Starting a new eCommerce business can be a little intimidating when you think about the cost of launching your website and stocking a warehouse (or your basement) full of products. As you get started, a great way to round out your product offerings without a large investment is by using drop shippers 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 drop shipper for your online retail business is finding high-quality products and suppliers that keep their inventory up to date and ship promptly. The internet is full of scams and websites that are ready to charge you a significant fee each month for a list of drop shippers which may not have current information or legitimate businesses. The way to find the right partners for your business is to determine what products you want to carry and then look for drop shippers for those items through reputable methods and good old fashion research. Follow the following five easy steps to find great partners and products for your business.
Decide the types of products that you want to sell in your store.
You can find products through trade shows, trade magazines, and manufacturer websites. Compile a list of the manufacturers of the products and their contact information. If you are also selling your own products, find items that compliment your site’s theme. For example, if you are selling your own set of kitchen knives, look for complimentary items such as cooking utensils, garlic presses, or food storage containers.
Call or email each manufacturer and ask if they offer a drop-ship program.
Once you have a list of products that you would like to offer, contact each one individually, and ask if they offer a drop ship program and if so, what are their procedures and 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 rather than simply viewing their website.
Ask for referrals to other small manufacturers if the initial companies that you chose do not offer drop-ship programs.
Be persistent if you have difficulties initially finding great partners because dropshipping can be very advantageous if you find the right manufacturers. Also, remember that companies do not have to allow you to sell their products so if one company turns you down, just move on the next on your list.
Make a list of the best product fits from each manufacturer.
As you gather information from each manufacturer, make a spreadsheet of each product that you believe will compliment your store and the other products you sell. Make a list of the product’s name, manufacturer, wholesale price, drop-ship fees, MAP price and/or your retail sales price. This running list will help you determine which items to carry.
Calculate your profit for each drop ship sale.
Using your product spreadsheet, calculate the profit for each by subtracting the wholesale price of the product and applicable drop ship fees from your retail price. Typically, you will want a 50% margin on products that you purchase, stock and ship yourself and approximately 30-40% for drop-ship items at a minimum. For example, if you stock an item that costs you $10, you will want to sell it for at least $20, so that 50% of the sale price is profit. For drop-ship items, that same item that you sell for $20 may cost you $10 for the product and another $1.00 to $5.00 in drop ship fees so calculate your profits to determine which items will bring you the highest returns.
PRO DROPSHIPPING TIPS:
- Determine the point when purchasing stock inventory, rather than paying drop ship fees, will lower the product cost to the point where shipping product yourself is more advantageous.
- Small manufacturers that do not offer drop-ship programs may offer low minimum purchase amounts and fast shipping which would make it advantageous to you to stock small amounts of their inventory so that you can carry the products you want.
- Ask your drop shippers if they are willing to include your company fliers in the shipments if you supply the materials.
- Beware of companies who promise you large incomes if you use their drop shipping programs which are often scams.
As you start your dropship journey, reach out to us if you have questions or need some guidance on how to find and/or choose new products for your store. We are happy to help!