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I get asked all the time why distributors wont do 100% fly and buy on products. Since this forum is about cell phones I will keep the post on that subject.
When I first got started in the business I use to think the same thing. Well if someone is legit they will offer 100% fly and buy no matter how large the quantity. But since I have started working direct with a distributor and have had talks with them I have found out why.
What I have learned in this industry is that people equate payment terms often as the sole indicator on the legitimacy of a company. This could not be further from the truth. There are a lot of legitimate business people who do business by wire transfer, and on the flip side people get scammed all the time making payment by L/C or Escrow. So before you make hasty decisions on whether a company is good or bad based on how they take payment it is in your best interest to do some research.
I notice people like to scream scam when a seller won't front 5 or 10 million dollars of inventory for a fly and buy. Yet ironically the only thing a buyer wants to provide the seller to place this large order is a piece of paper saying he is coming. Even with an irrevocable PO unless the seller wants to spend time taking the buyer to court it’s just a meaningless piece of paper. Buyers want every document under the sun and then on top of that they want you to front millions of dollars for these items basically only on "their word" that they will come.
People asking for fly and buys should think of it from the seller's point of view. People accuse any seller not willing to do fly and buy as a "scammer" or not a serious seller. Well how does the seller know this person he is dealing with is a serious buyer? Is the seller supposed to order millions and millions of dollars worth of inventory for every buyer that comes along and asks them to do so? Think about it, if you were the seller with the contract and it was your business, would you purchase $5-10 million plus worth of product because someone you have never met somewhere across the world tells you he is coming to get it? Of course you wouldn't.
Now definitely I understand the buyer's point of view in wanting to protect their money, as this industry is full of fraudulent characters. However not everybody who doesn't offer fly and buys or letters of credit are scammers, and vice versa not everyone who offers these options are honest people.
Now you would think that people would flock to a dealer who has access directly to a regional Distributor for Nokia and can get anything and the best LEGITIMATE PRICING around. But yet they don’t they are to busy trying to chase some stock that might exist somewhere else even though they have no proof its there and have been offered no proof.
People come to us we offer them more proof of stock then anyone else can. We offer them to come down and meet with a Nokia distributor and have access to an unlimited amount of phones and they hear a rumor about some stock somewhere else a little cheaper and yet are offered NOTHING and yet they go after it anyway.
For example, we work with a 100% legitimate authorized distributor for Nokia. These people can be verified with Nokia themselves, and we offer our clients to come down and visit our facilities, and us as well as inspect and pick up whatever is in stock.
However we request for large orders (1k pcs and up) that they place it with their own money. We know some people are uncomfortable with placing orders with money upfront, so we offer that they do business with us on a smaller scale so they can pick up for a while until we build trust and they feel comfortable doing so. So because we don't offer large fly and buys, does that mean we are not legit? No, it just means that we actually have A REAL BUSINESS and we have to consider these factors.
Some companies are more willing to keep larger amounts of stock on hand. But these usually are large corporations who can afford to take such risks as this.
If you are a legitimate business owner in this industry, you know that overstocked inventory can be catastrophic to your business. What if this person who asks you to front $5-10 million worth of inventory does not come to pick them up? Something like this could cause serious strain on any business, especially in an industry like this where technology becomes obsolete every day. The hot item today may not be so hot next week, so generally keeping inventory at a low level with regards to electronics is the savvy way to do business.
On a flip side of the coin, just because someone says the transaction will be done by L/C or fly and buy DOES NOT mean that the transaction is legit. For example, I am sure all of you know of someone who has flown across the country to inspect some "Fly and Buy" shipment and ended up at an address that didn't exist or a warehouse full of counterfeits or even empty! Sadly it happens more often than you think.
Also transactions done by L/Cs or Escrow should be heavily scrutinized, as these methods are also not 100% full proof. These methods of payment often incur fees that need to be paid even if the transaction does not go through, and these methods of payment have also been used to scam people as well. So just because a seller uses these methods, it is still in your best interest to find out everything about the seller.
The ironic part is people in this industry fly all over the world on a whim for fly and buys with little to zero verified information. They hear about stock in NY from a guy in FL, and they are on the first plane out there to investigate this "rumor". They assume that just because payment is done this way that it has to be legit. This could not be further from the truth. You would think this would be true, but this is a wacky industry, and weird things happen. I get it all the time people saying there are fly and buys in Hong Kong, Ney York, Florida, India and so on and yet they can not show any proof its actually there.
If you are flying all over the world to investigate fly and buys with little to zero evidence it is there, you are going to lose a lot of money. If you use escrows and bank letters of credits without verifying who the seller is or requiring more proof the seller actually has the goods, you are going to lose a lot of money. Always always always ask for more proof. Legitimate sellers can always offer you this.
Another thing to think about is why would someone who is offering you fly and buy ask you to post an LC or a deposit either by cash or into escrow in order to come and pick up the phones? If they are legit they wont. There is no reason to ask such things. If the person or persons who have the phones is offering fly and buy that means they already have them. They have already fronted the money so why do they need to know you’re serious by putting up escrow, LC or cash? If you do not show they are not out any money and it in no way affects them.
True legit sellers do not ask for money up front to look at product. Again I cannot stress this enough. Never just fly on a whim unless you are given 100% Proof of stock and never put money up front in order to see stock for fly and buy.
I guess the point that I am trying to get across here is that every transaction has to be individually scrutinized. People who don't offer fly and buys are not always scammers, and vice versa those that do are not necessarily legitimate. Payment terms are not always the best indicators of legitimacy, and you should not base your decision to do business with a company solely based on this.
When someone says that they have physical stock in hand ask for proof. When someone says a heard there was an LC transaction in the UK or NY or Hong Kong and that person is somewhere else and is just going by that they “heard” there was stock somewhere again ASK FOR PROOF!! If they cannot provide you with pictures its not there period no ifs ands or butts about it.
The most important part in this business is to gather the facts yourself. Gather all the evidence, do some research, request documents and photos, ask around. Regardless of the payment terms presented by the seller the process of investigation should be the same. Do not travel, open an escrow, wire money, etc. until you have a mountain of evidence that you are indeed working with legitimate and capable suppliers. This will help you to save a lot of money, time and headaches in the future. Good luck.
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March 2010
