This is a common enough practice with a lot of IT resellers, they have various suppliers around the country etc and do exactly this so its not a new way of doing business.. basically you're a middle man..
Customes order the product off you for price A, you order it off the supplier who usually in a different location for price B (a lower price than A) and they ship it direct to the customer saving you the cost of storage space, shipping etc..
Some suppliers will even customise packaging to use your company logo etc..
Its probably best to find a product yourself though cause they could be selling the same service to a thousand other people who all end up undercutting each other just to get the business but this company dont care as they have got their money and they just move onto the next person who is willing to hand over the cash as they dont want to do the leg work themselves.
Why not bypass them, look at what they are selling and try and find a supplier yourself.. build it up overtime and if it works out, expand your product line, there is no real risk involved, if you get orders you simply order from the supplier, if u dont, then no orders placed and nothing lost rather than handing over £500 per year to someone for no real reason.
I.C