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Drop Shipping Conundrum

A major drop shipping problem I need help resolving.

     
4:56 am on Jul 29, 2006 (gmt 0)

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Hey Guys I need a little help here I am about to establish a drop shipping arrangement with several manufacturers, that sell similar types of products of course only differentiated by different brands. Now the dilemma.

Say Manufacturer A (Manu-A) and Manufacturer B (Manu-B) are shipping from different locations. Hence a different shipping charge would be applied. So say to ship 2 lbs would cost $50. from one location to the next but 0.5lbs costs $35 from one location to the next. If a customer buys 2 products one from each Manu-A and Manu-B they would pay $70. in shipping instead a regular $50.

Has anyone ever encountered this problem and found a way to beat it. This will seriously affect my bottom line. I just have not found a method of dealing with this problem.

Any ideas guys.

6:01 am on July 29, 2006 (gmt 0)

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Free Shipping.
1:04 pm on July 29, 2006 (gmt 0)

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How would I factor in the price of the product what formula would I use. Some products cost $10 and shipping woudl cost $35, while other stores dont offer this service, I would lose for sure, elaborate on this JPSY
6:54 pm on July 29, 2006 (gmt 0)

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Ideally, the shopping cart should be able to group items together based on the item's location. It should also calculate the shipping cost from its starting point to destination. If the shopping cart has an from Manu-A and an item from Manu-B, the calculator should be able to give you a cost for Box 1 from Manu-A, and Box 2 from Manu-B. But in your situation, it sounds like your calculator is putting two items in one box and quoting a price of $70. In actuality, there are two boxes shipping, requiring a total of $85 ($50 from Manu-A + $35 from Manu-B).

As a starting point, I did a search online and found these two carts:

1) AmeriCart
* SHIPSEP tag:
* set a max box weight such as 35 lbs so any products heavier than that ships separately
* "Our UPS shipping calculator will also handle orders which must ship in multiple boxes!"

2) Volusion

"Multiple warehouse support - efficiently calculate shipping rates to account for split-shipments due to the fact that you only stock specific products at certain warehouses."

[edited by: minnapple at 1:50 am (utc) on July 30, 2006]
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3:30 am on July 30, 2006 (gmt 0)

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I am about to establish a drop shipping arrangement with several manufacturers

You can do this:

- Add [Blind Drop Shipping] as a requirement to your agreement with your suppliers.
- Inform your customers that their orders may be filled from multiple warehouses.

Can you get free shipping from your supplier partners?

3:52 am on July 30, 2006 (gmt 0)

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Can you get free shipping from your supplier partners?

Drop shipping + Free shipping!
No wonder a lot of our better suppliers want no part of small web retailers.

5:15 am on July 30, 2006 (gmt 0)

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hi there everyone,

Does anybody know of a dropshipping company that will ship to Australia at reasonable costs? Any ideas or advice?

I know that Australia is on the other side of the world, but we still want to buy bits and pieces. So, I figured that if I could find a dropshipper willing to ship to good old Australia, then I would have bits and pieces to sell in Australia.

cheers - greg

4:35 pm on July 30, 2006 (gmt 0)

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Guys I am actually trying to introduce the idea of dropshipping to these manufacturers who are stuck on providing wholesale to distributors. They are vey capable of putting together single boxes and wait for the FEDEX to collect and deliver.

For this reason I have offered Free shipping to my customers and work out how to mark up the prices to cover these losses. I have done it in two ways becuase of multiple warehouses it is better for customers to spend a minimum of USD$25.00 to get free shipping. This is the FEDEX home delivery service which reaches a maximum of say $60.00 and thats for a lot of weight.

Now the problem is Ive had to mark up the products by at least 160% and that is still with a distributor discount of 15% of avg. retail price.

I will make up to about 12% mark up on the products.

With the costs I have I will have to go PPC and use what little A/Cting knowledge I have to effectively price all units and still keep a decent margin.

Has anyone encountered this yet and any ideas on a plan...
Say product A costs me $4 and I sell the product for $5. I state a minimum purchase of USD$25.00 for free shipping to kick in, then the purchaser would have to buy at least 5 items to receive free shipping.

However shipping charges amount to USD$7.00. Then my profit = 5 items * $1.00 mark up = $5.00. I would have made a loss of $2.00 due to free shipping.

To break even I must sell at a minimum of $5.40 giving me a mark up of $1.40 * 5 or the # of units = $7.00 just enough to pay for shipping.

We will add our margin say another $1.00 to the purchase price giving us $6.40 a total mark up of 62.5% of cost price.

This problem is exacerbated based on the fact that shipping is correlated to weight and this means that 1 product can dramatically increase the cost of shipping hence a different costing technique must be applied as weight is now the determining factor.

Assume product B weighs 3 lbs pushing the shipping cost to $7.00 but its actually flour...now how much of a mark up can you effectivly place on flour?, it means that EVERY PRODUCT must be looked on individually and a mark up assessed to cover your overheads. This means examning other sales techniques like the marrying of products (which can affect sales negatively even more - you wont know until tested in your own business)....Ah the conundrum appears again....!

I am currently working on a strategy in excel that assess this problem and will directly apply an effective mark up based on weight and cost price God help me when goods such as flour and rice heavy on the weight low on the cost come into play...

More HELP guys you are guiding me in the right direction...More to come....

5:00 am on July 31, 2006 (gmt 0)

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Unless you are in the top 10, preferably top 3, for converting keywords, don't bother selling your items that have such a low margin. When you have more traffic, you can sell more at higher prices due to your SERP. $1.00 profit margin does not allow you to provide free shipping nor is it enough profit to set up a drop ship situation. If flour is a competitive or not a high-demand market item, its not a good drop ship situation. I think you may need to look in to other products that will provide better margins.

Many companies do not want to offer drop shipping due to the administrative costs. Unless the drop shipping company has their process mostly automated, its a burden in time and labor to take on a drop ship client.

5:10 pm on July 31, 2006 (gmt 0)

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I am not sure what shopping cart you are using, but with the one I use, I can do shipping as: a flat fee, labeled as a "handling charge", a matrix (based on either weight or price), or via Fedex, UPS, USPS, etc.

If you drop shipper is providing free shipping, does that mean your customer has to know that? If the vendor is using UPS, use UPS...get the actually shipping. Or, just put in a flat fee for shipping...since it would be profit for you.

Re-reading your first post, a solution could be to just create a matrix that will cover the majority of your bases. Sometimes, you might lose a few dollars and other times you will make a few bucks.

I am using a multi vendor shipping module for my cart and I asked a few well-established brick and mortor store to make some test purchases - whether they bought 5 items from Vendor A or one item from five different vendors - the shipping ended up being similar (made sure the weight and such were the same for both instances) - just wanted to test of the different vendors' shipping costs were not overboard - they ended up not being such.

Not sure if this posts helps you any or not.

1:08 am on Aug 1, 2006 (gmt 0)

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You'll probably never get it to work out 100% the way you would like. I don't know of any shopping carts that can handle that type of task. What we do generally is add a surcharge for certain items on top of the usual shipping costs for items we know are drop shipping from a location or manufacturer that will end up costing more. It averages out in the end fairly well.
11:46 am on Aug 10, 2006 (gmt 0)

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If the shopping cart has an from Manu-A and an item from Manu-B, the calculator should be able to give you a cost for Box 1 from Manu-A, and Box 2 from Manu-B.

Assuming your shopping cart can do the above the calulations for products , i.e product 1 weights 2lbs.

My question is about volemetric weight. You would put in to your shopping cart the weight of the product i.e 2lbs, but what about the size of the box? Should the product take up a large box, but it weighs only 2lbs, you will be charged a 10lb rate.

You have no weigh of knowing what size box the wholesaler will use, and therefore the actual rate you will be charged by the shipping company. Even though you have charged the customer for 2lb shipping.

Who knows how to deal with this?

12:26 pm on Aug 10, 2006 (gmt 0)

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From your example, you would have a $5 profit margin on a $32 sale, which works out to be about a 15% gross profit margin. This number is too low for a niche market web site. Typically you'd want 40-70%.
7:37 pm on Aug 10, 2006 (gmt 0)

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> no weigh of knowing what size box the wholesaler will use,
> and therefore the actual rate you will be charged by the
> shipping company.

Some shopping carts allow you to configure a "box" weight or a "handling" weight for each box or per order. All shopping carts should provide a field for "handling" amount which can be used to offset the occassional order that does not fit neatly in a box. :)

8:10 pm on Aug 10, 2006 (gmt 0)

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The best solution is one website per supplier. This is what we do.

However this only works, if each of your suppliers have a wide range of products.

You then link the two two sites together, either at the home page or at the checkout.

I thought customers would complain that they would have to pay two shipping charges at first, but I get very little of it.

The customers realize that you own two (or more) websites, and that two differnt supplies chains exist, and the cost of greater selection is increased shipping.

The customer is either going to pay greater product costs or greater shipping costs, for greater selection.

There is no such thing as a free lunch.

8:25 am on Aug 11, 2006 (gmt 0)

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Some shopping carts allow you to configure a "box" weight or a "handling" weight for each box or per order

I am designing a module for this application. I think I should assign 3 types of boxes, such as default, where weight exceeds volume and they can use a standard box or assign box B or C.

Each will have a value on my shipping scale. I guess after time, I will be able to evaluate and refine which works best.

8:04 am on Aug 16, 2006 (gmt 0)

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It seems to me you may be overthinking this unless you are planning several million dollars in sales. We use at least 6 different dropshippers and ship product we stock. We use a simple flat rate billing chart. you spend xx your shipping is xx. We find that only about 10% of our orders include more than one dropshipper. On those we lose money relative to what we charge for shipping. We make money on other items that have low wieght to value ratios. Some items from some dropshippers we do not carry because of the high shipping cost to value issue.

As a general rule items available locally in most areas with a significant shipping cost do not make sense for internet sales. ie flour. if you are selling flour to someone who lives 150 miles from the nearest store and all they need this month is 20lbs of flour maybe they will pay a dollar a pound for shipping. otherwise no.