April 14, 2008

Choosing Your Drop Shipper

So how do you go about finding a reputable drop shipper for your business? Well, here’s where doing your homework pays off. Whenever possible, you’ll want to set up drop shipping arrangements directly with the manufacturers of the products you want to sell. The fewer middlemen you have to go through, the bigger your profits will be.

If, after contacting the manufacturer, they agree to drop ship to you, great! You can be fairly confident they’ll offer you a competitive price. If they don’t agree to drop ship for you, you’ll have to look for snother alternative.

This ussualy means tracking down a distributor. A distributor is simply a company that maintains a large inventory of another company’s products and distributes those products to smaller companies. The best way to locate a distributor is to simply ask the manufacturer of the product to recommend one.

Another great way to find a distributor for the type of product you wish to sell is by looking through related trade magazines. You’ll frequently find manufacturers advertised in the backs of these publications. To find appropriate trade magazines, check out Yahoo’s listing of trade magazines. You may also be able to find distributors and manufacturers using Thomas Register. They provide listings for thousands of companies broken down byproduct, brand name and company name.

Most companies you contact will be more than happy tospeak with you-after all, you’re going to be selling their products for them. When you call, simply ask to speak with someone about becoming a vendor for their products. Once the switchboard puts you through to the right person, they’ll ba able to answer any questions you have, including:

  1. What is the wholesale price they can offer you on their products? You’ll need to make sure the wholesale price they offer is low enough that you’ll be able to generate a good profit based on what you will be able to sell their products for.
  2. Do they charge a handling fee for drop shipping? If so, how much? Most companies that drop ship will simply add the cost of UPS or FedEx shipping onto your wholesale price, but some will also charge you s handling fee (generally between $1 and $5). This is to offset their cost of picking,packing, and processing the order for you.
  3. How do they ship their products? Almost every company that drop ships products will use a major nationwide delivery service like UPS or FedEx. As them to include tracking numbers with the order confirmations they send. This will save you many potential problems when customers ask, “Where is my order?”
  4. How do they bill you? Most drop shippers will bill your credit card the wholesale price of the product plus shipping and handling as soon as they receive an order from you. With others, you may be able to set up a monthly billing cycle where you submit payment for all orders at the end of each month.
  5. How do they deal with product returns? Be sure to find out what their policy is regarding returns. Most reputable companies will offer some kind of guarantee or warranty on their products and will deal returns for you. This way, if a customer contacts you with a return, you cqn simply tell them the manufacturer will be happy to speak with them directly. If your manufacturer doesn’t accept returns, look out! You’ll be the one stuck replacing defective merchandise for your customers

Competition In Drop-Shipping

Have you notices there are literally hundreds, if not thousands, of sites selling huge mish-mash selections of inexpensive gift items, things like plastic gnomes and porcelain figurines? That’s because there are a few very large drop shipping companies that import these items and then recruit Web sites to sell them on their behalf. These companies have massive product inventories and make it very easy for people to get started selling their product for them.

Unfortunately, this is not the way for you to go if you’re getting started with drop shipping. There are already a lot of giant gift sites out there-and fairly heated competition, making it difficult for amateurs to be successful at it.

Instead, spend some time researching specific kinds of products that you might want to sell. The products you choose should be in demand but not widely available online. As always, I highly recommend targeting a niche market rather han trying to find a product that everyone wants to buy.

A Drop-Shipping Narrative

Let me tell you a story. For too many years I squinted at a 14-inch monitor. Early this year I decided to get a 19-inch monitor that won PC Magazine Editor’s Choice regocnition. I went to an online store to secure my purchase. I found the monitor, and it indicated the ability to ship soon, so I ordered it. Immediately I got an e-mail that said the monitor was backordered L Why didn’t they tell me that before I oredered? I was ticked off, but decided to give them a while-after all, it could come any time. So I waited, visions of a shiny new 19-inch monitor dancing in my head. After a week with no word, I finally got tired of waiting and called customer service. I was connected to a polite customer service person who listened to my question:

“When will the monitor be available?”

“We don’t know Sir. The Manufacturer hasn’t told us.”

I was frustrated. I had looked around and knew it was in stock at another company.

“Cancel the order, then.” I told the lady, impatiently.

“You have to give 72 hours notice before cancelling,” she said.

“That’s just unacceptable,” I retorted. “If you don’t have the monitor ready to ship now, then cancel it.”

“The manufacturer may be ready to ship it.”

Aha! I thought. This is a drop-shipping operation!

“Then call the manufacturer and ask please,” I told her.

“I can’t do that, Sir.

“Then cancel the order. Now! ” I was disgusted.

She cancelled the order. The next day the monitor arrived by Next Day courier. It had been shipped, but the retailer’s level of communication with the manufacturer was such that they didn’t know exactly what was going on.

In the meantime, I had ordered the monitor from another dealer, and subsequently returned the monitor from the original company. I am sure that the return shipping costs ate up whatever profit there was in the sale. And why did that retailer’s site show the item in the stock when it actually wasn’t available? Probably bacause the inventory levels weren’t updated in real time, or often enough to be accurate. This situation is actually quite common, so be prepared for issues like this.

The lesson: Drop-shipping may well handicap your ability toprovide excellent customer service. And withoutexcellent customer service you’ll lose your bestcustomers to your competitors. If price doesn’t distinguish you from other onlne businesses then customer service most certainly must. Though I’ve had one occasion to return a book to Amazon,, I had a good experienece because they handled it so very well when I caled about the problem.