What Is DropShipping?
We have already mentioned that the typical wholesaler-retailer relationship looks something like this.
- Wholesalers sell products in bulk to retailers
- Retailers sell individual units of the product directly to consumers.
This means that the wholesaler is rarely, if ever, in contact with the person who uses the product.
Drop shipping is an entirely different process.
- To order a product, the consumer calls the store owner
- The wholesaler is contacted by the store owner to buy the product for the consumer.
- The wholesaler delivers the product directly to consumers
Technically, this means that the wholesaler has come into direct contact directly with the consumer. However, the product does not enter the hands of the store owner.
The process may sound strange at first. It might sound strange that the wholesaler does not sell directly to consumers. Or why drop shippers should be allowed to get any part of the sales (considering they have never even come in contact with the product).
The answer to both questions is quite similar.
Although not a retailer, the middleman acts more like a “finder” by doing all the legwork (marketing and SEO, etc.). To increase visibility for wholesalers’ products, the wholesaler must simply take the order and deliver it as required.
Here are some benefits to working with a drop-shipper
- You can get rid of excess inventory and save on storage space
- It’s enough to simply process the orders as they arrive without any outreach or marketing
- You’ll have opened up a new channel of distribution for your products to supplement the ones you currently use
You now know how important it is to work with drop shipping clients. Let’s look at some things to keep in mind.
Drop shippers: Things to consider
Drop shippers can be a lot like working with retailers, but it is completely different from working with them in other ways.
Despite this, you may be familiar with some of the information below (in relation to how it applies when working with retailers).
It’s important to approach this section with new eyes and a fresh perspective. We don’t want to see the drop shipper’s relationship with wholesalers and retailers as a whole. Instead, we want to view it as an independent entity.
What value do they bring to your company (and vice-versa)?
Your main concern should be whether the partnership will benefit your company, as with all business partnerships.
As we mentioned earlier, the biggest benefit of working alongside drop shippers is that your surplus inventory will be picked up by individual consumers, meaning it won’t sit in your storage.
This is only possible if drop shippers with whom you have partnered are able to market your products.
Drop shipping is a more appealing business venture than traditional retailing. This means that drop shipping is a popular venture, but not everyone takes it seriously.
This means that drop shippers need to be more selective about who they partner with. If they aren’t serious about their business, they will not be serious about helping you get your product noticed. You’ll waste any time and effort you put into the partnership if this happens.
Contrast that with doing business in a less-than stellar retailer. In those cases, your products have already been sold for a profit and it doesn’t really matter if your partner can sell them.
Also, you need to assess your ability to handle the smaller orders that are coming in. Although your partner will pay shipping and other fees (which we’ll discuss in a moment), you still need to think about the extra man hours and logistics involved before you say yes to a potential partner.
After you have decided that dropping shippers will be a profitable business venture for you, it’s time to start talking about logistics.
Pricing, Delivery and Other Logistics
Drop shipping is a cost that can be added to your wholesaler-retailer relationship, as we have already mentioned.
Wholesalers sell products to retailers at 2-2.5x what they paid the manufacturer. However, drop shipping partners will often work together to establish a reasonable price per unit that falls below 200%. You want to make every sale as profitable as possible, so don’t set the price too high.
Drop shippers will need to pay a small transaction fee in addition to the agreed-upon sale. This fee is usually less than $5 for smaller items; larger items or more expensive items will likely be charged more.
Note: This cost will be passed on to customers by your partner. You should do a cost-benefit analysis on your drop shipping partners to determine the best price and fee rate.
Before you move forward, it’s a good idea to talk with your partner about a minimum monthly payment amount. Recalling what we said about only working with serious drop shippers earlier, setting a minimum monthly purchase amount for your new partners can help you to filter out the ones who aren’t worth your time.
Wholesalers may require drop shipping partners to pay a minimum amount equal to the agreed-upon minimum revenues (i.e. the price per product plus the fee) times the minimum monthly order amount. Both parties will meet again after the first month to discuss next steps.
Your company will be responsible to physically deliver products. You’ll need to find out where your packages are going to be delivered. Are they looking to promote your product in the entire country or a particular area? Are they hoping to eventually expand into other countries? Although you may be able pass shipping costs on to your partner (who may pass these costs on to their customers), this is something to consider before entering into a partnership.
Note on In-House Logistics
This has been mentioned before, but it is worth revisiting:
Are you in a strong enough financial position to start this new venture?
Is it possible to assign some members of your team to fulfill drop-shipped orders? Or will this take away from your main operations
Are you able to provide a liaison for your drop shipping partners? Will you be spreading your staff thin?
How do you deal with problems, issues or other contingencies, such as return and delivery inquiries? Your drop shipping partner will handle all customer service but they’ll still come to you if there is a problem.
Your company will benefit more if you’re prepared for the new venture. Your new partnerships will open up many opportunities for your company if you are able to deal with the complexities and intricacies that come with working with drop shippers.
In 5 Easy Steps, How to Become A Dropship Supplier
Determine your Dropshipping Goals
Dropshipping is a good option for established distributors. However, dropshipping can be a more profitable alternative to a startup selling products through a dropship model. Dropshipping can be extremely profitable and help to reduce overhead costs. However, it should only be used for the benefit of your existing business.
Your first step in becoming a dropship supplier involves defining your reasons and setting goals for dropshipping specific items. What items are they? Do they appeal to a specific group of customers? Do they sell well in certain seasons, but not enough to move off shelves in others? Are there markets, maybe overseas, that you want to target but the costs of storing and fulfilling these items outweigh the profits? Are you seeing your warehouse become more cluttered because of the limited space available? Do you want to provide more choice to your customers, without adding overhead costs?
No matter your reason, it is important to establish your dropshipping goals so you can get started on the right foot.
Assess Dropshippers Potentially
Now that you have an idea of the inventory you wish to dropship, and why you are doing so, you can start looking for dropshippers to do business with. You will first need them to be able to dropship the products you want. Second, you will want their ability to do this in a timely, accurate and cost-effective way.
Consider the qualities that you would look for when evaluating potential dropshippers’ capabilities. Are they able to provide the product you need at the right price? Are they able to provide a high-quality product? Are they able to meet the demand? Can they deliver orders on time and accurately? Are they trustworthy? Are they too good to be true
Before you sign an agreement with your dropshipper, there are many questions that need to be answered. Before entering into any partnership, take your time.
Are they white label compliant?
Dropshipping is white labeling. This means that dropship partners remove their branding from packages and place yours instead. Instead of shipping a shipment with random company’s labels, it arrives with your company’s branding on the packaging documents and shipment. This eliminates confusion for the customer.
White labeling is not necessary for certain business models. However, it is important to maintain consistency across all channels for established operations. Make sure that your dropshipper will correctly white label packaging and documents before you sign a deal.
Dropshipping software is essential.
All inventory management software programs are not created equal. To manage dropship inventory, some software requires 3 rdparty integrations.
Acctivate Inventory Software offers powerful dropshipping tools that can be used by multi-channel distributors. It provides a seamless experience, from start to finish. Dropship orders online are processed in the same way as other inventory orders but you will receive an automated notice from Acctivate notifying your dropship partner about the purchase.
Dropship orders can be placed via other channels with the same exception. No matter whether you place your order online or offline; once your dropship partner has received notice of the purchase they will initiate fulfillment. Customers should be able to receive their orders promptly and accurately.
No matter what software or integration you use, ensure it’s a good fit for you and does the job that you have set out.
This is the easiest step to becoming a dropship supplier.
Now it’s time for you to start selling. You have chosen the products that you wish to dropship and evaluated the suppliers. You can sell your products through an ecommerce platform, a website, or physical catalogs. Once you’ve agreed to terms with your dropshipper it is time for you to add the items to your general sales inventory.
Dropshipping is a great way to save money. Your customers still view you as the primary ordering point. Dropshipping inventory can be sold online and over the phone.
Once you’ve completed all of these steps, you can enjoy the new warehouse space, the reduced overhead costs and, hopefully, the satisfaction of your customers who purchased dropship inventory.
Many people are excited about the idea of starting an online dropshipping store. This will allow you to have lower capital, offer a wider range of products, and ship internationally.
These are all true. However, it is important to find the best dropshipping supplier before you start. You might end up with scam suppliers that deliver late shipments, poor customer service, or no order fulfillment. Your customers will eventually get upset and ask for a refund. This means that your efforts and time are wasted.
Lucky you, we’ve written this dropshipping tutorial to reveal to you 10 must-have characteristics of dropshipping suppliers to help you choose the right one!
Dropshipping apps allow you to access a large number of verified suppliers around the globe. This is very convenient and useful. You can launch a dropshipping company today with an Oberlo app and a Shopify store!
It isn’t easy, however.
Although the apps can be helpful, the information they contain is not sufficient to assess the reliability of a dropshipping company. They don’t have any information about suppliers, such as order policies and shipment preference.
Dropshipping apps such as Spocket, Orbelo, Modalyst and Spocket are examples of this. The first source should not be used. It is better to search for suppliers listed in multiple apps.
Verified information about Search Engines
Once you have a list from dropshipping apps of potential suppliers, it is time to do some research on those suppliers using other sources such as Google or Bing.
Enter the supplier names to learn as much information as you can about them, including their history, customer reviews and policies. Moreover, a reliable wholesale/dropshipping supplier should have a Google Business Listing.
Be a true supplier and not a middleman
Let’s now look at some of the key elements that will make you a dropshipping supplier.
You should ensure that they are actually the producers of products and not middlemen who import them from other countries. A supplier who is likely to make a variety of products is most likely a vendor or trading company, and not a factory.
It is important to know that suppliers have the ability to control product inventory, prices, customer service, and so on. Pretend suppliers are a frequent fraud in ecommerce and dropshipping in particular. You are also a fake supplier that makes customers believe they are purchasing from you.
After you have confirmed that potential suppliers are indeed available, spend some time looking at their website.
These checklists will help you keep on top of your game.
- About Us:This is a great place to learn about businesses, including their main products and market experience. There are many factors that can determine the business’s scale.
- Contact details The bare minimum details you should expect are email(s), address(es), telephone number(s), or a contact form.
- Customer feedback The website has almost all positive reviews. You can still read every feedback and determine if it’s from a genius customer.
- Policies & Conditions: Many online customers skip this important information. You should not do this as you could end up becoming their partner and not a common buyer.
Obtaining practical feedback on multiple platforms
You should not only read testimonials and reviews from customers on the website. But you also need to search for the supplier’s website name with the tag “review”, fake, or scam.
Take the time to read as many feedback as you can and remember that negative reviews may be more valuable than those with positive comments.
Providing responsive communication
You can reach the people responsible for an issue by contacting them via email, phone, or address. (
Congratulations if yes. The business will likely have excellent customer support that is always available to you when you need it. You should look for another drop shipping provider.
It is important to know that your suppliers are available to help you with customer problems.
Expertise on products and your target markets
Dropshipping suppliers that manufacture products should be well-versed in quality issues.
You can contact them to ask questions about the products, just like you would a customer. You can even place an order and experience their customer service to find out if they fix problems early.
Delivery of the shipment within time
Customers may become frustrated if suppliers send out late shipments. Dropshipping efforts will be in vain if this happens. You should ensure that your suppliers have a clear shipping policy, and that you ship the shipment on time.
What can you do to verify?
Just place your order and wait for it to be shipped!
Many products at once
- Quality of the product: Checked!
- On-time delivery: checked!
- Check out these policies and customer service: Excellent!
Next, you can choose your suppliers. Two more steps.
Check the website for product availability. It is best to ensure that products are not out of stock or back in stock within a few days. Customers can place orders whenever they want and receive their products in a very short time.
Open to the pricing quote
This is a common error made by those who find suppliers via apps and don’t contact them directly. They then try to set a high price for customers and don’t get any orders. This is a mistake that you should not make!
You can actually deal with dropshipping suppliers to set up a customer sales price.
To get the best prices, find a supplier you can reach and ask to be a partner. It is best to pay your bills on-time and establish a long-lasting relationship with them.