Dropshipping

If you’ve been surfing the net looking for suppliers then you are sure to have bumped into companies offering a drop shipping service. They can make it sound so good that you almost want to sign up there and then. It seems like all you have to do is sign up with them and you’re on your way to becoming rich with very little effort. Unfortunately, the truth, as always, is not so simple. Let’s look at drop shipping.

If you haven’t come across drop shipping, it simply means you sell stock held by someone else. You sign up with them and they will allow you to view their website looking at their stock. You decide to sell some of their stock, say for example by putting it on EBay or through your own website. When a customer buys the item, you pay the company for it and they ship it to the customer. The difference between what the customer pays you and what you pay the drop shipper is your profit. Less the costs, you incurred in the sale. Basically, you the retailer, choose not to carry your own stock.

It sounds too good to be true and it usually is. There are a number of things you need to be aware of if you’re thinking of adopting the drop shipping route. I tried it for a while and decided it wasn’t for me. One of the major problems with this business model is you have no control over the process. This is something that I found out pretty quick. Here’s a quick checklist of what you need to be aware of:

Delivery Times

This is one of the things that got me into trouble. A few items I’d listed on eBay from a dropshipper sold. I contacted the drop shipper with the order and was shocked when they told me the products would be delivered within three weeks. Now when you order something from a website or an auction site you don’t want to be waiting three weeks for the delivery. And neither did my customers. I was soon receiving emails complaining that they had not received their goods.

And here is one of the main problems of drop shipping; you have no control over the order process. A three week delivery time is unacceptable. The dropshipper is sheltered from the customer’s anger by you. The customer has bought from you so he will complain to you. You, however, have no control. Nothing you can do can increase the speed of delivery. My own experience with this particular drop shipper was bad. I stopped trading with them when I grew tired of taking customer abuse.

Price

The closer you are to the manufacturer of a product the cheaper you can get it. The wholesaler buys from the manufacturer in bulk. The wholesaler puts his profit onto the goods and sells them to retailers. You buy from the wholesaler and sell to the public after adding your profit. If you’re dealing with a drop shipper, they will add their profit before offering it to you so your profit potential will be reduced. If you’re looking into drop shipping then make sure you are able to make a decent profit on the product. If the margin is too low it could end up costing you money. You will have selling costs to cover. Also, don’t forget to take into account how much they are charging for postage and packing. Sometimes this can be expensive and will put buyers off.

Availability of Products.

How large a stock base does the drop shipper have? You need to know this. Does the dropshipper have a system in place that allows you to keep a check on their stock levels? You will need to monitor this daily. A quick look around the drop shipping forums will turn up lots of people complaining about goods customers have ordered which the drop shipper does not have in stock. Remember if you are selling on eBay, things like this can destroy your feedback and thus your credibility. You have no control over stock. Other people will also be selling the same stock so you need to know what the dropshipper has in stock at any given time.

Charges

There are many disreputable drop shippers out there. Many of them are guys running a business from their bedroom. All they are doing is buying stock wholesale, adding a profit and dropshipping it. These people are unlikely to have much stock. When I used the dropshipper, it was obvious that they didn’t carry some stock. When they told me an item would be shipped in three weeks, I knew they were ordering it because they didn’t have it in stock. Why else would it take three weeks to ship a package?

Many dropshippers charge for their service. This is another cost you have to bear in mind. Many people use dropshipping as a business model and they use it successfully. All I’m saying is that if you are thinking of going down this route be aware of the problems. Make sure you go with a proven dropshipper. Personally, I prefer to buy direct from a wholesaler and have full control over the whole process. If I’m going to be abused, I want to be abused for my own mistakes not someone else’s.