At first glance, this method seems simple: the seller finds an intermediary, establishes contact with the customer, sells the product, purchases it from the intermediary, and makes a profit. Essentially, it’s a classic "buy-sell" model. However, in practice, there are many nuances that can complicate the process.
For example, delivery times, customer uncertainty, and lack of knowledge about the product can create difficulties. Often, buyers make requests without clearly knowing what they want or without setting a budget, which can complicate interactions.
The biggest challenge, however, is building customer trust. This can take time and money: initially, the seller might need to offer discounts or promotions, potentially operating at a loss. Over time, as a base of loyal customers forms, the business can break even and start profiting through word-of-mouth.
Another risk of this business model is the reliability of intermediaries. There are two main types of fraud in this area: delivering counterfeit products and delays or complete loss of orders.
The first issue is hard to avoid, as product authenticity can only be verified upon receipt. For the second issue, many logistics companies offer insurance for the goods. If the item is lost, the seller may be reimbursed for the product but not for the shipping costs.
Some dishonest companies may use tricks, claiming that the item was lost due to various reasons (e.g., "it sank" or "it burned in a fire"), refunding only the product cost and keeping the delivery fee. It’s important to remember that such actions may be classified as fraud prosecuted under the law.
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Pros:- High demand
- Low startup capital
- No need for inventory storage
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Cons:- High competition
- Fraud risks
- Advertising costs
- Dependency on the intermediary
- Issues with returns and warranties