Drop shipping allows you to send low quantity unit orders that you sell on your website, to manufacturers or wholesale warehouse companies, who ship the items directly to your customers. Instead of worrying about inventory and delivery, you get to focus on listening to the market and discovering the products your visitors want.
A drop-ship company can buy in huge volumes so they can also offer you the best prices on products and shipping. They can offer you wholesale rates, which will return a greater profit to you. There is no need for an inventory so you do not incur additional expenses in warehousing the products you sell or pay rent or mortgage for the warehouse or hire people to maintain such a warehouse. Promote 1 item or promote thousands; it is entirely up to you.
How to find drop-shippers
There are three approaches you can take to find suitable drop-ship wholesalers:
Direct contact: You can contact wholesale suppliers directly who produce or stock merchandise of interest and inquire about a drop shipping partnership. However, be a little cautious, especially if the company hasn’t participated in these type of partnerships before.
Search engines: Google on the terms: “drop shipping” + product of interest
Directory: Our recommended directory: OneSource. They give you access to lists of over 1,000,000 products from over 234 different categories in their directory. Find reliable drop-shippers from their directory.
Cons of drop-shipping
Many wholesale companies will have their own interest in teaming up with you in a drop-shipping arrangement as this is an easy way for them to generate extra revenue, but there are a few issues to consider:
Let’s not just accept the first drop shipper you come across – shop around for the most suitable wholesaler company.
Some drop-shippers will have a handling fee over and above freight costs – it’s important to know all the costs involved so you can calculate your profit margins accurately.
Is the drop shipper using the cheapest available shipping method or name brands? Will the company ship internationally? You will need to be confident that their shipping methods will ensure that your clients get their products in one piece.
Many shopping carts only allow for one “ship from” zip code in the configuration for freight calculations. If you are dealing with a number of drop-shippers you may have dozens of point-of-origin zip codes – this can be problem to estimate more accurate shipping costs. A drop-ship module will need to be added to cart. We can help you set up such feature.
Returned products can be a hurdle. Ask the drop-shipping company about their returns policy, what kind of support they can offer you for their products and about any guarantees associated with their products; get it in writing.
A chargeback is where a consumer has filed a complaint with their bank against a company regarding a transaction for any number of reasons such as a claim the goods were not received, unauthorized transactions, etc. A chargeback is a great consumer protection mechanism, however there are many abuses.
If a chargeback is initiated, it can be a lengthy process to challenge it. If your challenge is rejected, the full amount of the sale is removed from your merchant account plus a chargeback fee is applied; usually around $30. Additionally, if your level of chargeback is high, you may be penalized in the form of higher transaction fees and ultimately, your merchant account being shut down. It is always good to use a reputed gateway provider who does meticulous fraud screening. Other measures to consider are having a pin and an address verification system enabled in your system, and, using a reliable drop-shipper.
New drop-ship companies and wholesalers can go out of business quickly, or, on the flip side, grow too rapidly and as a consequence good customer service suffers. Do your diligent research on drop-shippers.
To summarize, 1. Find wholesale suppliers of products to sell that incorporate drop shipping as a business method. 2. Set up a web site that includes a drop-ship friendly shopping cart and credit card processing facilities. 3. Gather content and images relating to the products you have chosen, and then, incorporate them onto your site and shopping cart. Collect the order and process the payment from your site. 4. Provide the supplier with the customer details. 5. The company then bills you at the special price you have agreed upon, fulfills the order and sends it to your client – in most cases with labels referring to your business/web site instead of the drop-shippers.
Drop shipping is a great way to get involved in an ecommerce business. Many established online merchants are turning to drop-shipping companies to minimize stock on hand, decrease overall shipping costs and cutting down on delivery times to customers. Overall, drop shipping is a win-win solution.