Starting a new eCommerce business can be intimidating when you calculate the cost of launching a website, stocking a warehouse full of products and advertising to your target customers. As you launch, a great way to fill your site with products without a large investment is by using drop ship companies who will store and ship the products for you. Often, the product manufacturers will act as the drop shipper which allows you to keep your fees low and your profits high.
The key to using a dropship company for your online retail business is finding high-quality products and suppliers that keep their inventory up to date and ship quickly. To find those companies, you will need to do some research and due diligence but in the end, you will find suppliers that you can trust. The following six quick steps will help you find great partners and products for your business.
1. Determine your theme.
Deciding the theme of your store is your first priority in business. Once you know the types of products you want to carry, you can find items through trade shows, trade magazines, and manufacturer websites. Begin with online research then consider attending a trade show or wholesale market. Most major cities have retail markets throughout the year. Gather a list of the manufacturers of the products you like and the company’s contact information. If you are also selling your own products, look for items that compliment your site’s theme. For example, if you are selling your own baby clothes, find complementary items such as toys or bottles.
2. Contact each company.
After you develop a list of products that you would like to offer, contact each manufacturer individually, and ask if they offer a drop-ship program. If they do, ask for a list of their program’s policies. Often, small manufacturers may be willing to drop ship for you even if they do not have a formal program in place so always contact companies directly.
3. Ask for referrals.
Be persistent if you have difficulties initially finding manufacturers because dropshipping can be very advantageous if you find the right partners. Remember that companies do not have to allow you to sell their products if they believe that your company is not a fit for their brand. If a company turns you away, simply ask them to refer you to other manufacturers they may know. Also, small manufacturers that do not offer drop-ship programs may offer low minimum purchase amounts and fast shipping to your warehouse. In this instance, keeping a small amount of their inventory on hand may be more advantageous financially to your company.
4. Compile your product list.
As you gather information from each manufacturer, make a
spreadsheet or database of the products that you believe will compliment your
store and benefit your customers. Your spreadsheet should list the product’s
name, manufacturer, SKU number, barcode, wholesale price, drop-ship fees, MAP
price, and your retail sales price. After you have compiled a long list of
potential products, you will use the spreadsheet in the next step to finding
the most profitable products.
5. Calculate the profit margin.
Using your product spreadsheet from step four, calculate the
profit for each individual product by subtracting the wholesale price of the
product and applicable drop ship fees from your retail price. You want products
with a 50% margin if you purchase, stock and ship the items yourself and 30-40%
margin for drop-ship items. For example, if you stock an item that costs you $15,
you will want to sell it for at least $30, so that 50% of the sale price is
profit. For drop-ship products, an item that you sell for $30 might cost you $15
for the product and another $1.00 to $7.00 or more in drop ship fees, leaving
you with a smaller margin. The reason that a lower margin is acceptable for
drop-ship items is that you have no upfront costs, freeing your cash for other
business expenses. Your spreadsheet calculations will show you which items will
bring you the highest returns.
Now start selling!
Once you choose the products for your store, ask each
manufacturer for product photographs and descriptions to keep your sales pages
consistent with their brand. If the manufacturers do not offer images and
descriptions, you will need to take your own photos and write the sales copy.
As you begin to work with manufacturers and make sales, ask if they are willing
to include your company fliers in the shipments if you supply the materials.
Including your store information with each order will keep your customers
returning again and again.
As you start your eCommerce journey, finding strategic drop-shipping partners will help you boost sales, control costs, and keep your customers happy. While the process of finding companies with lucrative drop ship programs takes time in the beginning, the benefits of having good partnerships in place will be a long-term benefit to your business.