Want to learn the basics of drop shipping? This guide’s a good place to start! In this post, we’ll define drop shipping, discuss its benefits and give solid tips to help you find and choose a drop shipper.
By this time, you’ve probably heard the term “drop shipping” before. But what is it? What can it do for you? And why all the excitement about it?
Never fear, because this beginner’s guide will answer all those questions and more, specifically:
- What is drop shipping?
- What are the benefits of drop shipping?
- How do I find a drop shipper?
- How do I choose a drop shipper that’s right for my store?
So let’s get started!
What is drop shipping?
Drop shipping is when your products are shipped directly from your supplier to your customer, rather than shipping first to your business and then to your customer.
To better understand what a drop shipper does, here’s a typical purchasing process without a drop shipper:
1. Your business orders your products from a supplier, eyeballing how much to get of each product
2. Your business stores your products in your warehouse or other storage facility
3. A customer places an order with your online business
4. Your business receives the order
5. Your business packages and ships those products to your customer
6. Your customer receives the products they ordered
7. Your business continues to store any extra inventory that isn’t sold
With a drop shipper, however, the purchasing process looks more like this:
1. A customer places an order with your online business
2. Your business passes the order information onto the drop shipper, which has all the products in its storage space
3. Your drop shipper packages and sends products directly to your customer
4. Your customer receives the products they ordered
What are the benefits of drop shipping?
The main benefit of drop shipping is that it frees your business from the costs, effort and time of storing, packaging and shipping your own products. However, that’s not all it has to offer. Here are some additional benefits of drop shipping:
By using a drop shipper, you and your business are able to cut a number of typical business costs. For example, drop shippers often get a better shipping rate than a small-to-medium business could get on their own. Furthermore, you can reduce losses from products damaged in transit because the products are taking a more direct route.
Minimizes risk and waste
Without a drop shipper, businesses have to take big risks when they buy their inventory. It’s almost impossible to predict trends and tastes, or whether that new product line will really take off or just take up storage space. With drop shipping, there’s no excess inventory or under-ordering. Since all the products are with the supplier, you’ll have exactly as many as your customer ordered.
Increases inventory variety
Drop shipping can effectively increase the variety of products your online business sells by giving you access to both specific niche products and popular best-sellers. Plus, your business is no longer limited by product aspects such as size or perishability.
Allows for more business flexibility
When drop shipping frees your business from storing products, you’re free to locate your business almost anywhere. Anywhere there’s an internet connection is now fair game. And since you don’t have to worry about storage space, it’s also very easy to scale your business.
Proven to work
While it has gained in popularity with the growth in online business, drop shipping is a tried and true practice used by successful businesses for decades. From huge retailers like Zappos, to many small-to-medium Volusion stores, drop shipping can be a great asset to your online store.
How do I find a drop shipper?
So you’ve decided to use a drop shipper, but don’t know where to start looking for one. Luckily, you have one of your best allies at your fingertips: the internet. Here are three major ways to figure out your drop shipper options:
1. Search online
If you’re like most people nowadays, this option came to mind immediately. Simply go to your favorite search engine, type in “drop shippers,” and done, right? Unfortunately, finding a drop shipper is a little more difficult than your average search. Drop shippers tend to have very poor SEO marketing campaigns, as well as typically less-than-impressive web design. However, it is possible to find a good drop shipper through search. You just have to be persistent.
Pros: No extra cost, you’ll be very knowledgeable about your options by the end.
Cons: Takes a lot of time and effort.
Some extra tips when searching online:
- The best drop shippers may not show up on the first couple pages. Try digging deep, like pages six through 10
- Expand your search terms from “drop shipping” and “wholesale” to include other terms like “distributor,” “bulk,” “reseller,” “warehouse” or “supplier”
- In addition to using typical search engines, don’t forget to visit pages like yellowpages.com and search for the terms listed above
2. Try paid directories
Because it can be difficult to find drop shippers through search alone, websites have cropped up that have extensive lists of drop shippers, but can only be accessed at a price. In addition to the cost, many of these directories are suspect. Legitimate directories do exist, but be aware that many of these sites are full of outdated links and drop shippers that are out of business.
Pros: More convenient, less time spent searching.
Cons: Cost, moderate to high risk of encountering a scam.
3. Use alternative drop shipping websites
There are other websites that are a mixture of directory and drop shippers themselves. Doba is a good example of this. These websites are often more legitimate, but come at a higher price than your average paid directory website.
Pros: Get a variety of drop shippers to choose from, convenience.
Cons: Higher cost.
What should I know before choosing a drop shipper?
As you will see, there are plenty of options for drop shippers. Do ample research on what each drop shipper provides, and determine which one best fits your specific business needs.
Here are some questions you should ask before deciding on a specific drop shipper:
How long have they been in business?
Drop shippers have a reputation for going in and out of business fairly quickly, so a fresh face is far from ideal. Instead, choose a veteran drop shipper with a proven record of trustworthiness. Typically, the longer they’ve been around, the better, with a good benchmark being 10 years or more.
Who do they use for shipping?
Make sure that the drop shipper you choose is using a legitimate and capable shipping company for maximum reach and stability, as opposed to a small shipping company that’s just starting out.
Do they ship internationally?
Though you may not be selling internationally yet, if you’re even open to the idea doing so one day, you’ll want to make sure that international shipping is an option.
Who else do they work with?
Get an idea of who else is using the drop shipper and figure out where your company falls in their mix of clients. Ideally, your company will fall in the middle, since being the largest risks the drop shipper not being able to keep up, and being the smallest may end up in your business being overlooked.
Do they offer custom packing materials?
Being able to customize your shipping labels and packing slips means you can make sure that products will show up on your customers’ doorsteps with your branding on the box. Plus, having control over the packing slips means you can include things like coupon codes or customer service phone numbers.
Do they send order notification emails?
If your drop shipper sends order notification emails to your customers, then that’s one less thing you’ll have to keep up with when processing orders. This can be a great way to save time and maintain quality customer service.
What is the drop shipper’s return policy?
Read the return policy closely to identify any specific fees or charges for processing returns. And make sure they update their records so you won’t have to cover the cost of the returned merchandise.
How much will you be paying?
Many drop shippers only have per order fees, but some also charge a “participation fee,” which can greatly drive up the overall cost. So be on the lookout for any hidden or additional fees.
How do they accept payment? What are their terms?
It’s important to consider how flexible the drop shippers payment options are, and whether or not they fit with your business. And remember, sometimes payment options increase after a certain period of time or a specific number of orders.
What are others saying about them?
Whether they’re doing a great job or a poor one, there should be no shortage of reviews on the internet. See what people are saying in forums, on social media and by word of mouth. And if you have any questions, contact the drop shipper and ask for references from companies they’ve worked with.
Your online business has a lot to gain from partnering with drop shipper. But remember, like most things ecommerce related, it has to be right for your business. With patience and a little know-how, you can utilize drop shipping as another tool to build a successful online business.
-Gracelyn Tan, Volusion