Should you be looking into buying your products in bulk or drop ship?
In the beginning, it is going to be a good idea to test out drop shipping prior to committing to a great deal of inventory. Once you have an understanding of the market, you need to determine how much volume you can expect to sell. It is then a good idea to think about purchasing in bulk to save you some money.
What do you need to work with a drop shipper?
Within the United States, drop shipping companies that are legitimate are not going to work with you unless you have an established, legal business along with an employer identification number (EIN). Basically speaking, your EIN is like a social security number that is meant for your business. If you live in a state that charges a sales tax, you will also have to have a sales tax identification number from the state.
It may not be as complicated as you would think to put together a legal business structure in the United States. You may even be able to get it done in as little as an hour or two simply by visiting the website of your State Department of Commerce. You can usually find this on a site such as Legal Zoom and you can incorporate your business for as little as $200 or less. After you have a company that is established within your state, you can request an EIN number through the IRS.
It is crucial that you spend a good amount of time researching the corporate structure that is best for you. Researching this extensively will always be a good idea, so it is recommended that you consult a professional, such as an accountant or attorney.
What fees can you expect to pay a drop shipper?
There could be two fees that you can encounter with a drop shipper. One is a per order fee and the other is a monthly fee.
Per Order Fee: These per-order fees are common and they cover the expenses that are involved with the packing and shipping of products. You can generally expect these fees to range from around $2 to $5, while some may be higher if you have an item that is large or hard to process.
Monthly Fee: Some of the drop shippers might charge a monthly fee that is ongoing for the privilege of going through business with them. Sometimes, this can be an indication of a fake or poor quality drop shipper. There are very few drop shipping wholesalers that are legitimate who will also require that you pay an ongoing fee. Be careful if you are asked to do so.
Some of the legitimate drop shippers could require that you purchase a minimum amount of product. This could be true with your first order or as a monthly basis. If you are not able to meet up with this sales threshold, you can be charged a fee. They will do this to filter out any of the business owners that are not serious and could be more trouble than they are worth.
Know the differences between a drop shipper, manufacturer and a wholesaler.
A manufacturer is who builds the product. For example, the Wii gaming console is manufactured by Nintendo. Wholesalers are someone who will buy right from the manufacturer and then resells to a retailer with discounted wholesale pricing. Drop shippers are those who ship products directly to your customer for you.
It is possible for both a wholesaler and a manufacturer to be a drop shipper. If you happen to find a manufacturer that is willing to ship products right to customers, they will be acting as your drop shipper. Any wholesale distributor that ships to your customers for you is also a drop shipper.
What products should I be drop shipping?
There is a great deal that you should take into consideration when you pick out products for drop shipping. Take the time to research and understand the demand in the market, pricing, available suppliers and competition and the overall value that can be offered, as these will all be critical to the process.