s website
– Look for contact information, including a landline telephone number
– Use resources such as the Better Business Bureau and WebRank Stats Whois to help validate the company as trustworthy
– Check out other forums to see what other e-commerce merchants are saying about the supplier
– Copy and paste some text from the wholesale supplier’s website into a search engine to see if it matches content on another site

Share Your Horror Stories

As an e-commerce merchant, what types of wholesale supplier scams have you seen? What companies should your fellow merchants avoid? What additional tips do you have for merchants to help them avoid a wholesale supplier scam? Have any programs, productivity or efficiency tips, or particular things helped you spot these scams?