- Posted by admin
- On July 16, 2018
Last week I was asked to write an article about the ugly truth of reverse auctions such as Fedbids and Fedbizopp which we discuss a lot and always end up cursing a lot during the conversations but I always tell the truth about them being a scam.
It is important to note that the initial idea was to both lower the cost and improve the buying potential of the Federal and State Agencies. This idea was great but no one considered any negative effect the idea could pose or they just didn’t care. The reason for the negative effect of the idea include ;
- Human nature of greed
- Human nature of dishonesty
- The faceless name behind the bids
The Federal Government spends millions of dollars on products which are sold by brokers or brokerage firms and companies which are manufacture direct such as the one I personally own and operate daily.
Brokering is simply a business where a firm sells goods without having prior and dependable knowledge about the product or manufacturer but only looks for the cheapest in price to buy and sell then sells it to the Federal Agencies to make profit without even seeing, touching or observing it to see if it is manufacture direct quality OEM or a remanufactured or counterfeit substandard product.
All they do is broker products between two people which are the seller of the product and the end user which in this case, are the Federal Agencies.
No one, based on common sense and intelligence from the side of the Federal Government has questioned why these brokers are offering a cheaper price than the standard manufacturer. Questions should normally have been asked following the golden rule that states “if it seems to good to be true, it is probably not true”
Daily my company is contacted by companies in Mexico, Russia, China, Korea, other Asian countries and even beyond offering to supply me well known and brand-name products like the Black Hawk, 5.11, Flying cross, Bates, Safariland, Honeywell of which I am sure are fake and counterfeit version of the manufactures products because of the low price they are willing to sell them.
My first opportunity to be in government sales was in 2003 after leaving the military and it was not a good experience. I worked for a company who would have me call companies daily in other countries to purchase goods. These goods were not from the manufacturers but from companies who counterfeited these goods to imitate and look like the real standard brand. Needless to say I did not work for them long and I contacted the Government to tell them what was happening but no one ever followed up my claims and as a result, the company continues to operate to this day.
In 2010 I started my business after a Law Enforcement Agency I worked for ordered some Tactical Gear for our SWAT team. It wasn’t the very best but it was good equipment as we then thought. After just a few months the equipment started to fail and I took it upon myself to reach out to the manufacturer who requested that I send one of the failing pieces of equipment to them. Surprisingly, the product had their name on it but it was not from the original manufacturer.
The manufacturer explained that the material used and the stitching was both inferior and they subsequently went after the company who sold it to us. In short, the company we obtained the gear from purchased this equipment from a broker who offered the lowest price to them, they thought this equipment was directly from the original manufacturer and in the end the company who manufactured it was not even an American Company but was located outside the United States.
Our Chief did not go after the company who sold the equipment to us because I believe he did not want to admit he, as a Law Enforcement Officer got ripped off. Pride and Butt Hurt is another elephant in the room we must address because no one admits to having the wool pulled over their eyes and they would rather just sweep it under the rug. Due to this, I decided to establish my own company and offer products to agencies at a cheaper cost.
When we talk about cheaper cost, people think that products sold on the open market have a 50% or higher profit margin which is not true or even close. On average my company being a wholesale company makes between 5% to 25% off of the MRP which is the Manufacturer’s Retail Price. So if you are looking to buy let us just say for example 5.11 Polo Shirts, 5.11 is a big seller in the Military and Law Enforcement community so that is why I am using them as an example, they retail around $49.00 and higher. On average we as wholesale companies, buy them at around $39.00 or higher and on average for clothing we make about $10.00 to $15.00 per Item.
A couple of years ago, I attended an event called the Broker Think Tank in Fla. This is a monthly meeting where brokers and business owners get together to talk about purchasing, how to buy in bulk to save even more money. After a couple of meetings, I was approached by a young man who had these unbelievable prices on products my online store sold so he gave me a sample and I thought “HEY, I get 60% profit on a large ticket item” and at the time was the happiest person on the planet. Well, after two weeks, I made my first purchase of just a few of the items and started selling them after comparing them to my manufacturer direct products. It did not take much time before a customer that had purchased the product called to give horrible experiences about the product. I had never seen these products have this issue so I reached out to my supplier and he was good with sending out a replacement.
Well, soon the replacement increased from just 1 to 5, 8, 15 and still increasing. Subsequently, after the third and forth replacements were made for free, my supplier started charging me a replacement cost which I was happy to do since I was making this huge profit and the cost wasn’t that much so I still thought I was on cloud nine with our deal until I was at a yearly manufacturer’s expo where I ran into my old sales rep with the manufacturer and we started talking about the issues I was having with some of the products. My old sales rep asked me to ship him one of the products which had the wearing issue and said that he wanted to bring it up to his quality control department so they could nip the issue in the bud before it escalates to an unfortunate situation.
About a week later he called me and told me that the owner of the company and the corporate attorney was on the line and wanted to ask some questions about my supplier and it was at that moment I had the sinking feeling I was duped and defrauded. At first, I felt embarrassed and then had that voice in my head saying “you idiot, how could you not see this coming” so after telling them who I purchased from the attorney told me he knew the guy I told him about but he wanted to be sure. He told me this guy has been buying from the Asian market for years and reselling them with the manufacturer’s company brand name and logo and once his business gets investigated he shuts down that business and starts up a new company with a different name.
Well, I did call the company I purchased from and surprisingly, he denied everything about these items being counterfeit. I brought this issue up at the next Think Tank event and I was astonished to know just how many brokers didn’t even care, how they thought I was the bad guy for even bashing this company and marking them out as a fraud and I even had one of the brokers from another company advised me to mix the remainder of the counterfeit items I had with products I got from the manufacturer on my next sale and the foolish purchasing agents I sell to will never know the difference and it was then I decided to get away from that group of brokers and transact with the manufacturer directly.
I never thought in a million years that so many people in business had this type of thinking but I see it day in and day out as if it is a normal course for businesses. Even in Government sales I’ve had companies I’ve lost bids to call me looking to buy all the remanufactured goods I have, returned items I could not sell as new and have even been asked if I have any contacts overseas that I can get them from which on all accounts are illegal when it comes to selling to our Government.
It was not too long ago, maybe 3 months, I contacted a purchasing agent from a Federal Agency and advised him about the bid I lost. I advised him that there was no way he could buy those products for the price he was paying. They couldn’t even get them directly from the manufacturer for the price they purchased unless the manufacturer was willing to lose about $18.00 per unit. I even contacted the manufacturer who gave me the price to manufacture and the specification sheet so as to show the purchasing agent and convince them that they purchased a counterfeit product.
A month later, they must have figured out that the company was defrauding them and understood the goods they purchased was counterfeit and the next company in line which bid $1,000 more on the bid was chosen. The company that later won the bid called us because they knew we sold this product and I sent them a quote and they called me a few hours later and told me they were not interested in new ones that they have the new ones already. They said at the price they bid, they needed refurbished or returned products I couldn’t sell as new and I just hung up on them.
In conclusion, if your initiative and logical reasoning is signalling to you that a price you are getting is too good to be true, it is. You, as purchasing agent, have a responsibility to those you are purchasing for to make sure that you are getting a manufacturer’s original brand product and not just something that looks like it. Those men and women you are buying for bet their lives on this equipment you are purchasing and at the end of the day when it comes to reverse buying, you are the one with your ass on the line if they are counterfeit. Remember, if anyone dies because of an inferior product you purchased, you cannot be anyway exonerated from it.