Are you an Ecommerce business owner, or do you just seem to be one? There is a difference, and that difference will hurt your business.
When you sell products on the internet, just like anyplace else, you need to be buying those products from a
Direct Wholesale Supplier. Either the factory itself or a factory authorized distributor.
Here's a scenario:
John Doe wants to open an internet store and make lots of money. He can't believe all the news about new
internet millionaires. He's seen pictures of these people in the news and on the 'Net, and lots of them look like they're one beer short of a six-pack.
"If they can do it, so can I!" he thinks, and starts to search around the 'Net' for information on starting a business. He finds boatloads of hosting companies willing to put his site out there for just a few dollars a month. He finds that many of them offer free shopping carts, so that he can take his customers orders. He finds services that let him accept credit card payments without even applying for a merchant account.
Only one thing left...what to sell?
John looks around online for wholesale suppliers. He comes across a wholesaler of name brand products that he knows are very popular. He contacts them, and they say, "
Certainly! We will drop ship products directly to your customer for you one at a time, at wholesale. All you need to do is fill out some paperwork about your business, and supply us with your Tax ID number."
"
Paperwork?" thinks John. "
Tax ID number?" Yechh!
That sounds like work. Worse, it sounds like LEGAL work. That's a scary thing to most people and John is one of them!
A little more searching...
and John finds a web site called "Stuff R Us".
Stuff R Us is screaming at him:
"Thousands of wholesale products you can sell on your website! NO investment for inventory! We send each item right to your customer! No shipping, no handling products, no minimums! Sign up with us and we handle everything! This is your road to Internet Riches!"
Well, that's the road John was looking for by golly, so he happily sends his name and address to Stuff R Us along with his sign-up fee.
John is creating a new Internet millionaire, all right. No doubt about it.
Unfortunately, it's not him. It's Stuff R Us.
Stuff R Us is a middleman.
Every time John places an order with Stuff R Us, they turn around and place that same order with the REAL wholesale dropshipper. John never knows this is happening.
Stuff R Us is marking up the real wholesale price to John. John will piddle along selling the same over-marketed imports as thousands of other Stuff R Us clients, at over-inflated wholesale prices.
So, where did John go wrong?
It's simple. Instead of bothering to do some simple legal paperwork for his business, John let Stuff R Us cheat him out of most of his profit because it was easy.
Please remember the following two statements:
1. You MUST work with REAL wholesale suppliers to be truly successful in E-commerce.
2. You cannot buy from a REAL wholesale supplier if you are not a LEGAL business.
ANYONE who allows you to purchase wholesale products for resale without legal business paperwork is NOT a real wholesaler and is taking profit that should be yours.
Getting legal is not that hard. Don't listen to the people who tell you that you don't have to do it. Here are the basics (in the US):
1. File a DBA (Doing Business under an Assumed name), or a Corporation. You can do it yourself for surprisingly little. As far as I know, all states in the US have web sites where you can read instructions and file your papers online.
2. If required in your state, file for a local business license. Here, we paid $35 for this. Many states do not even require it.
3. Contact your State Tax office (NOT Federal!) and file for a "Sales and Use Tax ID" or "Resale Certificate." This is what a real wholesaler needs to see in order to do business with you. They use it to justify the fact that they are not charging you sales tax on the products you purchase and resell to your customers.
Getting legal is easy and the benefits are tremendous. Don't make money for a middleman..make it for yourself!
