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Dropshipping - how does it work ?

No discount for you from posted price?

     
2:33 pm on Mar 13, 2008 (gmt 0)

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I came across vendor that offers dropshipping and he also sells the items on his website. In his dropshipping info he says: we sell presented widgets for e.g. $100. You can sell it on your website for whatever you want and we will dropship it for you after we receive our $100.

My question is: is this the common way dropshippers work ? They sell to you for the same price as they would to ordinary customer ?

As usual, thanks for all your replies.

3:48 pm on Mar 13, 2008 (gmt 0)

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Simple concept.

1. Your supplier sells you widget for 100
2. You sell the widget for $125
3. You pay the supplier 100+ S&H to ship the widget
4. You keep the 25.00 minus CC/Merchant/Processing fees
5. Profit! (you hope haha)

Keep in mind that many dropshippers have charges for minimum orders, may not dropship quick unless they're well known and have a great supply chain and will most likely keep your margins SLIM so its VOLUME VOLUME VOLUME

3:13 am on Mar 14, 2008 (gmt 0)

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That's all well and good, but if buyers can get the widgets from the supplier for $100, why buy them from you for $125?

In my niche there are many manufacturers who sell their products directly to consumers as well as to dealers and wholesalers. But the manufacturers charge more than what I can buy their products at through a distributor. So the manufacturer charges $209 for a product that I can buy through a distributor for $150, and I sell it for $190.

My distributor charges a flat fee of $2.50 to drop ship.

I'd suggest researching distributors further to find one who isn't competing with you online.

12:18 pm on Mar 14, 2008 (gmt 0)

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That's all well and good, but if buyers can get the widgets from the supplier for $100, why buy them from you for $125?

Wholesalers/manufacturers/distributors deal with the B2B market, not the B2C. If your product is sold consumer direct then obviously the manufacture doesn't respect or want a retail channel outside of their control.

This is how it "works" for those most part.

1. New biz has no credit/sales/history
2. New biz buys from distributors who marks up products they buy in quantity from manufacturer
3. New Biz then turns around and sells the product and either ships it or dropships it from the distributor (if the distributor offers it)
4. A year or two later new biz isn't so new and has the volume to either purchase "Floor planning" and get its own inventory or can go "warehouse direct" and buy cheaper or get incentives from manufacturer to ship straight from warehouse.

some places lower prices once they go wholesale direct, orther simply incentivise them by offering free overnight shipping and such. the 5-15% savings of skipping the distributor opens up a door of options for the retailer and thats the gist of my market.

the simplistic view of what i said earlier was uber simplistic and a flat model. Obviously in my realm i have loss leaders that are used to bring in consumers and hopefully cross sell & promote the profitable items to come out on top so it isn't always rosy profits.

If you build great relationships with your distributors sometimes you can do more with less. For example i found an EXCELLENT distributor that has worked with me to fully automate the order process from ecommerce to ship confirm and i can get all products from website to consumer in 2-3 days. I pay a premium for <100.00 orders (because of handling/profit margin) but overall its a very profitable relationship because they already have strategic warehouses, supply chain management, vendor direct relationships, address/ship verification and the real beauty is they use MY fedex and MY UPS account so i get the benefits of UPS/Fedex ship confirm/tracking integration straight into our ERP/Commerce system. The premium i pay for small orders PAYS for itself in customer satisfaction from MUCH less errors. - I didn't have to lease a warehouse in 3 state, hire staff, security, automation, pay for the pickup/dropoff services and all that. I just have to take care of my customers and foster the business relationship.

So drop shipping is very feasible and over the very near term it MAY BE THE ONLY PROFITABLE WAY. I would hate to be a middle man in an era of rising fuel prices - it will soon outweigh the margin on consumer electronics to have a middle man and retailers will go direct and save the planet. Why go from manufactuer -> warehouse -> distributor -> warehouse -> retailer when for ecommerce you can go manufacturer -> warehouse -> consumer and be done with it :) leave all the serial/warranty/product return to the manufacturer as well so returns don't have to go customer -> retailer -> distributor -> warehouse -> manufacturer and be worth nothing in the end.

my rant is done :)