Steps to DropShipping Success Section III

Section III

Welcome to the third part of this 5-part course

on dropshipping and how to use it to your advantage.

In Step 3, you need to select a supplier or suppliers

for your products.

As we illustrated in the Basics discussion,

the best supplier may be the manufacturer because

you will not need to pay the mark-ups of wholesalers

and distributors. However, manufacturers may be focused

on production and not interested in or capable of taking

on the fulfilment function. The wholesaler or distributor

may be considered a "middle man" but they play an

important and useful role in connecting manufacturers

to buyers.  If the manufacturer of your product does

not work with individual buyers, ask which of their

wholesalers or distributors offer dropshipping.

Locate possible suppliers

There are many ways to locate possible suppliers for

your products. We'll describe a variety of options

then give you our recommendation for the most effective

method of finding suppliers.

If you know the products you want to sell, find out

the name of the company that manufactures the product

and inquire about their willingness to sell to you on

a dropship basis. If the company does not operate that

way, ask if they have a wholesaler or distributor who

might strike this type of relationship with you.

If you know the type of product you want to sell, but

do not have a specific manufacturer in mind, you can

try Googling the "product + drop shipping". This method

should yield some possible candidates for a dropshipping

relationship. However, it's a real challenge to make

individual contacts and evaluate all of those suppliers,

plus you are much more likely to run into middlemen.

You can buy dropship distributor lists, sometimes very

inexpensively. However, in our experience, you get what

you pay for when it comes to cheap lists. These lists

are often not updated regularly so you may find that

contact or other information is not accurate.

Our advice - simple lists and directories aren’t usually

worth the money or the effort to use them.

Go to trade shows or scan trade publications.

Dropshippers want your business. They are looking for

you through matching services, directories, ads in trade

publications and exhibits at trade shows. You'll never

find each other if you're not looking in the right places.

You can use a matching service such as eSources.co.uk.

ESources offers buyers an opportunity to announce their

need for a drop shipped product and for sellers to describe

their products and their terms of sale.

Our advice is to use matching services such as ESources

(there are also good alternatives available, however

watch out for cheap wholesale lists, they are not worth

much at all). Here's why you should choose a matching

service such as eSources.co.uk:

Suppliers are vetted; information is constantly updated

and monitored.

You will find suppliers who may not be savvy enough to

get their websites noticed by search engines but who have

indicated they are looking for new business.

You can view dropshippers by accessing specific categories,

such as our UK dropshippers and International Dropshippers

categories. This way you can deal directly with those

suppliers that are prepared to deal with you on a dropship 

basis.

You can announce your needs so that suppliers who can meet

your needs will solicit you, creating a highly targeted group

of supplier candidates to explore.

Once you have created a short list of candidates, begin

the evaluation process.

Supplier Selection

Explore these issues as you go through your selection

process.

Supplier Location

Although it would make sense to say that it should make

no difference where the shipper is located, there are

some issues to consider. 

If your target market is in Canada, you may want to

locate your suppliers in Canada since many shippers

do not want to deal with the hassle of customs processing.

(If your goods are low cost, they won't meet the threshold

for customs declaration so this may not be an issue.

However, it pays to sort out international delivery issues

upfront.) 

If you are having products shipped into the U.S. or any

European Union country (and many others countries as well),

those products must meet stringent standards for safety,

etc. Be sure you know the rules that apply to your product.

(You can learn all about importing by selecting one of our

country-specific importing courses or our course on

importing strategies.)

Company History, Reputation and Service

Ask about the history of the company. How long have they

been in business? Google the business name plus complaints

or reviews and see if there are any negative reports about

them floating around on the Internet. If so, either move

or at least ask the company to explain their side of the

story.

Consider the professionalism of this staff. Are your

questions answered in an informed and straightforward way?

Product quality

This is absolutely critical! Do you know that there are

many ecommerce resellers who have never seen the product

they sell? Don't rely on a picture or a description.

Order a sample and be sure that the quality is up to your

standards.

Price

What price will you pay for the item? Are there other

charges that apply? Beware of suppliers that ask for a

monthly "membership" or "participation" fee. These are

often scammers. Legitimate drop shippers make their

money on a per piece basis.

There are a few exceptions to this rule, however

generally you should stay away from dropshippers that

charge a fee to join their dropshipping service.

Payment

Drop shippers work in one of two ways. Either they

will bill your company credit card for each individual

purchase or, in some cases; they will bill you on a

monthly basis. If you can arrange monthly billing, you

may be required to supply a letter of credit. In general,

payment should not be an issue because you will collect

payment from your customer before you place the order

with the shipper.

Volume

Ask your supplier if they require a minimum volume of

monthly sales to maintain an account. The minimum monthly

quota should be a nominal amount; it should cover the

administrative cost of carrying your account; nothing more.

Be sure that you will be able to meet the quota. 

Inventory

Ask about inventory levels and arrange for  real-time

inventory reporting so you can quickly advise your

customers of any stock-outs or back order situations.

Shipping

Be sure that:

The supplier uses a reputable transport firm such as

UPS, DHL, FedEx or the postal service.

Your shipments to your customers will always have a

tracking number so they can be traced.

The shipper will include the tracking number in their

order confirmation.

Ask about the option of placing your name on

merchandise or at least on the shipping package.

There's great value in keeping the source of your

products a secret from consumers; you don't want

them to bypass you and go directly to the source

if that's possible). One of the hazards of tracking

numbers is that the tracking number reveals the source

of the product. You can handle this problem by referring

to the shipping origin address as your remote warehouse

location. 

Refunds

Be sure you understand and can live with the dropshipper's

refund policy. You will need to make this policy clear to

your customers. If you don't and there's a problem, you may

find yourself underwriting refunds.

Avoid Scammers

We've touched on several of the red flags that may

indicate a situation to avoid. They are worth repeating

along with a few other cautions.

Avoid companies that want to sell you a list or

directory of distributors at a low price; they're

usually not worth it. Plus, everyone else will be

buying those lists and accessing the same deals.

There are a number of legitimate, large scale dropship

companies that advertise a huge inventory of items to

choose from.  However, some of these mega dealers may

simply represents products, essentially the same way

you do. When you transmit your drop ship order, this

middle man company transmits the order to the true supplier.

The result? One more fee to increase the final selling price

of your product. Ask your supplier candidate if they

actually stock the products you will be purchasing in

their own warehouses;

Beware of companies that offer you package deals with web

presence, payment system, distributor lists, etc.

These deals can be so costly that you will be hampered

in making a profit.

How many distributors are too many?

The fewer suppliers you use, the better. More suppliers’

means more differences in shipping charges and return

policies as well as more management responsibilities for

you. Every business is different. Try to use the fewest

suppliers possible to support your business needs.

What have you learned?

By the end of this section, you should know:

How to locate possible suppliers for your products,

with the recommendation to use a matching service.

How to evaluate suppliers.

How to recognize red flags that can mean a problem

supplier.

That your best strategy is to work with fewer suppliers,

if possible.

Terrific! In part 4 we will look at how to establish a

relationship with the dropshipper and incorporate their

products into your business.

To our success working together.