I have had a number of discussions with people about this same subject and, surprisingly, many people wont buy perfume, aftershave, or cosmetics on eBay because of the fear of being scammed. My most recent conversation with the owner of a large Melbourne-based pharmacy revealed that his wholesale price was higher than the highest bids for the same items on eBay; conclusion – the items must be fake.
I will explain how it is possible to sell perfume so cheaply:
1. There are economies of scale for large bottle runs
There are set-up costs associated with making a perfume such as development, testing, engineering, and factory fit-out. The more perfume that is made, the cheaper these costs become as they are spread over more manufactured units. For example, it may cost $17 per bottle to make 10,000 bottles but only $8 per bottle to make 30,000 bottles. If demand for the new batch is limited to 19,000 bottles, the manufacturer can choose to continue to pay storage costs OR liquidate his current stock, sell it for a little bit less and still make a profit AND he is getting his brand into the market place.
2. Shipping from another economy = no taxes and no GST
By setting up a distribution agreement with a resident or supplier from another economy (such as Hong Kong), sellers are able to supply stock into countries all over the world without having to pay taxes, import duties, or customs levies which are paid on large shipping containers. While this is tax evasion and highly illegal, many eBayers are either unaware or they simply do not care (until they are caught). The only problem with this method is shipping costs may be slightly higher.
3. Distress stock
Sometimes the number of bottles manufactured exceeds the number of labels or boxes. Sometimes everything goes to plan and then labels or boxes are water damaged, misplaced, or quality control means the boxes have printing errors (not spelling mistakes) like ink runs. The excess bottles of perfume are often auctioned in tonne lots. Distress stock can also refer to many other reasons why a manufacturer may want to move stock, such as storage space.
4. Testers and excess sample stock
Unboxed, or primitively boxed perfume (such as was referred to in point 3.) can also be released to retailers as testers and to agents as samples. Agents often provide their samples to their best clients and employees, however, when a distributor has excess testers and sample stock, they are often sold very cheaply through side door shops or discount outlets, or provided at no charge to employees.
5. Customs seizures and auction buy-outs
When goods enter the country and are inspected by customs, if import duties and taxes have not been paid prior to the goods arriving on shore, they need to be paid prior to the goods leaving customs. If the amount payable is more than the importer can pay, the importer is given a period of time (say, 90 days) to settle the account prior to the goods being auctioned. When the goods are auctioned, the proceeds are used to pay the outstanding amount, and any excess funds are returned to the importer. Needless to say, the stock RARELY sells for retail at auction so there are plenty of bargains. Check your local newspapers for details of such auctions.
6. Short shelf lives
Sometimes, manufacturers bring out limited release lines to attract interest in their brand. Generally it is a new slant on an old favourite – Joop and Ralph Lauren often do this. Once the limited release product starts to slow in sales, it makes more sense for the distributor to stop stocking the product, free up storage space, and auction off in tonne lots or distribute in other channels, the remaining quantities.
7. New packaging
New packaging, label, and box design, or included gifts, out of date packaging like Fathers Day 2005 or Christmas 2001. All these things can date a product and make it less desirable to buyers. It costs a lot of money to unpack stock and repack into current boxes. Distributors generally accept returns from stores and the stock is written off after being discounted in store sales. The out of date product is then auctioned, sold through side door factory shops, or sold in bulk to 3rd party discounters.
8. Vendor storage requirements
When a product is discontinued, and the distributor accepts all the returns from retailers, it is often cheaper for the distributor to auction off the stock in tonne lots than to pay storage fees, OR for the old stock to take up storage room in place of current lines that are selling strongly.
9. Shoplifted Stock
Not realising that stock can be obtained legally from the methods listed above, perfume is undoubtedly stolen from department stores and listed on eBay. Often these are testers or counter stands because they do not carry a security label. More recently, stores spray sample cards and hand them out to customers so tester bottles are obviously not full when first placed on the shelf. This limits the re-sale value of the bottle. Obviously, be somewhat wary of people who sell unboxed perfume on eBay.
It costs MILLIONS to set up a production line to accurately copy (counterfeit) an intricate design, why bother when it can be done much cheaper in at least 9 different ways?
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