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Dropshipping: Why those online deals are usually too good to be true

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When Sean Virsunen of Collingwood, Ont., was looking for an aquarium heater recently, he did what a lot of Canadians do: He shopped around online to find the best price.

He eventually found the item he thought would suit his needs on Walmart.ca for a great price — $15.97 Cdn. “I knew it was going to be something really cheap,” he says, “but I thought it could be worth it.”

A few weeks later, the item had yet to arrive, so Virsunen sent off an email to Walmart.ca to inquire about the delay. 

“Their response, in a nutshell, was that it was sold by a third party, we have nothing to do with this, you need to contact them,” Virtsunen recalls.

That was surprising to him, since he had ordered the item on Walmart.ca and didn’t notice anything about the product not actually coming from them. But sure enough, when a package arrived some time later, it was from a company called Zest Mall Inc.

Dropshipping started as a way for retailers to supplement their own offerings online, but has devolved into online businesses with no products of their own selling straight from manufacturers. (Aleksey Novikov/Shutterstock)

It looked vaguely like the product he had ordered, but it came with foreign writing on the box. It also had European-style electric plugs, so it was wired to work on a 220-volt system — not the 120-volt system used throughout North America.

Virsunen contacted the company to complain, and after receiving numerous emails offering him a discount on his next purchase, he grew frustrated and insisted on a full refund. The company said it would do that if he could ship the item to an address in California — something that would have cost more than twice what he paid for it in the first place.

He complained to Walmart again, and they eventually said they would refund his money if he returned the item to a store. 

“We expect our sellers to honour their return policies,” Walmart Canada told CBC in an email. “However if a customer is not able to receive a refund that is allowed under the policy, they can escalate their refund request to Walmart.”

While Virsunen thinks he will eventually get his money back, the experience was an eye-opening one for him, and his first foray into the murky world of something called “dropshipping.”

Representatives of Zest Mall Inc. did not respond to multiple CBC requests for comment. But their business has the hallmarks of a practice where third-party companies known as dropshippers sell products to consumers directly from the manufacturer, without the need for a physical store of their own.

A murky world of retail

Traditional retailers sell products to domestic consumers that are often made by foreign manufacturers. Retailers make money by marking up the price to cover their costs — rent for the store, salary for employees, warehouses to store the stuff and the technology to process payments.

In dropshipping arrangements, goods go directly from the manufacturer to the consumer without the added costs of the retail side. (CBC)

Dropshipping cuts all of those costs down drastically, because it circumvents or outsources most of those tasks. The dropshipper sets up a web store that’s often little more than a photo catalogue of available items, and ships the item directly to the customer from the factory.

In some cases, dropshippers don’t even have their own web store, selling their wares on the web portals of established retailers like Walmart, Amazon or Home Depot.

Payment processing is usually handled by an outside party, too. Canadian tech company Shopify is a big booster of the practice, via its app called Oberlo. Shopify says 85 million products have been sold through Oberlo. 

It didn’t used to be that way.

“In the past, retailers would engage in a dropshipping arrangement for purely logistical purposes,” says Mark Cohen, the former head of Sears Canada, who now teaches business at Columbia University in New York.

In Cohen’s day, a brick-and-mortar retailer like Sears would partner with a foreign supplier to dropship “large bulky products it didn’t want to stock on its own shelves that it could more efficiently simply arrange to have shipped directly from point of origin.” It worked well for big-ticket items like appliances, many of which are made outside North America to begin with.

But the rise of online shopping has turned dropshipping into something quite different, as consumers demand better deals and expanding selection.

“Consumers don’t care where the goods are coming from,” Cohen says. “They see it, they want it, they buy it, they expect to get it.”

More and more, that suspiciously cheap item online is coming to a consumer from a dropshipper “without the retailer they engaged having anything to do with the handling of it,” Cohen says. “And they don’t really care as long as everything is as promised.”

‘Selling really cheap stuff’

Problems arise when it isn’t.

A worker assembles ornaments at factory Xitanon village in the outskirts of Wenzhou, China. Dropshipping allows online stores to sell imported products at deeply discounted prices because they ship directly from foreign manufacturers. (Qilai Shen/Bloomberg)

Andrew Youderian runs an ecommerce consultancy and community called eCommerceFuel, but between 2008 and 2016, he ran several dropshipping businesses that collectively netted more than $1 million in annual sales.

Back in his day, he says dropshipping was a viable business plan for real-world entrepreneurs who wanted to offer more products without having to take on the risk of adding expensive inventory that has to be stored, and may not sell quickly.

“Six or seven years ago,” he says, dropshippers like him “worked with reputable suppliers and legitimate businesses.”

Now, he says a lot of the industry has just devolved to mean “people selling really cheap stuff directly from the factory to consumers.”

Amazon’s journey to becoming an online colossus played a big part in the evolution of dropshipping, first by making it harder for their real-world competitors to sell stuff themselves online, and now by working closely with third-party sellers. Some of them are legitimate retailers, but many are just dropshippers with no products or stores of their own.

As Virsunen puts it, “[Amazon] used to compete with them, but now they’re letting them on their platform.”

“If your whole strategy is trying to resell someone else’s products … it’s really hard to out-hustle Amazon,” Youderian says, which is part of why he got out of the business entirely.

But not everyone thinks the same way. One of the ways that dropshippers now get noticed is by advertising on social media feeds to try and nab bargain-hungry browsers. Once you click buy, you’re bombarded by even more ads for products, since dropshippers know you’re open to buying them.

Consumer-focused chat forums are replete with countless stories of consumers angry about being sold shoddy merchandise based on ads targeting them in their social media feeds.

“A bogus manufacturer creates a picture and body copy describing this wonderful product they’re going to make available for an incredibly low price, and the consumer opts to buy it,” is how Cohen describes the process. “Then, when they get [the item], they get a package full of sawdust.”

“They complain and discover the retailer that sold them the box of rocks is gone,” he says, “doing business under a different name.” 

In the past, consumers trusted that retailers were screening the items they were selling, Cohen says. “If they viewed the product as shoddy or substandard or not living up to its claims, they would typically reject it.” 

Prices that are too good to be true are a hallmark of the dropshipping process, as items often take a long time to arrive, are of suspect quality and are very hard to return. (Pete Evans/CBC)

That’s not happening as much any more, which is why Virsunen says he feels duped. 

“It’s kind of false advertising,” Virsunen says of his experience. He says he’s unlikely to buy on Walmart’s Canadian website again, despite the fact that Walmart said they will give him his money back.

“I ordered something off a Canadian website, I was expecting something that would at least work in Canada,” he says. “Who are these people [and] how are they allowed to just willy-nilly sell stuff?”

In an email to CBC News, Walmart said all third-party sellers it works with are “carefully vetted and reviewed before being invited to join Walmart’s marketplace community to ensure our customers receive the quality and service they deserve.”

But Zest Mall’s page on Walmart’s official marketplace sellers list is littered with poor reviews that are reminiscent of Virsunen’s experience.

Walmart says it makes it very clear on its website if any available product is being sold by a third party, as such items will have a “sold and shipped by” line next to their products. Walmart adds that customers can return any item from a third party to a Walmart store, “subject to the return policy of the marketplace seller.”

Virsunen says that’s not good enough.

Cohen says bad experiences with suspicious-looking deals online are a good reminder of the age-old retail advice: buyer beware.

“It’s like caveat emptor on steroids,” he says. “You took your chances, it seemed too good to be true and it was too good to be true.”

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Window repair or replacement is the responsibility of the condo corporation

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If the windows in your condo are hazy, drafty, or have rotting frames, it’s an indicator that they need repairs or outright replacement.

However, under the Condominium Act, it is the responsibility of the condo’s board to carry out such changes as a replaced window is a common element.

“Under the Condominium Act, a declaration may alter the maintenance or repair obligations of unit owners and the corporation but cannot make unit owners responsible for repairs to the common elements,” said Gerry Hyman is a former president of the Canadian Condominium Institute and contributor for the Star.

“A declaration for a high-rise condominium invariably provides that the unit boundary is the interior surface of windows. That means that the entire window — whether it is a single pane or a double pane — is a common element. Necessary repairs or replacement of a broken pane is the obligation of the corporation.”

According to Consumer Reports, selecting an installing windows replacement can be very overwhelming for homeowners. Therefore, if you aren’t covered by your condo’s corporation, it would be necessary to hire professional hands.

Wood, vinyl and composite windows need to be tested on how they can withstand various natural elements. For wind resistance, a window can be very tight when it’s warm but get quite cold too—especially when it begins to leak a lot.

Whatever the case may be, the bottom line remains that replacement windows can save you heating and cooling costs, but it’s best not to expect drastic savings.

Additionally, while getting a new window might help you save on your electric and gas bills, due to their expensive cost, it may take a long time to offset their cost.

Mid-last-year, the government withdraw a $377 million Green Ontario program that provided subsidy on windows to installers and repairers. Window companies had to install energy-efficient windows in order to qualify for the government subsidy that pays for up to $500 of a $1,000 to $1,500 window.

Due to the largely generous subsidies from the government under the Green Ontario program, a lot of window dealers were fully booked for months—even after the program had ended.

“We’re fine with the program ending, we just need more time to satisfy consumers,” said Jason Neal, the executive director of the Siding and Window Dealer Association of Canada, the industry group representing window dealers in a report.

According to Neal, the Progressive Conservatives acted hastily, making massive changes with no prior notice.

“No notification was given to us by anyone,” he said, noting he learned about the change through one of his dealers.

“It’s created a ripple effect.If they had just given us notice we would have pushed that down the line from the manufacturer right into the dealer right down to the consumer.”

Neal noted that he wasn’t particularly sad to see the Green Ontario program end, as it was “the worst rebate program in the history of the window industry.”

“It’s been horrible,” he said. “$500 a window has created such hysteria.”

However, despite the program ending about a year ago, numerous homeowners have been contacting window dealers consistently with concerns that they might not be able to afford replacement windows without the government’s subsidy.

“I understand their concern,” said window dealer Chris George. “I would suggest they reach out to their local representative of the government in their riding and let them know about their concerns.”

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7 Vancouver Real Estate Buying Tips

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The real estate market in Vancouver is turning around for good for everyone looking to purchase a home.

Previously soaring prices are now beginning to ease up, making it a perfect time for buyers—with real estate agents already getting ready for a very busy spring and summer season.

However, before splashing cash on a new property, there are some very important tips you need to know to ensure you make the most of the buyer’s market.

Here are some few expert tips that would guide you when purchasing a home in the sometimes frustration Vancouver seller’s market.

  1. Get adequate financing

It is very important that before you make the move to purchase a property, you put into careful consideration your credit score.

Normally, home buyers with lower scores use the secondary mortgage market to finance their purchase, as they’re more likely to pay a higher interest rate.However, it is advisable to get loan approval long before purchasing the house. This way, you are fully aware of how much you are able to spend—but never be tempted to borrow the maximum amount of money available.

“What’s your mortgage payment that you’re comfortable with? And take into the fact the taxes you’re going to have to pay, if it’s a strata – what the maintenance fees are, if it’s a home what type of maintenance are you going to have to pay in the future?” said Phil Moore, president of the Real Estate Board of Greater Vancouver in a report.

Always be careful of the type of loan you secure and ensure that you can comfortably afford it over a long period of time.

  1. Get a real estate agent

Buying a property without professional help is a very risky move and can be likened to choosing to represent yourself in court without a lawyer. While you might trust your negotiation skills, only realtors are permitted to present offers directly.

Therefore, it is necessary to get a professional real estate agent in the area to represent you. So, screen a few agents and select the best one who has in-depth knowledge of the markets and has a great reputation.

“They’re there to protect you. They’re there to walk you through each step of the process,” Moore said.

  1. Sign up for automated alerts

Most—if not all—realtors have access to the Vancouver real estate board’s database which is updated approximately two days before the public MLS website.

Therefore, you can request from your realtor to sign you up for automatic real-time alerts of all new listings. Doing this gives you an edge as you’re among the very first to know about new properties.

  1. Do a thorough inspection

After receiving an alert for a new listing, it is necessary to push almost immediately for an inspection from your realtor. In this current market, buyers now have time to make an inspection.

Making a quick inspection eliminates any surprises—as there could be major maintenance or repair issues that could spring up. Therefore, you can now table your offer based on the outcome of the inspection, with clauses about claiming your damage deposit back if everything isn’t as was advertised.

Additionally, if you notice that renovations were done, you need to be sure that it was permitted work and carried out appropriately. Failing to do this would ultimately lead to further cost down the line and simultaneously affect the resale value.

  1. Have a back-up plan

There’s always the possibility that everything may not go as smoothly as you’d want. From the inspection being a failureto the property not living up to your expectations—or not being able to agree on the closing date that matches with your needs.

However, a professional real estate agent will definitely help you get past all of these things. If you plan on selling the property as you buy, you can table that and make it part of the deal.

“You’ve got an option, especially in a buyer’s market: you can put in an offer subject to selling your place. So maybe you want to have a place lined up,” Moore added.

Additionally, building contingencies into your buying plan is necessary. Things such as unexpected delays in closing the deal, closing cost and moving costs that could result in added living expenses if that’s your permanent home.

  1. Don’t fall for the buyer frenzy

The Vancouver market buying frenzy that caused a serious climb in the prices a couple of years ago has ended. Thus, it is important not to get caught up in bidding wars with properties that have been deliberately under-priced—with the hope of initiating multiple offers.

“Some of the sellers have been on the market for over a year and they’re eager to sell. So what I’m saying to consumers is: you have a lot of choices, you’re in the driver’s seat, let’s go out and take a look at what’s available,” said Moore.

  1. Never be wary of multiple offers

When purchasing a property, don’t be afraid of multiple offers as you have the same opportunity as anybody else.

Typically, there are just a few offers below the asking price: a couple priced fully, and two or three above the asking price—depending on how close the fair market value is from the asking price.

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Do you know what kind of condo you’re buying?

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(NC) Condominiums can come in all shapes and sizes. But it’s important to know that not all condos are created equal when it comes to warranty coverage.

Whether you’re buying a condominium townhouse, loft-style two-bedroom or a high-rise studio, they are all classified as condominiums if you own your unit while at the same time share access (and the associated fees) for facilities ranging from pools and parking garages to elevators and driveways, otherwise known as common elements.

The most common types of condos are standard condominiums and common elements condominiums. The determination of how a condominium project is designated happens during the planning stage when the builder proposes the project and the municipality approves it.

When you’re in the market to buy, you need to know how your chosen condo is classified because it affects the warranty coverage under the Ontario New Home Warranties Plan Act. Standard condominiums have warranty coverage for units and common elements, but common elements condominiums only have unit coverage.

How could this affect you as the owner? If your condo complex has underground parking and, for example, there are problems with leaks or a faulty door, the condo designation will determine whether there’s warranty coverage.

If your unit is a standard condominium development, then the common elements warranty may cover the repairs. If it’s a common element condominium development, then repairs might have to be covered by the condo corporation’s insurance, which could impact your condo fees or require a special assessment on all the owners.

To avoid surprises, you should have a real estate lawyer review the Declaration and Description attached to your purchase agreement to be sure that you know the designation and boundaries of the unit you’re looking to purchase. Find more information on the types of condos and their coverage at tarion.com.

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