Running A Drop Shipping Business Successfully

Some questions when running a drop shipping business:

Do Most Drop Shippers Provide Customer Service To My Customers?

The answer to that question is no, they do not. You are the retailer, and it is your responsibility to deal with all customer problems. You have to keep your website up to date and deal with any problems that your customers are having. Your role is that of an intermediary between the customer and the supplier.

How Are Orders Submitted To The Suppliers?

Every wholesaler is going to have a different process. However, most accept their orders through email or phone. There are many wholesalers who have a complete website ready to take your orders 24 hours a day. Depending on the size of the wholesaler, they may even allow you to submit a bulk order through an XML or CSV spreadsheet.

How Long Does It Take For An Order To Be Filled?

Again this all depends on the individual wholesaler and their location. The vast majority of wholesalers are able to get any orders out the same day as long as they receive it by noon their time.

Where Do I Get Tracking Information?

This type of information is also dependent on the drop shipper. The vast majority of drop shippers will email you the tracking numbers or supply them to you in a CSV file. You should receive your tracking information as soon as the shipment has been processed or at the very least at the end of the business day. Once you have the tracking number, you should then send it directly to your customer unless you have software that is designed to do that.

You can always tell a drop shipper is not of high quality if they do not send your tracking information as soon as possible or always have delays.

How Do I Pay The Supplier?

In order to get your first order shipped, you will need to have a credit card to complete the order. You may want to get a business credit card that features the Mastercard or Visa symbol. Also, be aware that a large number of suppliers will not accept American Express or Discover cards.

Once you have a solid relationship with your supplier you may be able to request a ‘Net 15’ or ‘Net 30’ term. This is quite simply an extension of credit that must be paid within a specific time frame. At the end of the 15 or 30 day period, you pay whatever you owe.

You are typically better off paying with a credit card as opposed to the ‘Net’ terms. Credit cards are more convenient and you do not have to waste precious time writing and mailing checks. In addition, you generally get more favorable terms and rewards with credit cards. In fact, if your business really prospers you may be able to use your bonus points to take some very exotic trips.

You may want to read “Wholesalers And Drop Shipping Companies” if you wish to know more about drop shipping.

Is Drop Shipping A Business Model That Is Profitable?

Like any kind of business, there are a number of different variables that determine how profitable and successful a business will be. However, when drop shipping is done properly, it is very possible to build a very profitable online drop shipping business. When it comes to drop shipping, there is no such thing as a magic formula, It takes a significant amount of time and work to achieve success. However, this business model does have very low risk and is quite viable. I used the drop shipping model to get my own online store launched, and it allowed me to quit the corporate job that I had permanently.

How much money can be made with drop shipping?

Like any other kind of business, success and profits will vary widely depending on a number of different factors – most important, the niche that is selected and the business owner’s dedication and commitment. However, with the right approach, hard work and long-term commitment, it is very possible that a drop shipping business can be created that will provide you with a six-figure income or even higher.

It will take some time to get a business of this type of scale built – most likely several years – however, it is certainly possible to do. Also, once you get your drop shipping business operating, outsourcing and/or automating a majority of the business’s daily aspects is a fairly straightforward process.

What sort of profit margins can drop shipping provide?

The profits margins that you can achieve will vary a lot depending on which products you sell. Margins are thin on expensive electronics, and will probably be in the 5-10% range. However, you could get as much as 100% profit margins on low-priced accessories.greatvalue

Another thing that your margins will heavily depend on is the value you are able to provide your customers with. This enables you to charge premium pricing that your competitors can’t offer.

What Happens When Fulfillment Mistakes Are Made?

Fortunately, a majority of drop shippers do pay to fix any mistakes created by them. For instance, if the wrong item gets shipped to a customer by a supplier, they are responsible for paying to re-ship the right item in addition to paying for any shipping fees for having the incorrect item returned.

drop shipping business

However, although you might not be responsible for paying for the expenses that relate to supplier problem, this is still a relationship issue that is a poor reflection on your customer service and business. When mistakes are not your fault, it can often be even more frustrating.

However, as a drop shipping business, blaming your suppliers for problems really isn’t acceptable. You are the supplier as far as your customers are concerned. So it really isn’t an option to pass the buck if you are wanting to maintain a good reputation. What you need to do instead is to ensure you take responsibility for whatever problems occur and quickly solve them.

Even if a problem completely eliminated or cuts into your profits on an order, it is critical to maintain a good reputation. Usually suppliers will pay to fix mistakes they have made. However, even when they aren’t willing to or don’t, it’s still very important for you to understand that you will need to pay to correct fulfillment mistakes once in a while. For drop shipping retailer, this is just a cost of doing business.

What Benefits Are Provided By Drop Shipping?

There are several different advantages to the drop shipping model:

capital

Lower Amount Of Capital Is Required: You don’t need to make an investment of thousands of dollars worth of inventory with drop shipping. Instead, you just need to buy product whenever you have an order that needs to be filled.

 

Broader Product Selection: Since all of the products that you sell don’t need to be purchased ahead of time, it allows you to offer to your customers a much larger selection of products.

Lower Risk: Your risk for getting an online store launched is reduced significantly when you don’t have to invest thousands of dollars into inventory. If it doesn’t work out, you won’t be stuck with thousands of dollars worth of inventory that you will be forced sell at a big loss.

Location Independence: Since you won’t need to worry about running a warehouse or fulfillment, you can run your drop shipping business from anyplace you have an internet connection and laptop.

Easy To Scale: Since each order doesn’t need to be fulfilled manually, scaling a drop shipping business is fairly easy.

How Can I Ensure That Out-Of-Stock Items Are Not Ordered By Customers?

When it comes to drop shipping, one of the main challenges is that it can be hard to know when a product is available in the warehouse and when the item is out of stock. Whenever an item is ordered by a customer that is listed as being in-stock, and then they find out that it isn’t available, that is always a very poor experience for the consumer. The reputation of your business can suffer greatly if this occurs too often.

Real-time inventory feeds are used by a few of the more advanced drop shippers, however they are not always easy to get incorporated into your online store. Fortunately, services such as eCommHub are available that make syncing your store with the real-time feed of a supplier easy and help to keep accurate inventory counts.

However, in the likely scenario that a feed is not offered by your drop shipper – or it is hard to integrate with your store – then you will be forced to use other strategies instead. Working with several different suppliers having overlapping product lines is the best safeguard to protect you from this problem. That way, if one supplier is out of stock on an item, there is a good chance that another one of your suppliers will have it available.

One of the largest challenges with drop shipping is keeping out-of-stock items and inventory accurately reflected on your sites.

Wholesalers And Drop Shipping Companies

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.

employer identification number

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.

Minimum Purchases

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.

How To Successfully Run A Drop Shipping Business

There are many questions that you will need to have answered once you decide to run a drop shipping company.

Some of the initial questions that must be answered are what you are going to need and how much money needs to be invested to get started.

If you are starting up a drop shipping business within the United States, there are a few things you are going to need:

1) You are going to need up to $300 to incorporate your business in your state.

2) You will need to request a free EIN number from the IRS

3) Request a free sales-tax ID from your state, that is if your state charges a sales tax.

4) Find a reputable drop shipper and create an account with them,

5) Have an eCommerce site developed and created for your products.

There is no set figure for creating a drop shipping business, but it is estimated that one can be started for under $400. To find more information on finding the right suppliers, look at the section that is devoted to finding drop shipping companies.

What Is Drop Shipping?

Introduction To Drop Shipping

Drop shipping is a type of fulfillment model that makes it possible for you to purchase products from wholesalers individually and then have them directly ship the product to your customer.

what is drop shipping

Rather than buy large amounts of inventory, all you need to do is find a drop shipping supplier to partner with and then list their products for sale. After you get an order, to have it fulfilled you just forward it over to your supplier. The supplier then directly ships the product over to your customer from their warehouse and only charges you the cost of the item that is shipped.