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Is the stock declared in the free market always realistic?

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24/10/2019
Is the stock declared in the free market always realistic?

 

There are weeks in which some components cannot be found even at higher prices and other times in which there are really competitive offers with decreasing price wars that seem to be endless!

How come the prices of components fluctuate so much?

Our market is increasingly similar to that of the stock exchange even in terms of the time that elapses between the ups and downs! This is due to factors that affect any type of product ( typically where there are high numbers of consumers) so the speed is very high since a product begins in a startup situation, comes to maturity and then moves into downward sales!

Even the companies producing the electronic components are aware of this speed, and, realizing that it makes the opening of new production sites too risky from a financial point of view, they “rent out their production lines” to their most important customers.

When major customers start producing in large numbers, they create shortages of components in the market and the material can only be found at very high prices, even if smaller customers have long scheduled orders!

After serving the important “priority” customers, sales collapse, which means that the commitments made to the component manufacturers are also cancelled. They then find themselves with full warehouses in a very short time. In this situation, the market falls and the stock is available everywhere at continually falling prices.

How the parallel market fluctuates

The parallel market also follows this dynamic, so those companies that promote their excess stock on the various platforms often do not have time to update the platforms. Indeed, very often and most voluntarily, the operators in this sector (brokers) will charge each other in advance – before processing any requests. If the stock suddenly disappears, the following two situations may occur:

  • The client’s advance payment is retained by the broker as a bonus for future purchases.
  • Among less “reliable” brokers, the client’s advance payment and the broker will disappear directly without providing the client with anything.

A similar situation, with similar scenarios from the supplier/broker, may occur in the case of non-compliant goods.

This explains why the free market can be a huge opportunity but must be approached cautiously: a new supplier’s must be referenced and it is important to verify the references that he provides us. If the new supplier requests advance payment, it is wiser to use an intermediary body to avoid fraud.

Ultimately, being a distributor in the free market is complex and requires promptness, but we would like to think that all the parties involved can be satisfied at the end of the game. We strongly recommend that you are very careful when you buy material on the free market, especially when the stock seems to appear from out of nowhere because, at this particular time, many individuals present themselves as experts without any knowledge of the market they are dealing with.

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