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Question re; drop shipping

     
10:47 pm on Jun 28, 2007 (gmt 0)

10+ Year Member



I have received several requests from websites who want me to do drop shipping for them. I don't know much about it, and I am wondering what's in it for me and how exactly does it work? What is a fair fee to charge for doing this? Do I mark up the shipping cost? I assume I have to provide photos to them to sell my products...I just want some general advice on how this works so I can decide it it's worth my time. Thanks.
12:57 am on Jun 29, 2007 (gmt 0)

WebmasterWorld Senior Member rocknbil is a WebmasterWorld Top Contributor of All Time 10+ Year Member



We get the same thing, and I'm sincerely interested in some of the more experienced answers on this. Our take on it is:

- They don't want to hassle with maintaining inventory, keeping things in stock, or dealing with shipping, and want you to do that for them.

- Branding issues, order from X and receive a package with Z's address and company name? Do you work out a policy for putting their name on your shipments?

- If a customer complains about a product, or wants to return it, or there are shipping problems, who answers the calls, resolves the complaints? You.

- One of the points of success for a retailer is finding reliable wholesale sources. Sometimes you have to work pretty hard just to find them. From a drop shipper's viewpoint, why bother when someone else has done the work for you?

- People requesting drop shipping don't have the money, knowledge, or time to invest in their own business and are looking for a way to get in on someone else's hard earned work.

So our impression is, if we were to take on drop shippers, we would price accordingly, which would probably be beyond what they'd want to pay.

2:24 am on Jun 29, 2007 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



- They don't want to hassle with maintaining inventory, keeping things in stock, or dealing with shipping, and want you to do that for them.

Yes. But, they're paying for that convenience in that they are not making as much money as they would if they bought wholesale.

- Branding issues, order from X and receive a package with Z's address and company name? Do you work out a policy for putting their name on your shipments?

A lot of dropshippers will use the name of the company that sold the product and not their own. Or, they'll just use a return address with no name. But, the better ones will put your name on it.

- If a customer complains about a product, or wants to return it, or there are shipping problems, who answers the calls, resolves the complaints? You.

Different dropshippers do that differently. With some, the customer contacts the seller, who then deals with the dropshipper. That way, the dropshipper only deals with their own customers (i.e., sellers) while the sellers deal with their own customers.

Others will have a generic contact number/email, that, in the case of a phone call, would answer "Customer Support" or something like that without mentioning a company name.

But, yes, all that would be handled in the agreement/policy between the dropshipper and seller.

- One of the points of success for a retailer is finding reliable wholesale sources. Sometimes you have to work pretty hard just to find them. From a drop shipper's viewpoint, why bother when someone else has done the work for you?

Finding reliable dropshippers isn't easy either.

- People requesting drop shipping don't have the money, knowledge, or time to invest in their own business and are looking for a way to get in on someone else's hard earned work.

Set minimum requirements, such as having a business license or the equivalent.

Dropshipping isn't for everyone, and may not be beneficial to all businesses. But, it does have potential to expand your sales. Some people may be good at sales, but not so good at managing inventory or determining what products to carry and how many to carry and so on. But, they can sell. So, they look for a dropshipper--someone who has expertise in inventory and fulfillment. And, they can let the dropshipper handle all that while they concentrate on sales. Plus, they have lower overhead as they don't need warehouse space, so the savings they lose in not buying wholesale is a wash with not having to pay for warehouse space.

2:57 am on Jun 29, 2007 (gmt 0)

10+ Year Member



So...looks like there are several sides to this. I guess I'd like to know what sort of questions/parameters I should be aware of should I decide to enter a relationship with one of these websites.

The one I am considering at the moment has told me that she is unhappy with her current dropshipper and wants to make a change. I guess I should find out what her difficulties have been and what she is looking for. But also, I need advice on the pitfalls on my side and what is a usual or expected dollar amount (discount from my retail prices) as far as selling to her wholesale, and also what is expected for my time in shipping?

My own website is expanding and doing very well right now. I'm not sure it would be wise to take on more work, but then, sometimes that is what should be done when you are doing well. I really appreciate advice from both sides of this coin.

3:45 am on Jun 29, 2007 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



The one I am considering at the moment has told me that she is unhappy with her current dropshipper and wants to make a change. I guess I should find out what her difficulties have been and what she is looking for. But also, I need advice on the pitfalls on my side and what is a usual or expected dollar amount (discount from my retail prices) as far as selling to her wholesale, and also what is expected for my time in shipping?

For the product, the dropshippee's price would be more than wholesale but less than retail. The actual discount amount is going to depend upon your industry and other factors. Just as a vey rough example, if your retail price is $10.00 and your wholesale price is $5.00 then your dropshipping price may be $7.50.

For shipping, dropshippers charge their regular shipping charge (if they also sell retail) and may or may not charge an additional dropship fee. They may also charge an additional fee for custom labeling (i.e., putting the dropshippee's name on the return address) versus generic labeling (address only, no company name).

If you are seriously interested in doing the dropshipping, keep it simple. Have a set discount and a well-defined shipping cost. Make it so that the dropshippee can easily figure out what to charge for an item, and not be hit with a bunch of add-on charges after you ship the product.

You'll also want to decide if you want to have any price protection (check your local and national laws!) to protect against the dropshippee undercutting your pricing. The goal is to expand your customer base, and you don't want the dropshippee cutting into your base and eliminating your profitability.

10:04 am on Jun 29, 2007 (gmt 0)

WebmasterWorld Senior Member rocknbil is a WebmasterWorld Top Contributor of All Time 10+ Year Member



Excellent info ccDan - one question - what would you do if your website gets the shipping charges dynamically based on the order? What I mean is that we dont know what the shipping is until the order is placed. To do a drop ship, we'd get the order from the requestor, then have to manually calculate it, get my drift?

Either that or program an area just for drop shippers . . . .

3:08 pm on Jun 29, 2007 (gmt 0)

10+ Year Member



I see drop shippees as decent wholesale customers, who we do not have to market to. Its another income stream, and a lot easier to maintain than other 'standard' wholesale customers. You just put a different label on the box, end story.

Having said that, i wouldnt want too many people selling the same stuff as us. If I feel that they may be a good long term business partner, kind of like those symbiotic relationships animals have in the wild (everybody wins), then they can have wholesale pricing straight off the bat.

3:45 pm on Jun 29, 2007 (gmt 0)

10+ Year Member



In my industry there isn't a lot of concern about someone else selling the same stuff as me, I sell something that is as old as the earth itself - and everyone sells the same products in this field. So, quality and service play a major role. I have found that pricing isn't even the issue with most of my customers. They are willing to pay slightly more at my website for the exact same product because I give such great service and have developed a reputation of trust over the years.

I really do appreciate all your comments - I am warming up to the idea of becoming a drop shipper for some of these requests I've been getting.

5:07 am on Jun 30, 2007 (gmt 0)

10+ Year Member



i've been importing and drop shipping for others + having others drop ship for me for going on seven years. (my god where does the time go)

if you are an importer, manufacturer, wholesaler, and sell to retailers, you may want to consider a "drop ship program". you provide photos, basic product info, worst case shipping, etc. and let others sell your products. you simply fulfill the order by shipping directly to the end customer versus shipping to a retailer location or warehouse.

interfacing with the customer, taking orders, processing payments, handling customer service issues, processing returns, etc. is the responsibility of the retailer, not you. if you are performing those functions, they are an affiliate, not a retailer.

if you are a retailer (web based or otherwise), you generate the order from the end customer and pass it on to the wholesaler. there is considerable expense to gain a customer and provide post sale service, just as in any retail channel. there are a surprising number of ignorant wholesalers who sneer at drop shipping for web retailers based on the misplaced notion that web retailers "have no expenses like rent". maybe if they're using os commerce on a geocities site. however, any legitimate web based retailers that actually generate orders have plenty of expenses.

like almost any other business venture, the devil is in the details. worrying about generating accurate shipping quotes on a site that match the actual costs is the least of your concerns.

a solid method of interacting between the drop shipper and retailer is paramount. orders need to arrive to the drop shipper, and be acknowledged. when an order is shipped, the retailer needs to know in a timely manner to capture the cc and give tracking info to the customer. if an item is back ordered or otherwise not available, this needs to be relayed. product specific questions will arise and there needs to be a way to get this info from the wholesaler to the customer. you would be shocked at how difficult these simple communications tasks are for many businesses.

cases where drop shipping may not make sense are when the products are small, light, and expensive, thus shipping is a small fraction of the entire transaction cost, or a wholesaler has a very small line, or a line with limited options (color, size, etc).

where drop shipping excels is when a line is very broad, has many options, and/or is difficult to transport. Why would a wholesaler of 100 different pieces of large truck delivery only widgets available in 14 colors want to force a retailer to select and warehouse an arbitrary minimum order? (typical answer: "because thats the way its always been done")

the other boogey man is the specter of channel conflict. This, in simple terms, means creating competition for your own customers. if you have an existing dealer network, there may be hysterics if they learn the same products are now available on the web. while this can take a thousand different forms, it usually comes down to a fear of price competition. it is well within your discretion to force any retailer, web or otherwise, to conform to your MSRP, or create a minimum retail price. then allow your retailers, web or otherwise, to compete on service and their ability to market your products.

best wishes & good luck.

kyle

6:28 pm on Jul 9, 2007 (gmt 0)

5+ Year Member



- People requesting drop shipping don't have the money, knowledge, or time to invest in their own business and are looking for a way to get in on someone else's hard earned work.

I do not agree with this statement at all - it comes across as elitist. Who's to say that the dropshipper isn't the lazy one ... relying on others to sell his product for him? (see how it can work both ways?)

Dropshipping is very much an integral part of THOUSANDS upon THOUSANDS of successful ecommerce businesses - and it has nothign to do with the effort level of the eStore operator. While it is generally true that your average eStore owner/operator may not have the initial capital and/or storage space to be able to stock product, why should this be an area of contention?

The dropshipping relationship is mutually beneficial - otherwise there wouldn't be so many companies willing to dropship (and there are many). For example, have you checked out OneSource.com?

As someone mentioned, the trick is finding a [u]quality[/u] dropshipper whom one can trust to stand by it's program and practices. You need to be able to trust them just as much as they need to be able to trust you.

Bottom line, establishign relationships with companies who are willing to dropship products for you is an excellent way to intiatie oneself into the eCommerce arena.

2:29 am on Jul 10, 2007 (gmt 0)

5+ Year Member



You may want to look into whether the drop shipper can require your drop shippees to charge at or more than a specific price. It may be illegal price fixing. Don't know for sure. Simply raising it as an issue. There may or may not be legal distinctions between wholesaler price fixing regarding retailers, drop shipping arrangments, affiliate programs.

Maybe someone on this forum knows the answer.

[edited by: 4thePegeh at 2:30 am (utc) on July 10, 2007]

2:59 am on Jul 30, 2007 (gmt 0)

10+ Year Member



- They don't want to hassle with maintaining inventory, keeping things in stock, or dealing with shipping, and want you to do that for them.

True. But they also don't get the price breaks that retailers who buy minimum amounts do. In fact, the margins on drop-shipped products can sometimes be so thin for the retailer that it almost pays better to be an affiliate.

- Branding issues, order from X and receive a package with Z's address and company name? Do you work out a policy for putting their name on your shipments?

Varies by dropshipper. Some charge a bit extra for putting Z's return address on the package.

- If a customer complains about a product, or wants to return it, or there are shipping problems, who answers the calls, resolves the complaints? You.

Not necessarily. Again, it depends on the agreement, but from my experience it's usually the end retailer who deals with customer service issues.

- One of the points of success for a retailer is finding reliable wholesale sources. Sometimes you have to work pretty hard just to find them. From a drop shipper's viewpoint, why bother when someone else has done the work for you?

Finding reliable drop shippers is no walk in the park either. (Not to mention building a decent ecommerce site and drawing traffic to it.) But I find your statement a little confusing. Retailers aren't normally the ones who dropship; wholesalers and distributors do. Are you maybe talking about affiliates (online stores that get a cut for selling other people's products)? Or am I misunderstanding your point?

- People requesting drop shipping don't have the money, knowledge, or time to invest in their own business and are looking for a way to get in on someone else's hard earned work.

Businesses that rely on drop shipping run the gamut from newbies to multimillion dollar ecommerce sites (you buy toys on Amazon; Toys R Us ships them). Some retailers prefer to stock their own inventory and get the best price; others consider it a worthwhile tradeoff to pay more and not have the hassles of inventory. It's also a good way for a savvy retailer to test the market before investing in inventory.

Plenty of wholesalers and distributors (probably most, actually) don't bother with drop shipping, and that's understandable. Same with retailers and affiliate arrangements. Some don't want to bother with affiliates; others view them as a potentially large sales force that works on commission only.

Ultimately you just have to weigh the pros and cons, but thinking of it as a cooperative arrangement rather than a competitive one may make it easier to figure out the real benefits and drawbacks.

2:29 pm on Jul 30, 2007 (gmt 0)

10+ Year Member



what would you do if your website gets the shipping charges dynamically based on the order? What I mean is that we dont know what the shipping is until the order is placed. To do a drop ship, we'd get the order from the requestor, then have to manually calculate it, get my drift?
Either that or program an area just for drop shippers . . . .

Is it possible to allow them to access the scripts on your site for those calculations? Is it possible to give them a copy for their own use?

Or, if you are getting those numbers from someplace else, couldn't they pull them from the same place?

I think, if someone is going to solicit you for drop shipping, that they should have the technological capability to solve problems like that. They need to integrate so things are convenient for you.

Starting a drop-shipping program where everyone is welcome is a different story.

 

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