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Anyway, how are most here setup. I'm not sure if dropshipping would be a waste of time or if we should look into light bulk wholesalers at the beginning.
Any suggestions? Are there any respected resources to find quality dropshippers/wholesalers/distributors?
I didn't think most manufacturers dealt direct with retailers let alone e-tailers. Especially those with little volume and sending single items via a dropship arrangement.
Are there any other fees associated with your setup?
...Dropshipping is a scam in the sense that you'll pay far, far more than you should. In that sense you're being victimized. Prima facie, any sales price which covers the processing labor for only a single item with a relatively low ticket price, yet still allows for any kind of noticeable profit for both you and the originating wholesaler, is a contradiction, and not likely a feasible reality in a highly competitive marketplace. Rest assured your dropshipper will get the lion's share, and his markup over cost will be astronomical. You, on the other hand, will do all the labor but harvest only the crumbs. You're almost certain to discover that dropshipping is generally a scam, and prices from wholesalers who dropship will be around 2-5 or more times higher than prices at WidgetWorld.com.
Therefore if it looks to good to be true, you can assume it is. It's similar to predatory lending, or rent-to-own products. They prey upon those who want to start their own businesses but don't have sufficient capital to purchase inventory.
The most important part is "FINDING" a reputable manufacturer or distributor and "BUILDING" a contractual relationship/joint venture with them. This can be a win-win situation as Puma notes above.
The thing that's striking about the example is something that a lot of people have recommended: you must find a niche and exploit it. In this particular example, the owner had knowledge of the particular subset of the construction industry that was responsible for finding and marking various underground utilities (i.e. finding pipelines and spraypainting their location on the ground).
These folks use a tremendous amount of a few staple goods (e.g. spray paint) and the new company decided to offer those goods direct. It started as a one-man band who had a web site built, negotiated drop shipping arrangements directly with the distributors and used his personal contacts to solicit business.
From there, he's been expanding the number of SKUs he carries and has even moved into a 3000sqft warehouse that stocks some of the most popular items and can cater to the cash-and-carry local crowd.
His keys were:
a) Working a business that he was familiar with and had contacts he could leverage into sales.
b) Knew the various vendors and was able to negotiate dropshipping arrangements that worked for him. (Note that the distributors he worked with required significant minimums. He could not accept orders for, say, a couple of cans of paint and a pair of gloves.)
Multichannel Merchant is mostly aimed at catalog retailers, but they have been steadily adding content of interest to ecommerce stores for a while. Subscriptions are generally free to those in the industry.
Also, since we carry no product, we don't need to worry about inventory, or getting stuck with dogs, that we need to deep discount to get rid of it.
The most important thing about drop shipping. Find a distributer that has a wide range of products, and only create one website for each distributer. Split shipping drop shipments between distributers is logistics and cost nightmare.
The big problem is finding a real distributer, as the web is full of fake distributers. These are middlemen who buy from distributers and mark up the product and perform the drop shipping for you. Their are so many of these scammers out their, we don't even search on the web to find new distributers.
We got rid of physical inventory two years ago, and we could never be happier. Drop shipping is the way to go.
This is crucial to the success of my business as has been stated above. What are some good places to start looking?
-ABertone
