Unauthorized Supplier – Wholesale Stock Lot Offer Investigation

Client’s Challenge:

The brand owner grew concerned when they found a social media post that advertised liquidated past and current season inventory of assorted luxury goods. Based on the list price, the U.S. wholesale company was offering the stock lot at over 70% off retail (MSRP). With over 20 labels referenced and photographs of palletized boxes, the brand turned to outside counsel for support, who requested our assistance for further investigation. Our objectives included obtaining specifics on their client’s products in the offer, fully identifying the wholesaler and determining the source or true owner of the inventory.

Considering the nature of assorted or mixed stock lots, inventory samples are often unavailable. In our experience, while it is less likely that consolidated lots like the one offered would be counterfeit, authenticity also was still a point for verification. Although each case is unique and we never assume the outcome, our prior work on similar offers provides insight on potential avenues and obstacles that we may encounter during the investigation.

Vaudra’s Solution:

Using a suitable approach via one of our registered undercover entities, we initiated dialogue with the wholesale company to express our interest. After multiple messages, we obtained the manifest, which was in a foreign language. This, combined with several other indicators during dialog, led us to believe the goods were warehoused in Europe.

When selling stock lots and excess inventory, a savvy seller strives to spread the word to all potentially interested jobbers and brokers to see who can move it fastest. As a result, there are often multiple entities offering the goods and, in each instance, there is an opportunity to obtain additional details to benefit the investigation.

Since the entity originally identified was not answering questions to our satisfaction, we consulted our network of brokers and stock lot resources to see what other leads to the stock could be located. We identified a very similar offering from an overseas company at a lower price per unit (PPU). The lower price also indicated to us that this entity was closer to the source, which is typically more desirable and results in more accurate information.

We shifted our focus to this overseas party, negotiating on price and terms. Since samples were not available for review, we issued a Purchase Order (PO) and began discussing inspection specifics as well as export arrangements. Through this process and our related inquiries, we were able to identify another entity, revealing the owner of the goods. We also determined that this was not the first time such a stock lot had been consolidated and offered for sale, incorporating our client’s brand.

Client's Success:

Based on the details obtained on the involved entities, additional background research and specifics compiled on the goods themselves, the client was able to confirm authenticity and likely source – obtaining new insights into their supply chain dynamics and potential vulnerabilities or gaps in their reseller terms. This outcome was accomplished without the expense of an evidential sample, deposit or on-site physical inspection overseas, reinforcing the value of the investigative effort to achieve the end goal.

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