Practical Ecommerce

Drop Shipping: Pros and Cons

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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  1. Legacy User February 21, 2007 Reply

    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
    http://www.ez-order-manager.com

    — *Tony Birnseth*

  2. Legacy User June 9, 2007 Reply

    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*

  3. Legacy User July 12, 2007 Reply

    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 http://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*

  4. Legacy User December 6, 2007 Reply

    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 http://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*

  5. Legacy User February 29, 2008 Reply

    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*

  6. Legacy User March 4, 2008 Reply

    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*

  7. Legacy User March 22, 2008 Reply

    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*

  8. Legacy User March 22, 2008 Reply

    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*

  9. Legacy User April 22, 2008 Reply

    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*

  10. Legacy User June 10, 2008 Reply

    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*

  11. Legacy User June 16, 2008 Reply

    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*

  12. Legacy User July 3, 2008 Reply

    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*

  13. Legacy User July 4, 2008 Reply

    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*

  14. biophase December 2, 2008 Reply

    Hi Jean and Mary, If you are reading this I’d like to talk to you about your dropshipping problems. I run a few successful dropship only stores and can maybe help. I’m also interested in finding out why your fees are so high?

  15. lufkincy January 11, 2009 Reply

    I need to find some additional items to sell and am starting to look at drop ship suppliers. I presently sell hero autographs and descriptive displays out of anything I find interesting – fossils, minerals, excavated Civil War relics, etc. I do not really care what type of items I add – baby clothes to electronics, but I have no idea how to find hot items that hundreds of others are already selling. Can anyone point me to any tutorial information on these subjects? Thanks, Cy – http://www.hotlinecy.com

  16. disappointed October 16, 2009 Reply

    Before jumping onto the Green Supply gravy train, I’d suggest you do some Google searches for items in the dealerease catalog. Search the exact titles and you’ll find there are DOZENS of websites selling at Green Supply’s dealer cost.

    Green Supply advertises $1.50 per order drop ship fee. What they don’t tell you is they also charge $1.80 "self insured" insurance rate on all UPS shipments under $100. So even though UPS doesn’t charge any extra for insurance under $100, Green Supply charges $1.80 extra calling it self insurance fee. Your realized dropshipper fee is $3.30 per order for UPS shipped orders.

    If you do enough research you’ll find out the majority of these dealerease storefronts have fallen back into the hands of Green Supply who’s secondary business is building websites and charging dealers $200 setup plus $100 a month for 6 months for rent and then $65 a month after that. After the dealer defaults, GS leaves these sites up to generate business for themselves.

    Do your homework before investing in this dropshipper. You’ll be competing directly with them for retail sales and if you can squeeze out 5% profit you’ll be darn lucky and that will happen only if you build your own site and don’t have to pay them month rental fees.

    There are a lot of better choices for dropshippers that won’t use your hard work and money just to make their own retail sites look more appealing. You’ll find no less than a dozen of their sites selling at cost or 5% over cost to cover processing fees. No way can you build a site with their feeds and enjoy a profit. They have dozens of retail sites themselves flooding all the shopping channels and search results selling at their dealer cost.

  17. Sacredspaces November 11, 2012 Reply

    Hello, I have been selling art online for about 10 years. I’m opening an online store to carry other related products and am just entering the drop shipping world. What I am looking for is insight into is how to give good shipping rates to customers? If a customer buys from me and the products range from different vendors how is the best way to give a shipping cost? I am also wondering is there a way to combine the shipping of certain items which are from the same drop shipper in the check out process. I am using Volusion for my ecommerce store but having a hard time understanding how to create shipping guidelines for checkout. Thank you

  18. Brian July 26, 2014 Reply

    Who’s real who is not? Seems like that is the main question. It’s it worth it? Where can we find a legitimate list of real wholesale drop shippers? PLEASE HELP!

    • Cesar Ramirez November 2, 2014 Reply

      What are you seeking to sell? What’s your niche?

  19. Cesar Ramirez November 2, 2014 Reply

    A very good explanation of drop shipping. I attended the merchandise show with a few of my drop ship students in March at Las Vegas and most of them didn’t want to deal with average Joe’s helping them sell online. They wanted large buyers.

    I’ve built a system that I believe will help out the average person looking to scale up their sales. My software takes items with picture and description and bulk lists those items onto ebay. Essentially I’ve taken the busy work out of it. Take a look at http://www.EliteDropShippers.com