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Scam worth studying

 Scam worth studying


When trying to understand any scam, one has to accept the fact that no matter how, where & when the scam is taking place, it is a loophole of the system, process that was overwritten by the smartness of the opportunist.

Any manufacturer who is producing products that are carrying guarantee or warranty, can be at the risk of these kinds of typical scam.

We will go by an example:
Company A is producing products X, Y & Z.
X is being sold to the distributor at 100 USD per piece
Y is being sold to the distributor at 125 USD per piece &
Z is being sold to the distributor at 150 USD per piece.

While each of the products as the prices indicated to have an stepped up quality, the same also ensures that guarantee period.
So say X have say 5 years guarantee
Y have 6 years guarantee &
Z has a 7 years guarantee.

Mostly every manufacturer within their own understanding & principle has a policy to attend any complaints on the product within the given period of guarantee for any manufacturing defects, identified or experienced by the end users.
And while no product is going to remain defect free for all of its batch, the deviation & the thresholds defined during the processes of the production can reduce the chance of having many products that will fall out of the set limits, so either such products are rejected or downgraded.
But then there can be products & processes that cannot be scrutinized & the awareness of the very fact becomes the foundation of the said SCAM here.

By large every product will have its resale market & value as well, some are upgrading their existing products, while some are moving to different terrine & moving along with those products might not be cost effective, so given by many possible reasons, the second hand market remains as lucrative as it gets, why because of the fact that the first buyer has already enjoyed the value for their investment, while they are in almost a compulsive state to sell it off at whatever price they are able to get out of it. And given the fact that while many consumers prefer premium products, they cannot afford to buy the same at premium price & as a fresh product, but yet they can comfortably buy an second hand or fairly used product, as that is giving them value for their money & assurance that a fairly used branded product will still serve them better than any new non branded product coming at the same price.

Given this principle of the second hand product market, the resellers are likely to make more profits than the first seller or the main distributor of those very products.

Statistics & examples of the scam, it's really brilliant!!!!!

Say X being sold at 100 USD, as fresh product might get sold around 40 USD by the first user, the reseller might refurbish it at say 5 to 10 USD & can then sell it at 65 to 70 USD, so the net percentage of profit of any reseller might remain around 30 to 40% which actually might be much higher than the margins of the first seller & distributor. 
Besides, the second seller is not liable for any guarantees, once sold it's your baby. 

But what if any distributor becomes the bulk buyer of these first hand used products that are being sold off?
They will buy all the products of the SAME BRANDS that they are distributor to from the open market that are available for sale as used products.
Once they are bulk purchasing the used products they can even get a better bid.

So now here comes the SCAM, the distributor of the same brand will now take all these products purchased from the end users & resellers to the manufacturers with claims of manufacturing defects & demand for replacement under the clause of guarantee.
Look at the margin, X product that must have been purchased at 40 USD will be returned to the manufacturer to be replaced with a brand new product of 100 USD. 

NET 150% of profit, invest 40 USD and make profit of 60 USD which business can ever have these kinds of profits if not a SCAM?

What allows such SCAMS to find its place in any system is a topic on its own?
What can be done to avoid & safe guard your products & business from such scams is a subject of deliberation?

But the message is clear, leave a loophole in any system & SCAMS will continue to sprout from it like mushrooms!!!

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