» WholesaleU Home » About WholesaleU » Advertise » Terms of Service » Contact Us

TopTenWholesale Guide to Dropshipping Claudia in CB's Corner, Helpful Tools, Sales and Marketing February 20th, 2007

TopTenWholesale Guide to Dropshipping

By Claudia Bruemmer

If you are one of the many wholesalers and retailers that do not have facilities to stock products in bulk, this info is for you. Even if you don’t have back office operations due to the expense of facilities and personnel, you can still have a thriving business by shipping products to customers via dropshipping.

How Dropshipping Works

A dropshipper is a company that has access to products from various manufacturers and the means to ship these products directly to customers on behalf of other merchants or wholesalers. This can make wholesaling and retailing easy — for a fee.

Usually dropshippers charge a one-time fee to become a reseller and then smaller monthly maintenance fees for hosting and maintaining the web site and back office operations. Some dropshippers will even build you a web site geared for online retail or wholesale sales as part of the initial package. Or, you can build your own.

The benefits to using dropshippers is that you don’t have to hassle with returns, and they don’t have to pay the costs associated with managing, storing or sending out merchandise. Some dropshippers will provide marketing support and web analytics in addition to creating and maintaining the web site for you.

Selecting a Dropshipper

Start by establishing your company goals and budgeting needs. If you start small, you can look for a less-expensive option. Larger firms might look for a dropshipper that handles thousands of transactions per day.

You need to investigate potential dropshippers thoroughly, paying attention to size and reliability, product fulfillment channels, and the brands provided for shipment. You can offer a large product line of name brand items, depending on what your dropshipper provides.

Below are some tips for those selecting a dropshipper:

• Ensure that the dropshipper will identify only the your business and contact information upon shipping the merchandise. This is important for developing your brand and customer loyalty.

• Shop for a dropshipper that offers bulk discounts.

• Inquire how long it takes for products to be shipped, contracting only with dropshippers that ship in 5 days or less.

• Ask whether the dropshipper requires minimum orders. It’s best to deal with one that doesn’t require minimums.

• Ask if there is a middleman in the process. It’s best to avoid dropship brokers, dealing directly with the firm making the shipments.

• Ask whether the dropshipper offers manufacturer warranties on all the products it sells. This is a must for sales and customer service.

• Determine whether or not the dropshipper cares about your success as a reseller by offering phone support and/or other means of support. Reputable dropshippers know that your profitability contributes to their own success and will provide the support you need.

You can conduct a search on TopTenWholesale.com, which lists the firms offering dropshipping programs. Alternatively, you can look into dropshipper directories, which can be purchased from various publishers. A search for “dropshipper directories” brought up many such resources. One firm advertises a large database of ecommerce wholesalers, light bulk wholesalers, volume wholesalers, liquidation wholesalers and import wholesalers, in addition to information from successful ebusiness owners and access to market research.

Dropshipper Fees

Most dropshippers charge a base price for the program and then a monthly maintenance fee. However, there are many business models for reseller clients.

If you want to become a reseller for electronics products like computers and digital cameras, the dropshipping license fees may start around $5,000 to become a reseller. In many cases, this will include the custom web site, hosting, maintenance and marketing support. Then your monthly fees would be around $50 or $60 per month for continued hosing, maintenance, and back office operations.

In some cases, resellers receive a fixed percentage of the sale price for each product sold, ensuring reseller revenue. Depending on the manufacturer, the fixed percentages can run anywhere from 5 to 95 percent. However, the reseller makes money regardless of sales price because the fixed percentage never changes. Some dropship agreements give the reseller a percentage of the manufacturers’ suggested retail price (MSRP). However, products are not always sold for MSRP in today’s market.

Caveat Emptor

In Latin, this means “let the buyer beware.” This is relevant when shopping for a dropshipper. There are always fly-by-night scam artists operating on the web. The deal that sounds too good to be true usually is. Some companies claim to offer name brands and then don’t deliver what’s advertised. Then you get stuck with angry, dissatisfied customers.

Avoid gray markets and foreign dropshippers because there are no safeguards once you’ve sent your money. The gray market involves new goods sold through distribution channels unauthorized by the manufacturer. These goods are not illegal but because they are sold outside the normal distribution channels, there is no recourse if the goods are damaged or defective.

Another way merchants get ripped off is through foreign dropshippers that promise but don’t deliver. Again, there is no recourse. The best line of defense is to research thoroughly and follow the tips suggested above.

Share This |  Print This Post | Tags: none