Drop Ship Companies
The use of drop ship companies (or drop ship wholesalers) as a website monetization model has become increasingly popular with the maturity of the web. The concept is simple - you promote products from your website, and send orders to the Drop Ship Company, they fulfill the order, and make payment to you.
On the surface the concept is simple, but there are a number of factors you need to consider, to research and to decide on before you start a business relationship.
Before we look into these areas, we'll list some of the advantages to using the drop ship model.
- If you're good at marketing, then this drop shipping model benefits you. You can concentrate on driving traffic, leads and sales, and let the drop shipper handle the fulfillment piece of the transaction.
- You can use your capital for other business expenses rather than building a product inventory.
- You have the ability to choose a product, group of products that you would love to promote.
- The larger Drop Ship Companies buy in volume, so you should be able to purchase your products at low cost.
- Some will offer linking software which will allow you to very easily display product lines without ever having to worry about price changes, product line changes, etc.
- If you are in a hurry to launch an ecommerce website, the drop ship model will allow you to do so in a hurry.
How Does Drop Shipping Work - An Example
1.) You open an Internet Store, with a shopping cart and the ability to accept credit cards.
2.) You find a distributor who is willing to DROP SHIP the products you want to sell. There are many Drop Ship Wholesalers to choose from.
3.) You establish an account as a retailer with the Drop Ship Wholesale Supplier.
4.) You receive images and descriptions of the products you want to sell from the Drop Shipper and post them on your Internet Store.
5.) A customer surfs into your Internet Store, and falls in love with a product that you have priced at, say, $80. They purchase the item with their credit card. Your Store charges their credit card $80 plus your shipping fee.
6.) You turn around and email the order to your Drop Shipper, along with the customer’s name and fulfillment information.
7.) The Drop Shipper sends the product directly to your customer, with YOUR Store’s name on the package.
8.) The Drop Shipper charges you the wholesale price of, say, $45.00, plus their shipping costs.
9.) Your customer gets a great product from your store shipped to their door, and they tell all their friends about you, and you make even more money.
There you have it. You just made a $35.00 profit on one item. You didn’t have to buy a whole bunch of the product and keep it in your warehouse, hoping you would sell it. You didn’t have to pay to have it shipped to you, and then pay to ship it to your customer. All you did was send an email to your Drop Ship Wholesale Supplier.
That’s the drop shipping model in a nutshell.
Drop Ship Due Diligence
As with any other aspect of business, it is wise to perform the necessary due diligence before you enter into any agreement.
Determine what product, or product line you would like to promote. Look into which drop ship companies offer this product and begin your research.
Look over the drop ship wholesaler agreements of those you are considering. Pay special attention to the following areas:
- Payment Terms - do they charge for each product, or will they offer credit? When does Credit become available?
- Do you need to use a special "Shopping Cart"?
- Who is responsible for Fraudulent activity?
- What are their chargeback, return and backorder policies
There are many areas that you'll need to review before entering an agreement. Some other important aspects to investigate before are outlined below.
Not all drop ship companies will charge the same price for a given product. It is worth your time and effort to look into at least 2-3 companies before you decide.
Also consider volume discounts which might be available.
Fees and Charges
Be sure you identify all fees and charges that can be associated with your transactions.
One area to concentrate on is the shipping. Some Drop Ship Companies will also charge a handling fee. Make sure you understand how shipping costs are calculated (i.e. flat fee, distance, weight, etc.). You will need to incorporate the same fee structure into your transaction so that you can calculate your profit margins effectively.
You must also become familiar with chargebacks and any associated fees. Chargebacks are reverse transactions which accompany a returned item. Be sure to know how these fees are calculated and how they will affect you.
Some Drop Ship Wholesalers may charge you a "participation fee". You should avoid such companies. The more reputable will only have fees associated with a transaction.
Shipping can be one of the trickiest pieces of the Drop Shipping "pie". Understanding it, and incorporating it effectively through your website can be critical to your bottom line - especially if you have low margin, high-volume product sales.
Shipping costs can be calculated a number ways, including Distance, Weight, Price, etc. Before you setup your site, it is crucial that you understand the shipping cost formula from your drop ship company.
This could affect which Shopping Cart you'll need to use for your website. Some Shopping Carts allow for only "ship to" and "bill to" addresses. This type of Cart often doesn't offer enough flexibility to handle the Drop Ship Companies shipping model.
Returns, Refunds and Customer Support
If you're selling a product, you can be sure that you'll need to address all of the above.
Drop Ship Companies will handle all of this for you, but you need to be sure of what their policies are, and how they are actually implemented.
If they offer a product guarantee, how is it supported? What time period is extended to a customer for 100% refund? How do they handle Customer Support questions, inquiries, etc?
Again, most of the more reputable Drop Ship Wholesalers understand the need for this, and have provided the right tools, personnel, etc. to provide outstanding customer support. You need to be aware of how you can monitor these cases, if you so choose.
If you do not already have a website, but would like to promote and sell drop ship products, you should do your research first, as some of the larger drop ship companies offer website services, or minimally, plugins which you can easily use.
It will help to understand what free web services are available before you've already spent time or money building the same service.
1. Look into Drop Ship Companies that will offer the product(s) you wish to promote.
2. Apply for/Open an account with them.
3. Determine what web tools/services you can use from your drop ship company, and then build your website (if necessary) to provide any missing functionality and create great content.
4. Promote Your Website
The actual implementation process is fairly simple. It is your planning, due diligence and review process that should take the most time.
If you're wondering how you can find a drop ship wholesale company, or if your product of choice is offered as a drop ship product, there are a couple of methods for doing so.
Find a Drop Ship Company
There are a couple of ways to find a drop ship company for your product(s) of interest.
Utilize the Search Engines
Go to your favorite Search Engine and type in one or a couple of the following keyword combinations:
- Drop Ship + "Your Product of Interest" - or
- Dropship + "Your Product of Interest" - or
- Drop Shipping + "Your Product of Interest" - or
- Dropshipping + "Your Product of Interest"
If there is a company that will drop ship your product, these searches should return results.
Drop Shipping Aggregators
An alternative option to searching for your product is to look into some of the larger Drop Shipping Companies, which offer large volumes of products as well as many add-on services.
Some of the larger and more well-known Drop Shipping Companies are listed below:
Drop Ship Design Offers a full service drop shipping solution. From just products, to a Turnkey website with domain registration, hosting, email and a ready to go Storefront.
Simplx Supplier only - 60,000,000 products to include in your ecommerce site, or through your eBay store. Simplx is very well-known, with high customer satisfaction. You must fill out an application to be approved.
WorldWide Brands A very professional site. Includes many training materials, with excellent research capabilities for drop ship products.
Drop Shipping Wholesalers Supplier only – Offering brand name products, some educational how-to, and a 56 day money back guarantee.
Doba USA Only - Supplier only - Connects you to 100+ wholesale distributors via one site. You have access to all of their product lines. 10 day free trial. Also offers eBay setup and training.
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