Hello all, I'm new to the business world and am trying to start up a business however I have a few questions. Are trade companies legal? if so, how is it that they can sell BRAND NAME items at such a low price? For example, say a nintendo wii is sold for $289 through a trade company but sold for $529 at walmart, isn't this illegal? Does nintendo have any protective measures to protect its products?

anyone?? any info on trade companies would be great, how do they work, what are they.... any websites, etc? thanks in advance

I am not sure what you mean by Trade companies? Do you mean wholesale? (ie where shops go to buy their stock from?)

It certainly wont be illegal but may be breach of contract. Some companies fix the price of their products which the retailers must sell it at as well as put other prohibative clauses in such as not being able to sell them via mail order/ internet but these are the minority not the majority.

In most cases retailers will sell to wholesalers and may charge £100 per unit but there is a minimum order of 100,000 units per year. Large retailers or smaller wholesalers will then buy the products from them and the price they charge will depend on the volume they purchase so buying 1000 units per year you may get them at £120 per unit but if you buy 10,000 units per year you only pay £110 per unit (basic economies of scale)

If a retailer therefore can shift large volumes they will be buying stock at lower prices. Add to that cost savings through the total marketing element (eg an online retailer can have offices in cheap out of town areas where as a general retailer needs to have prime placement on the high street to get the footfall. Trade places tend to have basic shop fittings, no displays, low maintance where as retail stores have expensive fittings to make the products look better, display units that they can only sell at discounted prices after they start to look tired etc)

On top of all that is the whole concept of loss leaders and other strategies. Companies will sell a product at a loss simply to attract people into the store in the hope that whilst they are there they will also buy other items which are profitable - another easy example of this is resturants as some make no money at all from the sale of food but have a high markup on drinks; people tend only to check food prices for a resturant and drinks arent really considered.

__________________
Astaroth Solutions - Bespoke web development
Free Directory - Link exchange

thank you for your reply, it was very informative. By trading company I mean a company like this: dt-shoes.com where you can buy products in bulk. A pair of shoes in the store would cost $120 but by buying that same pair from a trading company in bulk, it would cost you $37 a pair. I was curious on the legality of this issue and whether or not this deal is too good to be true. thanks again

Sounds like a wholesaler, their target market are other trade customers and so their prices have to have room for profit margins and as per the original post their overheads are much lower than a retailer.

That said there are exceptions, for example I know one camera shop where their prices for lighting rigs are lower than most retailers pay from their wholesalers because they are shifting such volume that they buy direct from the manufactures cutting out all the middle men's profit margins and distribution costs etc. This is inevitably a vicious circle because less other companies buy the kit as they cannot compete on price so the wholesalers have to reduce their volumes meaning they pay more per unit because they're buying less etc

Can be an example where free commerce doesnt work as ultimately it could happen that the retailer becomes the sole stockist as the price differences keep growing which is why some manufactures will put minimum sales price as there is a big risk for a 1:1 relationship to exist (all their eggs in one basket etc)

__________________
Astaroth Solutions - Bespoke web development
Free Directory - Link exchange

this is confusing... then why do middle men exist at all. Why not the retailer go straight to the manufacturer and make more of a profit?

manufacturer sells product for $30 => middleman buys and sells to retailer for $50 => retailer buys and sells (to consumer) for $80......... it makes no sense, why not the consumer buy from the manufacturer for $30?

trade company or wholesale?

A trading companies is not illegal if you already register it with the authorities. But, the items you sell maybe illegal i.e. fake goods. Your business operations may also be bounded by the terms of agreement with your principles i.e. selling items at fixed prices by principals.

Trading companies is not illegal as long as there items are "real". All i know from living in China is, as long there products don't break down it's real.

There's a choice between "second hand" and from "The Box" when you buy something from cheap outlets. Price does matter if you plan to use it long term.

Blogerrita is going in the right direction they are far from fakes they might be second hand in the first place anyways.

ChrisVarick middle man exist is because people don't want to wait for production time. Most factory can't deal directly to buyers because in China, by law "factory" can only do factory work.

Where as like me, sales we only sale to clients who are willing to wait for product time within 30 days or more. People that will wait is like Wal-Mart and Sears big companies down to dollar shops. The 30 days is "if" the product during the "making" has no defect or flaw then that's 30 days.

Most factory have a minimum quantity something like 5000 each and there's a deposit requirement too. Some factory will want you to deposit 50% ~ 70% first before starting production. So do you think you want to wait for "maybe" 30 days or more sleepless nights and have 10,000 pairs of shoes?

If that sounds like you then please contact me, i'll be happy to know you better.