Drop Shipping: Pros and Cons
Helps businesses with limited capital
Drop shipping remains a hot topic among etailers but, even though it has many benefits, it isn’t the best option for every business.
A drop shipper is a product supplier who is willing to ship individual orders. Usually when products are purchased for resale, you have to buy them in bulk quantities, have them shipped to you and then ship them out to your customer. Drop shippers are the exception because they don’t have minimum purchase requirements and will ship the item directly to your customer when you place an order.
For a new business without much operating capital, partnering with a drop-shipping supplier can provide a multitude of products to sell without having to actually inventory those items.
“Using a drop shipping model is an excellent idea if you don’t have a lot of capital to start with,” writes Jeremy Hanks, Nichole Haims and Brandon Williams in Drop Shipping for Dummies. “Because you don’t need to carry any inventory and never make an actual order purchase until you’ve already been paid, drop shipping is a great way to break into the retail business.”
Pros and cons of using drop shipping services
SOME PROS:
- No need for your business to stock inventory, eliminating a significant cost for your business.
- Your site can be open for business very quickly.
- No need for your own warehouse or for filling your garage full of products that you might never sell.
- Many drop shippers will also sell to the etailer in “light bulk” (units of 500 or less), allowing the etailer to do his own fulfillment.
SOME CONS:
- When doing research, know there are a lot of scams and poor lists of drop shippers out there, and get one that is regarded as credible.
- Since you don’t own the inventory, you usually can’t control packaging and can’t include coupons or offers to boost return business.
- There are different fees from different companies for drop shipping, so do your research. You don’t want shipping costs to be so high that it turns away customers.
- You won’t get as good a deal on products because you’re ordering one at a time as opposed to buying in bulk.
- Selling multiple products from multiple suppliers can result in a significant drop-ship fee for the customer.
- Many suppliers that provide drop-shipping services also provide various ways to integrate their products into your website. There may be fees involved for using certain services from a supplier, so be sure to do thorough research before beginning any partnership.
Joseph Crimi, owner of Sportsmen Express, launched his online store in 2004. He said he did a significant amount of research to locate a partner that could meet his company’s needs.
“I was looking to supplement my income, and I didn’t want to carry inventory and mess with shipping the products,” Crimi said. His site is fully integrated with his supplier, Green Supply, to efficiently process orders and dynamically update his site as Green Supply adds product inventory. That helps ensure sportsmenexpress. com doesn’t create unnecessary work for Crimi.
“If everything is running smoothly, it’s a hands-off process,” he said. Crimi chose Green Supply because he said it was the only drop shipper he found in his niche that used his company's name on the package being shipped to the customer.
Finding quality drop-ship partners isn’t easy. Chris Malta, product sourcing editor at eBay Radio and author of The Drop Ship Source Directory (available at Worldwidebrands.com advises etailers to avoid the term “drop ship” at popular web-search engines. He said few legitimate drop-shipping companies would appear.
“‘Drop ship’ is a huge keyword and many companies tie themselves to it even if aren’t legitimate,” Malta said.
Malta says the best way to locate a legitimate drop-shipping company is to contact suppliers directly and ask whether they provide that service or purchase a resource like The Drop Ship Source Directory where companies have already been vetted to work with online businesses.
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13 Comments
Legacy User says:
Another alternative is to utilize a "back end" system that supports a variety of drop-ship suppliers (such as ez-order-manager.com). Once credit is established, the merchant can choose the appropriate agent for their needs.
There are other cons that are not mentioned. Drop-ship suppliers by nature are also independent businesses. Their IT infrastructure varies widely and most utilize home-grown systems/processes for communicating current inventory and availability. (i.e. most email spreadsheets to their customers or provide online 'reports' that can be searched. This can become a huge time-sink for the merchant.)
Thanks for the article. Like to see more on "back-end" processes and mechanisms. Business management does not end in the cart!
Tony Birnseth tonyb@1sit.com www.ez-order-manager.com
-- Tony Birnseth
Legacy User says:
the how to's?????
I am checking into drop shipping right now? How can a newbie tell who is the best to go with and if they are reputable? I am checking into Simplix and Doba who seem reputable....but which can you profit more with? Are others that are better?
Yikes........I hear that drop shipping is easy but it sure does not seem like any place I call is willing to give me 411.........they all ask me to sign up for a free trial.
What I really need to do is speak with those who already do drop shipping. I'd like to know if I can avoid costly mistakes if at all possible.
Di TalentExtras@aol.com
-- Diane
Legacy User says:
Diane,
Legitimate wholesalers/drop shippers do not make their money by charging you to buy from them. Real wholesalers/drop shippers do not charge set up fees, monthly access fees, etc.
I suggest you check out www.worldwidebrands.com. They have a service that you pay for once and they screen the wholesalers for you. It's worth their fees to know that you're working with true wholesalers and not some middleman who's just out to charge you fees and then sell you products at prices that you can't markup and still compete with those of us who are getting true wholesale pricing.
Bill gryphon1962m@yahoo.com
-- William Johnson
Legacy User says:
Worldwide Brands is a good source for suppliers. Doba and Simplix are not in the WWB directory because neither are real drop ship programs. They don't stock or ship any products. Like with Doba you buy products from them and they order them with the real suppliers. I used Inventory Source www.inventorysource.com. I started with the free account and found the real supplier programs...including Green Supply mentioned in the story above. I then use Inventory Source to format the data to load to Amazon, eBay, Jelly Fish and my website with the latest details from the supplier, like price, quantity, and status changes every day. I get a whole IT department supporting my drop ship business.
-- Bob
Legacy User says:
Thanks for clearing up the Doba simplix for me. I also was thinking these were good starting points but boy was I wrong. But for the truth is it easy enough to start a drop shipment business and still work my full time job. I just enjoy selling on eBay and would like to make income to vacation and play with. Is this as easy to do as I have heard?
-- Mike
Legacy User says:
I find sites like DOBA and Simplx and WWB are actually filling is as middlemen, all they have done is put in some hard work found a large number of companies who drop and they sell you the work they have done. I have put in some good hours and found wonderful sites who do not expect a sign up and give me a great deal. Would love to talk to more people who are follwing similar paths. I am going to look into green supply now!
-- Jamie Stewart
Legacy User says:
I am trying to find out if a particular company is respected or not dropshipbizz.co.uk. Is there anybody out there who has dealings with them or is it just too good to be true.
-- Paul Rhodes
Legacy User says:
I am trying to find out if a particular company is respected or not dropshipbizz.co.uk. Is there anybody out there who has dealings with them or is it just too good to be true.
-- Paul Rhodes
Legacy User says:
What about meggagoods.com. I'm considering them as a dropshipper for our electronics website. I agree, finding a true dropshipper is a night mare. I could sure use some input.
-- Skipper
Legacy User says:
Hello Everybody,
I am compiling a catalog of 'green' earth friendly products and am in search of a reputable supplier. Can anyone point me in the right direction for finding what I am searching for? I know it's got to be out there! Many thanks, ~Misha Stewart mishajstewart@gmail.com
-- Misha
Legacy User says:
Misha just wanted to know if you had any luck? I;ve been searching for a supplier (eco-friendly) that will be willing to drop ship>>>man its been a nightmare. If anyone out there know of any please help. Thanks inadvance.
CraigVBCampbell@yahoo.com
-- CraigVBCampbell@yahoo.com
Legacy User says:
Glad to hear that I am not alone. I took the bait to start an online business with the concept of dropshipping, but when I found my niche, eco-friendly dog products, I found that all the suppliers that had quality products were not interested in drop shipping. As a matter of fact, I just took a product off my site because I will go broke shipping it myself after paying shipping to get it to me. I am very discouraged at this point and wonder if I made a huge mistake. Without drop shipping, I am no longer looking at a feesible business but a money pit. I am paying merchant fees, hosting fees, gateway fees, oh and that LLC annual fee. I wish all of you luck finding the drop shipping solution that will make you successful. Any wisdom would we appreciated. If you think I should get out, I would be willing to hear that, too. All the best!
-- Jean
Legacy User says:
Hi Joan: It sounds like you are in the same program I am in, and I am slowly going broke. If you figure out how to do this program while making some money, I would love to hear more!
I too, would appreciate any tidbits of wisdom that anyone can offer...
-- Mary
