Essay Sample on Drop Shipping

Published: 2021-07-16 17:53:28
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Drop shipping refers to a retail method in which a store doesnt keep the products they are selling in their stock. In this approach, the store purchases the product from a wholesale supplier and plans for it to be delivered directly to the customer. In drop shipping, the retailer doesnt come into contact with the product.

Drop shipping can also be used to refer to the service offered when a wholesaler offers to ship their goods directly to your customer on your behalf. Retailers can also provide the drop shipping service since but the prices will not be as fairer as the wholesalers. To get the best prices in drop shipping, you have to work with the wholesaler or manufacturer (Youderian, n.d.).

Benefits

It requires less capital to operate this retail method. In drop shipping, it is possible to start an online store without having any inventory, unlike the traditional models where you had to have a lot of capital to hold inventory. Drop shipping enables a retailer only to purchase a product when they have already made a sale. The retailer purchases the product when the customer has already paid them. It means that the retailer can sell as many products as they want because they dont have to hold any stock. The capital investment when venturing into this model is very little because no inventory is required.

Starting an e-commerce business is straightforward. It is because you will not have to worry about: getting and paying for a warehouse, keep track of inventory, packing, and shipping of the orders and handling of returns. It is also effortless to grow in drop shipping. It is because even if the number of orders you are getting increase the supplier will handle the extra work of fulfillment for you. Therefore only a small bit of work increases on the side of the retailer.

Drop shipping is very flexible concerning location. It is because you can run it from anywhere provided you have an internet connection. You only need to be in contact with the suppliers and your customers. This flexibility means that you can easily operate the business from your house. In this case, the overheads of running an e-commerce business are very low. An individual only needs a computer and an internet connection.

Disadvantages

Drop shipping has minimal profit margins. It is easy to start a drop shipping business, so numerous merchants will sell a product at low prices to attract customers. The initial capital investment is very little so that the retailers can survive on minimal profit. The idea that the retailer does not hold inventory also brings up a big challenge. It becomes hard to keep track of the products which are either in stock or out of stock. Inventory at the suppliers warehouse changes regularly, and there are no real time updates to the retailer.

Sourcing from multiple suppliers also comes with some challenges. If a customer orders several products and all of them come from different suppliers, this will increase the shipping costs. This increase in prices will most likely be incurred by the retailer because customers will think you are overcharging them if you pass on this extra cost to them. The suppliers can also make mistakes when fulfilling the orders. The retailer has to accept responsibility and apologize to the customers to protect their business reputation.

The ordering process in drop shipping

The first step is in this process is the customer placing an order on the retail e-commerce website. If the order is approved, the client will get an email confirmation that the order has been received. The e-commerce software automatically generates the email. The customer's payment is captured as they finish the checkout process on the website and it is deposited into the retailers bank account.

The second step will be the retailer placing an order with their supplier. The retailer will do this by sending an email to the sales representative of the supplier. The supplier has the retailer's payment details, and therefore they will bill the retailer's credit card the cost of the goods, shipping costs and any other processing fees incurred.

The third step is the supplier shipping the order. If the item is in stock and the supplier has been able to charge the retailer, they can then pack the order and ship it to the customer. Even though the supplier is the one who ships the item, it will have the retailer address on the return label. The invoice and the packing slip will also bear the logo of the retailer. The supplier will then email the retailer the invoice and tracking number of the package. It is possible to have the goods shipped in hours, so most of the retailers will have same day shipping on their e-commerce website.

The final step in the ordering process will be the retailer notifying the customer of the shipment. The retailer will send the tracking details to the client. When the order is shipped, the payments have been made, and the customer is informed, then the order has been fulfilled. If the wrong product is delivered, then the retailer will organize to have the parcel delivered back to the supplier and the right product sent back. The retailer's profit margin is the difference between what the customer pays and what they pay the supplier (Clayfield, n.d.).

How to identify fake drop shipping wholesalers

It is essential for you to be able to distinguish between a genuine wholesaler/supplier and a retailer pretending to be a wholesaler. It is even easier to find a fake wholesaler than to find a genuine one. It is because the genuine suppliers are very poor at marketing as compared to the new and fraudulent suppliers. The following tips will help you identify a fake supplier.

A fake wholesaler will charge a monthly fee. A genuine wholesaler will not think of charging their customers a monthly fee because it is a privilege that a client chooses to do business with them. When you find a supplier who asks for a service fee, then the chances are very high that they might not be genuine. You need to understand the difference between suppliers and supplier directories. A supplier directory is a list of vendors classified into their product types, and they are investigated to find out if they are genuine. Most of the directories charge either a one-time fee or an ongoing fee, and this should not make you think that they are not genuine (Addison, 2017).

A fake wholesaler sells to the general public. For a genuine wholesaler, you have to get a wholesale account to get the wholesalers prices. This measure is used to check whether your business is legitimate and approve it before you can begin placing orders. Therefore any supplier you find offering products to the general public at wholesale prices is not a genuine supplier.

For genuine wholesalers, there is a drop shipping fee you might be charged. The first one is per order fees which are charged depending on the complexity and size of the products being shipped. It is considered as a standard practice in the industry, and the cost ranges between $2 and $5. Some wholesalers also have a minimum order quantity for the first order. It is done to keep away window-shoppers who will waste the suppliers time but will not end up buying. For example, a vendor could have a minimum order quantity of $450, and your first customer might place an order of goods worth $200. In this case, the best option will be for you to offer to prepay the $450 upfront and have credit with the supplier that will be used for your future orders. You will be committing to buy goods worth at least $450 so that you can meet the minimum order quantity.

Finding the right Wholesale suppliers

We have covered the ways of identifying a fake wholesaler, and now it's time to find a genuine one. They can be found through some ways, and we will go through the major ones. The first one is contacting the manufacturer. When you settle on what you want to sell, then you can call the manufacturer and request to be provided with a list of their wholesalers. You can then contact the wholesalers and try to find out if they drop ship and what they require to set up an account with them. It also allows you for sourcing many other items in the same niche. These also give you a chance of getting to know the best wholesalers in that market.

The second strategy is to search for the wholesalers on google. When searching on google, you have to search extensively because wholesalers are poor in marketing and promotion, so they are not going to be among the top search results. It means that you will have to scroll through a lot of page results before you find a wholesalers website. You also should not judge a wholesaler by the appearance of their website. A good site is an indication of a good supplier, but a lot of wholesalers have a very average looking website, and this shouldn't scare you off. You might need to use a lot of modifiers in your search for wholesalers since they dont do a lot of SEO. Some of the quantifiers that can be used are bulk, reseller, distributor, supplier, and warehouse.

The third method of finding a good supplier is ordering from your competitors. You will search for a competitor who you think is undertaking drop shipping, and then you place a small order with them. After you get your package, you can then google the return address to find out where the good was shipped from. You can then contact the supplier to find out their business terms.

The fourth way you can use to get wholesalers is by use of supplier directories. A supplier is a list of screened wholesalers who are classified by their niche, market or product. Most of this directories charge some amount of fee to be able to access the list. Supplier directories provide a quick and convenient way of finding a significant number of vendors and might also help you to decide on which niche you should enter or the products you can sell. However, the supplier directories are not that necessary if you already know the product or niche you want to operate in because with the use of the previous methods you will be able to find the appropriate wholesaler.

There are many supplier directories, and I will provide a list of a few well renown supplier directories that are found online. Worldwide brands supplier directory comes first, and they charge $299 for a lifetime membership. Worldwide brands provide a list of over a thousand wholesalers and over 10 million products. We also have the Salehoo supplier directory which lists over 8,000 wholesalers and drops shipping suppliers. Salehoo charges an annual fee of $67 and is very resourceful for those retailers who plan on using eBay and Amazon. Doba is another supplier directory available, and they provide an exclusive list of suppliers who offer drop shipping. Doba allows the users to place orders on multiple because of its centralized system and they charge users a fee $ 60 per month. We also have another called wholesale central which is free to the users, but it charges the suppliers to be listed. The directory has 1400 vendors and over 74000 products (Carter, 2007).

What you need to do before contacting Suppliers

Before you engage in any business with the wholesalers, you have to make sure that your business is legal. Most of the genuine wholesalers will not allow you to set up an account with them if the business is not legal. When you are asking the basic questions like, Do you drop ship, you dont need any documentation. However, when you want to view the wholesale prices, you will need to create an account first.

You dont need to keep on pestering the wholesaler with a lot of questions. Suppliers hate it when you keep on bombarding them with a lot of questions and take up a lot of their time and dont order anything. They will be delighted to help you set a drop shipping account but dont pester them for discount pricing. If you...

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