Mention the word “dropshipping,” and you’re likely to get a range of reactions. Some people will tell you it’s a scam, a loser of a business idea. Others, more tantalizingly, will tell you it’s a sure-fire success strategy that will lead you quickly toward a seven-figure salary. The truth lies somewhere in between those extremes, and your experience will be shaped mainly by how much you know going in and how well you’re prepared to succeed. Of course, there are people who won’t know what you’re talking about, because they have never heard of dropshipping.
Let’s start with those folks.
At the most basic level, operating a dropshipping business isn’t much different from operating a traditional, physical store. In both cases, you sell products you didn’t manufacture yourself. The key difference is that the brick-and-mortar store owner purchases directly from the manufacturer or wholesaler and keeps inventory on the shelf or in a storeroom until a customer wants to buy it. The dropshipper, on the other hand, waits until a customer places an order, then contacts either the manufacturer or a wholesaler and instructs that third party to ship directly to the customer. The dropshipper receives payment from the customer and then pays off the shipper, usually in advance.
Sounds simple, right? Well, it can be. The key is finding the right supplier partners. If you’re ready to explore some dropshipping options â or if you’re a dropshipper looking to find better partners â this article will show you the right way to proceed.
Dropshipping Suppliers VS Wholesalers
As you learn more about dropshipping, it’s important to understand a few basic terms — and the difference between them.
You can obtain merchandise from different types of suppliers, including wholesalers and fellow retailers. The difference between the types of suppliers will have an effect on your profit margin.
Wholesalers purchase directly from a manufacturer and hold inventory. Wholesalers normally will sell directly to consumers or to retailers. Some wholesalers may prefer working B2B, while others specialize in B2C.
There are two other types of suppliers that you may consider working with.
When you purchase goods for dropshipping from another retailer, your profit margins almost certainly will be lower. A fellow retailer serves as a middleman between you and another supplier, and every middleman needs to be paid.
If you arrange to purchase directly from the organization making the products, you can cut out the middleman entirely. That in turn can increase your profit margin.
How To Tell IfÂ A Dropshipping Supplier Is Running A Scam
Dropshipping is a legitimate eCommerce model and many people and companies find success with it. Unfortunately, others will struggle or fail, and one of the primary reasons lies in their choice of dropshipping suppliers. If the information a potential partner gives you seems too good to be true, it probably is. Here are a few red flags to stay alert for:
A legitimate supplier may ask you to pay some money upfront. The most common reason is to meet the supplier’s minimum order. Here’s how it works:
The supplier sets $500 as the minimum order, in order to ensure their own business model and profitability. Your average sale of the product may be only $100, so the supplier may ask you to pay up-front for the minimum order and hold your money while you make sales to meet that minimum.
If the supplier asks for continuing payments that are not related directly to purchasing merchandise, it’s probably not in your best interests.
“At Wholesale Prices”
When a potential supply partner uses these words in their advertising or on their website, it should alert you to the fact that they’re a fellow retailer, not a manufacturer or wholesaler. True wholesalers don’t advertise their wholesale prices, and they’re not usually advertising online for dropshippers. Not everyone who uses that phrase will be running a scam, but seeing those words should let you know you need to look before you leap.
No Physical Presence
Any legitimate wholesaler or manufacturer will have a physical address for their warehouse or production facility. If you’re considering a dropshipping supplier that has only an online presence, that’s a good sign that you’re actually looking at a fellow retailer. There’s nothing wrong with working with a retailer, if you so choose. A legitimate potential partner will make that status clear, though, rather than presenting themselves as a wholesaler.
What To Look For In A Good Dropshipping Supplier
Like any partner, the dropshipping supplier or suppliers you choose to work with will have an effect on your business. Here are a few traits and characteristics to look for.
- A physical location
- A good reputation and a long history (not a brand-new seller)
- Positive online reviews, including for a reputation for fast, on-time shipping and product quality
- Customer support, in case problems arise
- Volume of sales adequate to meet your customers’ demands
- Discount rates that allow you a decent profit margin
- A convenient location. If the supplier is overseas or on either coast of the U.S., factor in longer shipping times so your customers won’t be disappointed.
- Good communication. The best suppliers will allow you to submit and track orders online.
How To Find Dropshipping Suppliers
Now that you know what to look for, let’s talk about how to go about finding a good dropshipping supplier to start working with:
Step 1: Know Where To Look
It’s not always easy to find the best dropshipping supplier, and that’s because they’re not necessarily pounding the pavement looking for your business. Established manufacturers and wholesalers have established supply chains, and you can’t count on them to advertise online. So that leaves you with two options. First, once you identify a product you’d like to sell on your store, track down the manufacturer and contact the customer service or sales department. Don’t try to hide your intentions. Be upfront about who you are and how much you hope to sell via dropshipping. The more specific the plans you share, the more likely you are to capture the supplier’s interest. A manufacturer may direct you to a reliable wholesaler that can meet your anticipated sales volume. That wholesaler may not be interested in becoming your dropselling partner, but may have suggestions for where to look next. The key thing here is to be transparent.
If that route fails, there’s a second option that is less direct but can yield results. Find someone dropshipping an item you like and order it through that seller’s site. When the package arrives, look for the sender’s information on the package or packaging slip. You can contact that shipper yourself to try and set up a relationship.
Step 2: Evaluate Potential Partners
Once you’ve identified a good candidate for your dropshipping supplier, put them to the test. Place a few sample orders. Keep notes throughout the process. Are the items easy to order? Does the supplier have good communication that lets you know how the order is progressing, or are you kept in the dark? Does your order arrive on time, in good condition? Is the order exactly what you expected to receive, including quality? If something goes wrong at any stage of the trial, how easy is it to contact the supplier, and how efficiently and effectively does the supplier correct the problem?
Remember, your dropshipping supplier will be delivering products directly to your customers. That means your customers’ satisfaction ultimately lies in your suppliers’ hands. You will be the one to hear from dissatisfied customers, though, so make sure you choose your dropshipping suppliers wisely.
Step 3: Set The Right Prices To Protect Your Profits
Remember, your profit comes from the difference between how much money you can get for selling products and what you must pay your suppliers for those items. You control only one of the variables in that equation. You can set prices on your website to be whatever you want (although if they’re too high, customers aren’t likely to buy). Your dropshipping supplier probably has standard discounts that depend on sales volume; the more you purchase from them, the higher your margin.
Be aware that most suppliers will expect to be paid upfront for orders, probably via credit card. A few may invoice you. Just make sure you understand the situation before you establish a relationship so you can avoid surprises that may become dealbreakers.
Step 4: Consider Future Options
Starting with a limited number of items is the smart way to begin your dropshipping business. This lets you build your customer base, hone your advertising strategies, and cultivate your supply partnerships. That said, it costs you little in terms of time and money to simply keep future expansion options in mind from the start. The best dropshipping suppliers will offer a range of products that you might eventually be interested in offering to your customers. Nothing says you can’t work with a variety of suppliers, of course. But you can save yourself time and trouble by picking one now that offers versatility and variety.
Tips For Choosing The Right Dropshipping Supplier
Preparation and planning really are the foundation for success as a dropshipper. Don’t rush the process of finding the right suppliers, and remember that anything you hear from a potential supplier that seems too good to be true probably is. Once you’ve established a relationship with your dropshipping supplier, you must be ready to roll out a site for online sales and to start advertising to attract potential customers. Read more about dropshipping and keep learning to improve what you’re doing.
It’s never a bad idea to have a backup supplier, in case something goes wrong with your first choice. You can start your business relying on your preferred supplier, but you should also keep another supplier in your back pocket: someone you can turn to in case your primary supplier can’t come through for whatever reason. Diversifying your suppliers is a great way to diversify your offerings, too.Â You might find that your secondary supplier does a few things even better than your number one, leading you to eventually jump ship or split your business evenly between the two of them.
Once you’re up and running, you may start thinking about ways to expand your dropshipping business. You can partner with a marketplace site like AliExpress or, if your site is on Shopify, consider a service like Oberlo that lets you import a huge variety of products into your Shopify store and ship direct to customers. As long as you have built your dropshipping business on a solid foundation â by choosing good suppliers to partner with â you have many good growth options.
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