Drop Shipping Basics
eCommerce merchants are often doing what they can to cut costs and increase sales opportunities. For many, that means relying more and more on drop shipping.
Through drop shipping, retailers don’t have to purchase inventory upfront. When a customer orders, they pass the order information to the wholesaler, who then ships directly to the customer. They then make their regular profit on the difference between the wholesale and retail price. Since they can keep fewer items in stock, drop shipping also helps merchants relieve inventory management. It’s also a great way to supplement your store’s existing inventory.
Even though you make a smaller profit of margin, drop shipping helps you get your web store off the ground quickly with low risk, little overhead, and no need for storage space.
How do I Find a Vendor?
- Start by listing the product categories you want to include in your web store and then used Google to search wholesalers in each category.
- Contact the wholesalers and do your due diligence. If a supplier takes too long to respond or garnered negative reviews, rule them out. There’s a lot you have to be careful about when drop shipping, like suppliers making late shipments or not taking returns.
- When negotiating, the rule of thumb for drop shipping is that you want to aim for a 30 percent profit margin. (Inventory stores often shoot for a 50 to 60 percent margin.)
- Check out ProStores add-on tools Doba and Inventory Source to source product. Both sites give users access to hundreds of wholesale distributors who drop ship. You can browse products, choose what you want to sell, and then upload them to your online storefront. Both services also have tools that automate listings, so you can “push” products to your stores with just a few clicks. Then, when customers order something, the wholesaler ships the item directly - no fuss, no muss. Products can also be cheaper than those that come straight from the supplier, since Doba can negotiate in bulk. You can try both for free.
- Avoid using less reputable third-party companies that offer to find drop shippers for a fee. Sometimes their drop shippers are from countries you wouldn’t want to work with, and they often charge you $500 for access to their list when you can find the same or better drop shippers on Google. Doing it yourself may take you an extra hour, but it saves you a lot of money.
How Many Products Should I Carry?
Since you don't have to keep an inventory, there is obviously more flexibility in the number of products your web store carries. Some merchants recommend carrying as many products as possible in the beginning as long as they mesh well with your theme and mission. You have no idea what people will buy until you put it up there. Sometimes you’ll be pleasantly surprised--people may purchase items you'd least expect.
Then look at your analytics. How many visitors clicked on a certain product? How many people never searched for it in the history of your web store? If no one has, something could be wrong with your image or description, or shoppers just aren’t interested in buying it.
Drop Ship for Others
If you manufacture products for your web store, consider becoming a drop shipper for another company. If you find a good partner, it could be an additional revenue stream.