Find out with these simple rules…

Following last Friday’s eletter I’ve received lots of questions concerning drop shipping. Now, I anticipated this and I deliberately didn’t elaborate about the subject last week because it’s quite an in-depth subject and does warrant it’s own eletter!

Although this is a solution which can help you get started with selling online, it is a strategy that really should be combined with sourcing, storing, packing and posting products yourself.

The reason for this, as I briefly mentioned last Friday is that your profits can be less if you go with traditional ‘drop ship’ websites found online because you will be employing what is essentially a middleman. So my aim today is to let you know all about the pro’s and con’s of using a drop shipper so that you can decide if it’s the right route for you.

So, in theory at least, it all sounds very easy doesn’t it? You don’t have to deal with packing and posting orders and there’s no upfront money to be laid out. All that’s required is to inform your chosen drop shipper that someone has made a purchase from you and they’ll send it off to the address you tell them to. Simple!

But hang on, is it really this easy? Well this is one of those questions where there is no straight answer I’m afraid! Like everything, there are good and bad points when it comes to drop shipping so this is a heads up on the best way you can incorporate this strategy into your business.

I say ‘incorporate’ because as I briefly mentioned earlier, you should never just drop ship your products. You should also continue to source and buy in bulk at wholesale and do some packing and posting yourself too. Why? Well because firstly you should never only rely on one source or supplier – you never know what might happen, and secondly because your profits are likely to be much slimmer on the products that are drop shipped for you – especially if you fall for the old ‘middleman’ trick, which I’ll explain in just a moment.

In theory, there is no doubt that drop shipping is an excellent way to run your online business, but you do need to be careful.

Each week I receive emails from people asking me if I can supply the name of a good drop shipper. But it’s not that cut and dried. It’s actually not about finding an online supplier or website who stocks every item imaginable where you can simply go and place an order – although I am aware that this is the general view of most people looking for products to sell. You need to get just a little bit more specific than that! Whilst there are a couple of UK drop shippers out there who do hold a variety of products in their warehouses across lots of different niches such as (no fee payable to use their service), most of the companies you’ll find advertised online as ‘drop shippers’ are actually only middlemen. In other words they haven’t got the stock in their warehouses, they simply order the product from a supplier when you order from them! And that’s why you need to think ‘specific’.

You should aim to find a wholesaler of an individual product who will drop ship for you, not trawl sites hoping to find the perfect item. The internet is littered with companies purporting to be ‘drop shippers’ but you’ll find that mostly the products they offer are not available at prices competitive enough for you to resell for any kind of profit. These inflated prices then equate to less profit for you.

Here’s what you should be looking for…

A true wholesale drop shipper is not a middleman. It’s a legitimate wholesaler who will send individual products to your customers directly from their own warehouse. Yes that’s right, they actually own a warehouse from which they will pack and ship the products for you. All you have to do is collect the money from your customer, pay the agreed wholesale price for the product and drop ship service and pocket the difference. You don’t have to touch the product, spend any money up front or rent storage space for piles of items.

Sounds simple doesn’t it. And it is. Once you have found a legitimate drop shipper. That’s the hard bit!

You’re looking for legitimate wholesale suppliers who will drop ship for you. Notice I didn’t say that you need to look for a drop ship company, rather wholesale suppliers. And this is the key to success. You must contact wholesale suppliers and find out if they are prepared to offer you a drop ship service.

That’s the first rule you must remember.

True drop shipping involves going directly to the source – this invariably means contacting a manufacturer or an authorized distributor. This way you’ll get the best prices and make more profit. Yes it’s a little bit more hard work but you’ll reap the benefits by doing it this way.

So, before you choose to drop ship your products please take the time to read my tips below so that you are aware of the pros and cons.

The pros

Perhaps the largest benefit to you is that you will have nothing to do with posting out the products that you sell online.

I’m sure you can appreciate that making the trip to the post office on days where the rain is pouring down or it’s incredibly cold outside isn’t on your list of favourite things. Even if you have a whole car load of parcels to post which means you are doing well sales-wise, lugging all those packages can be hard work not to mention time consuming. If you are using a drop shipper though, all you need to do is let them know, usually by email or phone call depending on the company, that a product has been sold through one of your online venues such as ebay, Amazon or your own website. You’ll just need to pass on the details plus the name and address of the customer and they will send out the item for you.

Something else that you have probably already realised is that if you aren’t dealing with the stock yourself you don’t have to store it. Keeping small items in your home or office is not going to be a problem to you, but should you wish to really scale up your business or start selling larger items you may find that space becomes an issue. If you don’t want to rent the extra space required to house your goods this aspect of drop shipping is a distinct advantage.

Finally it is worth remembering that organising postage and packaging as well as storage all takes time. Time that could be spent researching and sourcing new products to sell, creating new online listings and generally working on your business. Using a drop shipper could free up more time.

The cons

As the saying goes, things that seem too good to be true usually are! Along with those advantages of using a drop shipper come some potential disadvantages too I’m afraid.

You should always ask yourself if you have you found a true drop shipper or a middleman? A middleman will eat into your profits so it’s important to build a relationship with a wholesale supplier and work from there.

I always make sure that the products I post to my customers are well packaged. It makes them far more likely to return for further purchases or even to recommend me to someone else through word of mouth or feedback. The same goes for a prompt delivery service. If I am in charge of posting out the products then I can ensure they reach the post office within a reasonable period of time. With a drop shipping service you may lose control of this, so if the drop shipper takes longer than anticipated to dispatch an order it may reflect badly on you, not them. Likewise if they package a parcel inadequately and the item arrives broken it is your reputation that is likely to suffer.

Don’t forget too that prices may be significantly higher than those which you could find with a wholesale supplier (the highest prices will be via those middlemen who advertise themselves specifically as ‘drop shippers’). This is because a drop shipper will of course take into account the postage and packaging costs, as well as some form of surcharge for the services that they provide to you including storage space. So, you will need to spend some time carefully calculating whether your profit per item is maximised through the use of a drop shipper.

The final thing that I think it is important for you to consider is that of inventory issues. I know many a seller that has suddenly had their drop shipper tell them that the item they have just sold is no longer in stock, and may not be for some time. It’s a difficult situation; do you apologise to the buyer and offer a refund or do you explain the delay, or try to scrounge around for stock from another source? I have had to do this on occasion, ending up out of pocket just to keep my customer happy! You can of course avoid this happening by doing what I know some sellers regularly using drop shippers do and that is to keep a handful of the products that they sell around the house to prevent this very eventuality from happening.

Is a drop shipper the best solution for your business?

I would love to be able to give you a definitive answer as to whether you should or shouldn’t use a drop shipping service for your own business, but unfortunately this is something that you will have to decide for yourself based on your own unique circumstances. What I can do though is provide you with 3 quick steps to consider, should you decide to go down this route:

  1. Spend plenty of time researching the different options out there. As a rule, you shouldn’t have to pay an annual or a monthly fee for a drop ship service or a fee just to look at the prices in the first place. There are a couple of exceptions to this rule, but if you are asked to pay a ‘joining fee’ for access to a site full of a huge variety of products, tread carefully as you are likely to be dealing with a middleman as I’ve discussed above.
  2. You should be able to order a test sample of the product at a wholesale price for yourself to see the quality and to take photographs if they aren’t provided by the company. This can also be a great opportunity to see what their postage and packaging service is like.
  3. Finally before jumping in headfirst you should always test the product first to see if this is the service for you by purchasing a small number of one particular product and selling it online. Remember that your relationship with a drop shipper needn’t be all or nothing; you can use them for one product line and buy another from any other source. In fact this is what I recommend. By all means try drop shipping but remember to source other products at wholesale and package and post them yourself too.