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Drop Shipping – Is It Right For You?

As small business retailers and wholesalers, you know just how valuable every dollar is to your business. Because of this, as well as our struggling economy, I encourage you to consider dropshipping if you have not already.

Dropshipping can be defined and understood in a variety of ways depending on who you are talking to. But for boutique store owners and small business wholesalers, dropshipping generally refers to when orders are shipped only once placed by a customer at a retail store and can be sent as single unit or more depending on the customer’s order. For example – if you are a children’s store owner and sell crib mattresses, you would only order a mattress from your wholesaler once a customer has ordered one from you. The customer would be informed about the delivery time schedule and typically would pay upfront or at least 50% when the order is placed. This gives you, as the retailer, the opportunity to then place the order with funds to cover your purchase while also giving the wholesaler the opportunity to make a new sale.

As a wholesaler, we understand that you may prefer to write larger orders at once, such as selling six mattresses instead of one at a time, but to consider dropshipping may add benefits to your business that you would not have otherwise.

Advantages For Wholesalers Who Dropship

Dropshipping introduces a whole new business to wholesalers once they establish it and get it in place. A few advantages include:

1. New retailers are more likely agree to your dropshipping terms and then sell your prodcut as a result of dropshipping. Particuarly in this economy, retailers are cutting back on larger orders and looking for products that bring value to their store but that they can also afford. This allows for you to get in to retailers you may not otherwise.

2. Higher priced and larger scaled items are great products to consider for dropshipping. Retailers have to consider not only in dollars, but their space. When you give them a reason to bring your product  into their assortment without an initial, big investment, it’s a win-win (assuming your product sells, of course). In addition, if you offer a larger product, such as a headboard, it allows your retailers to still carry you without holding onto large inventory in their often small spaces.

3. You can typically charge more for shipping and other expenses with dropship items. Because you aren’t processing a larger order at once, need to mail each individual item seperately and have to deal with all the other logistics of an order for one single purchase, your processing and shipping fee can be a bit higher. Don’t be too extreme here, though. Cover your actual costs and maybe cushion yourself a little for your extra time.

4. Retailers may buy your product in larger quanities over time if they see the value it brings to their store. Start with dropshipping and give them an incentive if they purchase more than one product at once. 10% of second item, 15% off all others. Or possibly six or more items include free shipping. Your call. Or just dropship and call it a day. Whatever makes you happy. But as a general rule, dropshipping costs more on average than if bought in larger orders. AKA – you make more!

5. Customized items are great for dropshipping since you can only get one at once. This just makes sense – period.

Setting Up Your Dropship Terms

Make sure that when you set up a dropshipping program with your business, you have very clear, detailed terms written out that any retailer you sell to understands and signs an agreement to. Terms should include the following:

1. Retailer pays for their own in store sample unless you feel otherwise. This is a fair scenario since they will likely use or sell their store sample at one point anyway. If you have marketing collateral to support your product, you should provide this without any charge. For example, if you offer customized products, include a little Look Book with choices for customers to review.

2. Retailer provides credit card number for all orders to be processed through upon placement. This should be in your files and approved for credit prior to retail agreement.

3. Retailer pays for shipping per order unless determined otherwise. Typically, the retailer will bill this to their customer anyway. Another idea is to have the product shipped directly to the customer.

4. Deilvery timeline is discussed and understood prior to retail agreement being signed. This gives you security in delivering your products according to your production timeline. Be realistic here – 6 weeks is a long time for most items, but practical for some. Determine what is best for you.

5. Make sure all these details are written out in an agreement that is signed by your retailer. Give them a copy with your contact information and necessary order form details as well as retain a copy for yourself. Note – having an organized ordering system in place with your agreement will make the entire transaction easier to manage. Include details on tax, shipping, cancelled orders, returned products, right to modify agreement and more.

A List Of Some Dropship Wholesalers

Retailers, this is for you! Below are some wholesalers who offer dropshipping. Wholesalers who still aren’t on board yet with the idea? Check out your competition (in no particular order)!

Victoria P. Zurcher Designs – Stationery and Gifts – www.victoriapzurcher.com

Just Be Products – T-Shirts and More – www.jb-justbe.com

Artist Jeff Cane – Angel Artifacts in Prints, Candles, Charger Plates and More – www.AnEnglighManInLA.com

Coco Company – High End Baskets and Decorative Accessories – www.coco-company.com

Vintage Body Spa – Bath and Body Products – www.vintagebodyspa.com

PurBliss Candles – Soy Candles and Wedding Favors – www.Purbliss.com

Kt Steppers – Customized Step Stools – www.ktsteppers.com

Vogue Fabrics – Fabric Home, Crafts and More – www.VogueFabricsStore.com

Yeni Bath Arpons – Bath Aprons For Babies And Dogs – www.yenithing.com

Barcelona Bath and Body – Bath and Body Products – www.barcelonabathandbody.com

Three Peas – Children’s Fashion Apparel and Accessories – www.threepeasco.com

BowWowzerZ – Dog Collars, Leashes, Cat Accessories and More – http://www.etsy.com/shop.php?user_id=5297476


Comments

  • Robin
    April 20, 2009

    Thank you for providing the list of drop shippers. I can’t wait to look at all of the available merchandise. Our shoppe works with a lot of vendors that drop ship. It is a great way to conduct business. It allows for a greater assortment of merchandise without a huge overhead and without having to store all of the goods.
    Robin
    Grandma’s Shoppe
    http://www.grandmasshoppe.com

  • Ted Hurlbut
    April 20, 2009

    There isn’t a small retailer alive who wouldn’t love to find a way to do business without having to carry any inventory.

    It’s an important point to consider in these difficult economic times. Retailers of all shapes and sizes have had to re-adjust their inventories to reflect new sales levels and build their cash balances. For many it has been a challenge to balance between reducing inventories and maintaining assortments.

    One of the ways that a small retailer can find an acceptable balance is to review what items might be able to be supported through special orders rather than standing stock. When I review assortments with new clients I almost always find a group of items or programs that could effectively be converted to special order.

  • Katie Danziger
    April 20, 2009

    Dropping shipping is an excellent way for retailers to “get to know” you, without a huge, if any, commitment. There is virtually no downside for them, and while it is more work for the wholesaler, I believe it will reap rewards over time.

    If anyone is interested in selling the nomie baby car seat covers in their stores, I am happy to discuss dropship options.

    best,
    katie

  • marianne
    April 21, 2009

    We use a number of drop shippers in our store and as a retailer I just recommend making sure the pricing, communication, and procedures are all in line with your store. We have had a number of bad experiences with drop shippers that have negatively affected our relationship with customers.

    Overall though, we have many successful partnerships with wonderful manufacturers we’ve developed over the years.

  • Terry
    April 21, 2009

    As an artist and jewelry designer, I welcome all channels of distribution. If it’s win/win, it’s win/win — even when you think outside of the box.

    I welcome dropship requests!

  • Terry
    April 21, 2009

    Visit my shops at:

    http://www.rawleathergallery.etsy.com
    http://www.terrymulligan.etsy.com

    My unique and hand-made items can be worked through drop ship arrangements that can make both the buyer and seller happy … 🙂

  • shoppersdream
    April 21, 2009

    Good comments. Great article. Thanks for the info

  • Lisa Komer
    May 4, 2009

    Great info! I offer drop shipping on my custom products, as well as sell products from other mom owned businesses by drop shipping. It has worked out great and allows me to support more small businesses instead of choosing just a few to carry.

  • Shannon Harrill
    July 20, 2009

    I’ve been thinking of offering dropshipping to other websites. I handmake baby accessories babyharrill.com and get asked all the time. Wondering how does the shipping work? I plan on starting in August.

  • Sally Waters
    July 23, 2009

    Thanks for the great information! I have used this method with other retailers and I appreciate the in depth process breakdown.

    I am interested in dropshipping my orgainic skin care line Birdy Botanicals.

  • chicadecanela
    July 28, 2009

    I will definetely dropship. And i have no minimum order! I want to make it as easier as possible to the retailer to order from me and establish a relationship based on trust. I do custom orders for my stockists too. Having my own workshop allows for a lot of flexibility and shorter delivery times.

  • Jennifer
    March 2, 2010

    If you’re a manufacturer/wholesaler that doesn’t make your own product and have minimums to have a product made how does drop shipping differ from consigment other than the product isn’t carried by the retailer? I’m open to drop shipping however when I place an order with sewing contractors there are minimums not to mention the production time of at least 4-weeks and I don’t want to place and order for goods not sold.

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