Posts Tagged ‘dropshipping’

What is Drop Shipping?

March 7th, 2011
Drop Shipping Photo

Storing Merchandise

What is drop shipping? Can it be leveraged into a successful business?

As a senior at BYU-Idaho, I first heard about drop shipping when a successful online business owner came to speak to us. She got her start selling homemade baby blankets on eBay and then over time expanded her inventory by adding furniture. When she branched out into furniture she was nervous that she didn’t have the space to store the cribs and chairs.  With a little negotiation her supplier agreed to be a drop shipper solely for her. When someone drop ships it means that the supplier or manufacturer ships the product directly to the customer.

This drop ship deal was due to the good relationship she had built with her supplier. (since the supplier didn’t drop ship with everyone) The  drop shipper saw that she worked hard and thus was willing to put in a little extra work by agreeing to drop ship. Really it was a good relationship that made the deal possible.

Most businesses will tell you that a good business is centered around a good product. But, because suppliers largely control if you sell a product or not, it is so important to develop a good relationships with them. The truth is that for most manufacturers, drop shipping only a few items can be a hassle. Most manufacturers would prefer to sell to organizations that buy a product in bulk. But many will know drop ship thanks to relationship built with a good directory or seller.

Suppliers also control when a product gets to your customers. This alone is reason enough to stay on good terms.  After all,  quick shipping generally translates into customer feedback. And any eBay seller will tell you the value of good feedback on eBay.

But besides saving you the hassle of shipping a product to a customer, it can also help you put profits back into your pocket more quickly. You see once the customer pays, you have your entire profit right up front. You don’t have to worry about the fees associated with shipping and handling.

While it’s true you can work with drop shippers without a directory, it can be extremely difficult to connect yourself to a legitimate drop ship distributor on your own. There are a lot of scams  out there but drop ship directories take the guess work out of finding trusted suppliers. They form relationships with these suppliers so that you’ll be connected to a friendly, dependable drop ship supplier. The supplier of the woman I told you about was a trusted supplier that helped the woman expand her business from a small eBay account, to an online store, and then into a successful brick and mortar store. While  this woman knows her hard work got her the trust of the supplier, she acknowledges that her dream business could never have boomed without an honest supplier that produces quality products and ships quickly to her customers.

Do you want more tips on how to jump start your online business?

Please follow us on twitter @gogodropship or read more of our blog articles.

 

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I Fought the Law (But the Law Won)

January 13th, 2010

A lot of new business owners are sometimes confused by the necessity of setting up a proper business entity, or going through the effort of getting a Federal EIN number, or state tax identification number. Many think that this is an unnecessary step, especially considering the time involved to get this information. To understand the importance of this documentation, one must understand the way that dropshipping and product sourcing work.

When we wish to begin our business, the common assumption is that we go straight to the manufacturer and move forward directly from there. If we’re going to be the next Footlocker, we should go right to Nike, let them know we want some shoes, and then we’re good to go, right?

Wrong. A manufacturer typically does not want to have anything to do with any company that is not capable of purchasing from them in massive quantities. The reason for this is they are selling the product at a mark up over manufacturing cost, which is typically very far beneath its eventual retail cost. To make it worth their effort, they need to sell in large quantities… sometimes numbering in the hundreds of thousands of units at once! Most up and coming stores, be it brick and mortar or online, simply cannot do that. What are they to do?

The solution that was reached is that another company will come forward and purchase the inventory from the manufacturer, and resell it to us in smaller quantities. This company, the distributor, typically has capital, but is not interested in marketing or advertising. They are more than happy to resell the item in a smaller quantity, allowing us a foothold in the industry. It is through these distributors that the concept of dropshipping came into being.

However, how does this all relate to our initial question of the necessity of these identification numbers? The answer is simple; there is a barrier of entry necessary for these distributors to ensure that they are dealing with actual members of the trade. Most manufacturers do not want their product hitting the market at just above-cost. They don’t want individuals purchasing their items at next to nothing, as many manufacturers have lucrative arrangements with departments stores and the like to sell their product. If everyone was going to be able to sell for a fraction of the store cost online, why would anyone ever go to the store?

This is a very bad scenario for the manufacturer, regardless of how nice it might be for us as consumers, and to combat this many manufacturers require any distributor that they work with to verify that anyone whom they resell their product to is a licensed member of the trade… hence the necessity for us as prospective resellers to have this documentation.

With this hard restriction on most suppliers, it is very important that we do go through the tasks of establishing our identification numbers, federal or state, so that when we do get to the point where we have a supplier we want to work with, we’re not stuck in a rut, entirely unable to move forward because our supplier is requiring legal documentation that we just don’t have. We may try to fight this step, but in the end, if we want to move forward with our business, we’re going to have to get legal, or get out.

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Scratching the Dropshipping Niche Itch

January 4th, 2010

As you begin your business, one of the hardest questions that will come up is “What do I try to sell?” We’ve talked previously on what not to sell, but the harder question still often lies in what exactly you should try and sell. Unlike the majority of the steps towards building a web-based business, this is not a simple linear progression of steps; deciding on a niche for dropshipping can sometimes be described more like an art than a science!

However, that doesn’t mean that we cannot approach it with a somewhat scientific mindset. There are a few things that we can add into a mental checklist to assist us in determining at a glance whether or not it will be worth pursuing a niche idea; I like to call it The Who and The Why of dropshipping niche research.

The Who

First things first, we have to think of who, logically, is going to want to purchase this item. For instance, we might think that that electric singing dinosaur lamp is a great buy, but are there going to logically be a lot of people who will agree? We want to think of potential customer base, and we have to think of if they are really going to be active online. For instance, the extreme, fashion-oriented people out there won’t be caught dead buying things online; for that reason, is it really logical to try and source high end fashion as an Internet site? Thinking of who is going to buy from us will greatly help in weeding out potentially bothersome dropshipping niches right from the get go.

The Why

When we are pretty sure of the customers having a real chance of buying from us, we have to determine what it is that will make them buy a product online, rather than in a store. Heck, we want to know why they’d buy the item in the first place! This brings us again into the very practical side of our dropshipping niche research; what void are we filling? Why would someone be buying our product? Is the product we want to sell something that is a popular gift item? Flatware is a popular wedding item, but also something that people may want for themselves, too. It’s something that they can constantly use, there’s almost always an application for the product. It’s not flashy like a gadget, or trendy like a toy, but it’s something that one can reliably expect to be used, abused, and needed. Item ideas like this really help in narrowing down our dropshipping niche, especially in these times of cutting back. There are near-essentials that almost any customer is interested in, and more often than not they’re an untapped market, as many people prefer to “go big, or go home”, and foolishly discount the lower, but consistent, sale items.

Even with these ideas in mind, sometimes the best way to get things done is just by diving into a dropship supplier and making a checklist. It is not a silly notion to simply take inventory of a supplier’s inventory, and look at the products that you like, and seeing what the demand is. Niche research is not an exact science, and sometimes blind luck has just as much success as deliberate research. The key is not to get discouraged if it takes some time; everything after finding a dropshipping niche is a methodical application and progression of steps. It’s only when we’re starting that we’re having to guess and hope on a wing and a prayer!

For more information about dropshipping, please visit www.gogodropship.com.

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GoGo Dropship | Holly Jolly Holiday Happenings

December 21st, 2009

The holiday season. The holy grails of the retail experience, Black Friday and Christmas… Its a great time to be in the business, but it doesn’t come without its problems. If we’re just getting started, trying to get in on the Holiday rush is going to come with its fair share of frustration. Suppliers are quite busy, and your application, through no fault of your own, may just plain fall through the cracks while they’re rushing to try and keep their heads above water with all the inbound orders. And even if we are already set up with our supplier, that does not mean we’re home free. Things get busy, and even the best supplier can drop the ball, and put us in a bad position if we’re not ready for it.

Christmas and Black Friday are the poster children of this phenomenon, but they are not the only holiday offenders out there. Even ignoring the big ones, like Halloween, or Easter, we’ll still need to become very aware of what times are of significance to our specific demographic. If we’re selling paintball guns, is there a paintball super event that we need to be aware of? Is there a season when demand for our products is going to be off the charts? These may seem like very simple questions to ask, but many forget about them until it’s too late.

The significance to these questions is because they will have a very real and very potent effect on our suppliers’ ability to meet our orders. If we know that there is going to be a massive movement in our industry during a certain time of year, we want to plan ahead well in advance. Let our customers know there may be delays in processing their orders, make sure our suppliers’ inventory levels are high. The last thing we want to do is have a major event roll in, and have us caught entirely unawares.

Holidays or special events are always an excuse for a buyer to be a little spend-happy, and that’s a great force for us to work with to our advantage. However, we need to keep on top of our suppliers, and make sure they have the inventory and the ability to keep pace with the demand, because in the holiday frenzy, if anything goes wrong, its going to become a giant headache for everyone involved, but by keeping the lines of communication open, and the remaining inventory watched diligently, we can avoid a lot of the normal holiday frustration, and make it a happy one instead!

For more information, please visit GoGo Dropship.

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The China Solution

December 16th, 2009

In our first post, we had postulated upon the problems of sourcing from China. Now, let’s talk about some of the solutions that we have to protect ourselves. The biggest thing we want to keep in mind is that the easiest way to avoid problems with Chinese suppliers is to avoid using them at all. It is very rare that a single product is going to make us or break us, so avoiding the issue entirely is by and far the safest thing to do to avoid and problems down the road.

However, if we are set on using that supplier and trying to secure that product, there are a few things that we can do to try and protect ourselves. The first main contender we have with effectively working with a Chinese supplier is getting past the logistic issue of shipping. There is the very real problem that we have to get a product halfway around the world. Our customers are going to be very impatient, and many will balk at having to pay more to wait longer. Our best recourse is to try and communicate with the supplier as to what their average shipping time and shipping costs are. They will typically be upfront about it, and it will serve a dual purpose in allowing us to see whether or not we can even speak with the supplier easily or not.

The second resource we can utilize in the great “authenticity wars” is a website called http://whatsitworthtoyou.com. This website is intended to allow us to research products and find out whether or not they are going to be legitimate or not. This is not a free resource, but for a price they will be able to help determine the authenticity of a product, which will allow you to know whether or not you can confidently and ethically sell the item on your site. Without handling the item itself, they cannot definitively and empirically make a statement on its authenticity, but we can very quickly and efficiently determine using this service if our source is legitimate. However, with a form from this site to verify that the site or product is, indeed, something that is not entirely questionable, it will allow us to list on eBay and our own site with much more confidence. It is not a bullet-proof vest to protect from any problem at all, but it is a great way to list without fear that your item is a clear counterfeit.

Our biggest concerns with Chinese suppliers will always be present; we can never be 100% sure that an item is not a counterfeit, that the shipping cost and time will not grow unreasonable, or that we’ll even be able to reach the supplier if there is a problem, but if we are very careful, it is not an impossible hope to be able to utilize Chinese suppliers. However, to quote an old food adage, “When in doubt, throw it out”: if we have good reason to think that our supplier is not legit, we are almost always going to be safer abandoning the product idea, and moving somewhere else.

To learn more about dropshipping and how it works, please visit GoGo Dropship.

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The China Problem

December 14th, 2009

As we’ve worked within the wholesale and dropship sector, no doubt we’ve come across a lot of suppliers hailing from the far east… China, in particular. They offer us a glimmer of hope that the iPhone is not an unattainable dream, and maybe we can get those great Prada bags. However, as with all beautiful dreams, they do not typically stack up well when compared to the starkness of reality. When you find something that seems too good to be true, that is typically because it is.

When sourcing from Chinese suppliers, there are a few things that we need to be aware of. First and foremost, the copyright laws that we’re accustomed to in the United States do not apply to Chinese suppliers. They can market an in-house product as a name brand if they so desire, and there is nothing by their laws that has them at fault. This is what is called the “Grey Market”. It is not necessarily illegal in China, for instance, to market a non-name brand as a name brand, or to replicate an item exactly. However, we are still bound by the laws of our land, so if we’re unknowingly marketing the Chinese iPad as an iPod, it is we who will be in trouble for it. We will be flooded with returns almost immediately from our dropship website, but if we’re trying to source these counterfeit items on eBay, then we’re going to quickly find our accounts banned for it.

A second issue we run into is that the product that we’re purchasing may be coming from black market sources. Black market sales are strictly speaking illegal, and as such it will exist as an ephemeral thing. Since we are not receiving from our supplier a consistent source, when their stock is gone, it is gone, and even if we’ve placed the order, we have no assurance we’ll ever receive the order, or see the money again once its been sent.

Now, taking a huge leap of faith, if we find that the items we are receiving from our Chinese-based supplier are the real deal, we now have the logistic problem of getting it halfway across the world in a reasonable amount of time… and while still being able to maintain a profit. In recent years, tracking technology has made leaps and bounds when it comes to international orders, and we’re going to need to take full advantage of that. We will want to know where our item is exactly… because its going to be spending a fair span of time getting from the supplier to the customer. The shipping cost to allow for a more reasonable amount of time will typically be much higher than a buyer is willing to pay, and the increased cost of having to go overseas is going to eat into our profit.

The biggest thing to remember when sourcing from Chinese suppliers is that these problems lie directly on our shoulders; any instances that come up are our responsibility. eBay does not accept “I thought it was legitimate” as an acceptable excuse if we try and source counterfeit products from a Chinese supplier, and our buyers on our website also tend to be less than forgiving when their $300 iPad arrives at their door. It is our responsibility to ensure that our supplier is legitimate, but how will we do this?

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Living on the Web

December 3rd, 2009

After we’ve gone through the rigors of setting up our dropship website, checked all the bells and whistles, and determined everything is good to go, our journey is still not quite over yet.

One of the most important things that we have to realize about life on the internet is that if you don’t diligently keep track of things, you’ll never be able to know how well you’re truly doing, and what you can do to improve your dropship website.

On a typical day, we are going to get people coming to our site.  Maybe we put out ads, and they responded and came thusly. 
Perhaps they just looked up a keyword in Google, and lo and behold our little dropship site appeared.  Many people think that so long as people are coming to our site, it doesn’t quite matter where; that would be wrong!

It is very important for us to know where our traffic is coming from, as well as what they are doing when they get here.  Are the ones come from ads staying to shop, or do they just arrive and leave in a matter of moments?  On the contrary, do the ones who arrive from the search engines typically stay longer, and go forward with purchases?  This is extremely important information, because it should be our goal to make our dropship site as efficient as possible, and we cannot do that if we do not know what our visitors are actually doing!

One of the most powerful tools to utilize in this regard is called Google Analytics.  It is a program designed to track all of that information; where are our visitors coming from?  How long are they staying?  Are they leaving and then coming back?  What pages do they go to before leaving?

All of this information is worth its weight in gold!  If, for instance, everyone is leaving when they get to our product pages, perhaps our dropship site is a bit on the expensive side.  It would be worth it, then to see if we can change things up a little bit to become more competitive.  Are they making it to the homepage, and then leaving?  Perhaps we can put more enticing offers for the visitor to stay and look around, be it with a sale, or changing the images that we have.

As you can imagine, there are tons of little instances just like those that we need to be aware of, because as the old adage says, “He who is resistant to change is destined to perish,” and never has this been more true than with our dropship site!

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Ho Ho Wholesale

December 2nd, 2009

One of the most common misconceptions when someone begins working in the dropship or wholesale arena is that there is only one wholesale price, and that is what they are receiving.  This in turn leads to a lot of frustration when one sees other people selling their same product for far less.  If they’re receiving the wholesale price, how is it that anyone can get something cheaper?

The reason for this is that the wholesale price is generally based off of the amount of product you are willing to purchase at one time.  At the dropship level, for instance, you are receiving a wholesale price, but your price point is going to be lower, because you are ordering a single item at a time.  If one of your competitors approaches the supplier, and asks if they can get a better price if they purchase ten items at once, for instance, most suppliers are willing to do so.

The strength of having a dropship site is that we are not having to carry any inventory, or do any of the shipping ourselves, but that of course comes with downsides.  Our profit margins can be solid, but if we are trying to compete price per price against a competitor, it is he who orders the most at once who will be able to negotiate the lower price.  Purchasing at wholesale is the natural evolution of our business, which is why it is important to realize that there is not any singular wholesale price, but it is instead a fluid concept, that we can use to our advantage as our business grows!
 

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Stepping Stones to Bridge the Dropshipping Gap

September 4th, 2009

In dropshipping, as in life, there are stepping stones that must be placed along the way. Without the stepping stones, there will be little to no success in in dropshipping; it is not easy to build the bridge of stepping stones that will bridge the gap between failure and success in dropshipping.

Finding a product niche to drop ship can be the most difficult stone to place but it must be firmly placed before proceeding on in the dropshipping industry. Keywords revolving around your product niche should also be found. I would suggest using the Google AdWords Keyword Tool. The best keywords will have over one thousand searches per month and under five million search engine results.

Now it’s time to find a supplier for your niche product. If you need help doing this, you may contact GoGo Dropship who has a Product Research Team designed to find a supplier for you. Please visit GoGoDropship.com for more information.

Once you have a product niche, create a company name and a website revolving around your product and target market. You want your website to include images that your target can relate to. Your website should follow basic design principles and have some kind of call for action.

You should also have a dropshipping strategy which may revolve around the following questions. At what point will I expand my product niche? What complimentary products do I intend to sell with my niche product, etc

Just remember to get each stepping stone firmly in place and don’t get too ahead of yourself. Take it easy and don’t skip any steps and you’ll be able to bridge the gap.

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