Working With Drop Shippers
By Ray Yee |
Drop Shippers, the manufacturers or distributors who are willing to ship their
products to your customers, bring a powerful benefit to ecommerce. Online
businesses that engage in the wholesale-retail trade can cut down on all the
hassles of shipping their products by simply establishing business relationships
with drop shippers, and using them as part of their business model. This article
will cover the aspects of selecting a reliable drop shipper, the process of
setting up with drop shippers, and also some of the common problems that may
arise from working with drop shippers.
Selecting a reliable drop shipper
is a very crucial element in your drop shipping business. If the drop shipper
you work with is honest and reputable, you can consider yourself to have won
half the battle in the order fulfillment process. Although this may not be true
in some circumstances, the direct manufacturers and the upper level distributors
are usually more reliable than the smaller distributors. Manufacturers usually
produce their products in large quantities, and require higher capital to
finance their companies. More often than not, these businesses are reliable
companies, because only businesses with a strong track record have the ability
to secure such high capital to finance their manufacturing process. Also, first
and second tier distributors are usually reputable as they are bigger and more
established, since their distribution spans a wider region. This is in contrast
with lower tier distributors or middlemen, who make their profit simply by
marking up the prices. Some low-tier distributors may be fly-by-night
organizations or businesses that may shut down easily due to their small size.
Hence, whenever possible, you should look for the direct manufacturers or
distributors of the products and ask if they offer drop shipping services, due
to their reliability. Direct manufacturers or distributors should also be your
first choice because their prices have not been marked-up by any middlemen, and
thus the higher your profits can go.
(This is not to say that smaller
distributors are unreliable, there are also numerous honest distributors out
there with established track records.)
Simply phrased, the drop shipping
process is as such: You set up a website catalogue selling the goods that you
want to sell. After a customer has placed an order on your website, you can call
or email your drop shipper to deliver the specific quantity of products to your
customer. Your drop shipper will then ship the products to the mailing address
as specified on the order form.
When selecting the products you want to
sell, you have to also consider the shipping costs involved. If your drop
shipper and your customer base are located in different countries, you should
definitely sell products which cost in the price range of hundreds or thousands
of dollars, so that the higher international shipping fee would account for a
smaller proportion of the retail price of the product. If your drop shipper and
your customer base are located in the same country, it would then be feasible to
sell products that are cheaper as the shipping costs are much lower.
So
how should you go about looking for your product suppliers? The first approach
you can take is through the search engines. You can start off by searching for
‘Manufacturers directory’, ‘Wholesalers Directory’, or ‘Drop Shippers
Directory’, and look through the websites containing the lists of such
manufacturers. Alternatively, you can type your product keyword together with
the word ‘wholesale’. For example, if you want to sell wooden carvings, you may
want to try the term ‘wholesale wooden carvings’ and take note of the websites
offering wooden carvings at a wholesale price. After which, you can email or
call the manufacturer and check if they offer drop shipping arrangements. Or, if
they offer the function to sign up for their drop shipping service on their
website, you can immediately sign up for it, but only after verifying that they
have a record of excellent and ethical service. (You can do this the easy way by
browsing their website. Most of them will display the awards or commendations
they achieved for excellence and reliability.) A good example of a wholesaler
that offers drop shipping registration on their website is
http://www.artinternationalwholesale.com. The drop shipping service can be found
on the left navigation bar under ‘Wholesalers’.
Remember to target
manufacturers as your first choice. You can find a directory of manufacturers
and distributors at http://www.thomasregister.com. If you cannot find any
manufacturer offering drop shipping services, you should then target the direct
distributors one level below the manufacturers. Their prices would have only
been marked-up once, and hence the lower your cost. You can locate these
distributors by getting the manufacturer to recommend some of the more reliable
ones. If none of these first-tier distributors offer drop shipping, you then
move on to the second-tier, and so on. However, it is not advisable to go on to
the lower tiers, as your profits will decrease.
Although manufacturers
or direct distributors are large companies, some of them may not have an
established website. You can still contact them by calling them or sending them
a mail. I would recommend that you call them personally so that there is more
room for negotiations, and also a warmer ‘touch’ to the business relationship.
Before calling your drop shipper directly, you will need to establish
your business as a legal entity before starting any business trading.
Registering your business with the government involves getting your Tax ID
number, and also your official business name. You can contact your state’s
administration and find out how to register your business. U.S. citizens can get
a lot of resources and information on registering a business at
http://www.sba.gov.
After your business registration is done, you can
start contacting your drop shipper and negotiating with them. There are several
important issues that you have to discuss with them:
1) Shipping. Most of
the companies outsource the delivery of their products to a delivery service
like FedEx or UPS. Once you email a customer order to your drop shipper, you
will need to be able to keep track of the status of the delivery. If any
customer were to query you on when the goods are to arrive, you will then be
able to account for them fully. Established delivery services like FedEx offer
online real-time tracking services. With the tracking numbers issued by the
services, you can log on to the internet to track the delivery status of the
goods. Alternatively, you can choose to include the tracking number in the email
autoresponders sent to your customers, so that they can log on to the FedEx or
UPS website to track the shipment.
You would also need to find out what
is the delivery service that your drop shipper uses, and calculate the shipping
costs. Shipping costs within a country should be significantly lower than
international shipping, thus it is advisable to select a drop shipper based in
the country where most of your customers are. This not only cuts down a lot on
shipping costs, it will also reduce the hassles of international shipping like
customs security and slow delivery time. Additionally, lower shipping costs
would encourage more purchases from your customers, as compared to cases of
international shipping where the high shipping costs can sometimes account for
up to half the price of the goods, deterring them from making purchases.
Usually, the logistics department of the drop shipper is willing to
label their products with your company name and logo, so that it will appear as
if you were the one who shipped the products to your customers.
2) The
wholesale price of their products. Although this would not vary much among
manufacturers of the same products, some manufacturers do offer a slightly lower
wholesale price than other suppliers for the same product quality. It would pay
off much in the long run if you scout around for wholesalers with lower price,
as you would make a bigger profit on each sale. You can also negotiate among
several wholesalers first because some wholesalers allow greater room for
negotiation than others. If your online businesses can have a guarantee of
selling a large quantity of products, you should be able to get a lower price
for them, similar to the discount given for bulk purchases.
3) Credit and
Billing. You would have to make clear with your drop shipper how you are going
to pay them, whether it is by credit cards or by checks. Will the payment be
made immediately after each purchase of goods, or will it be paid after a
certain minimum quantity of goods is purchased, or will it be paid at the end of
each month? These details may appear trivial, but it is important to clarify all
this at the start to prevent disputes later.
4) Product Return Requests.
Because your customers expect their products to be of a pretty high standard,
your drop shipper will need to guarantee you a certain standard of product
quality, and be willing to replace any defective products. Be wary of drop
shippers that do not offer these guarantees! If it turns out that many of their
products are defective, then your reputation is at stake, and you would end up
with many useless defective products. Clarify the process of returning defective
products. You may want your customers to return the products directly to your
drop shipper, instead of sending the products first to you, then from you to the
drop shipper.
An agreement with your drop shipper on their refund policy
should be finalized. If they do, you need to determine whether the funds are to
be transferred first to you or directly to the drop shipper.
In
conclusion, the process of establishing a business relationship with a drop
shipper can be quite complicated. However, if many of the details are clarified
right before any transactions are made, your online business should be able to
handle all the hassles smoothly.
About the
Author
Ray Yee is the founder and president of
Dropshipperscentral, a website which provides a wealth of informative articles,
tips and resources on everything you’ll ever need to know about setting up a
Drop Ship Business and marketing it. Click here for the Wholesale Drop Ship
Directory from http://www.dropshipperscentral.com
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