How to Start Your Drop Shipping Online Store

Oct 31, 2014 by Jesse Ness, Ecwid Team
drop shipping
Posted Oct 31, 2014 by Jesse Ness, Ecwid Team

If you’ve ever sold products online, chances are you’ve heard the term “drop-shipping”.

It’s something many online retailers are familiar with, and quite a few use it for their online businesses.

But what exactly is it? And, more importantly, is it worth your time? Will it benefit your selling experience?

Hopefully, by the end of this article, you’ll have a better understanding of drop-shipping and whether this business model works for you.

The 1-2-3’s of Drop Shipping

Basically, the process of drop-shipping looks like this:

  1. You find a wholesaler who sells mountain bikes for $300.
  2. You list the bikes for $400 on your website.
  3. A customer sees the bike, decides it’s a great deal and buys it.
  4. You buy the bike from the wholesaler for $300 and email them the customer’s shipping information.
  5. The wholesaler sends the bike to the customer.
  6. You just made $100.

We’ll go through some details to give you a better picture of drop-shipping.
Many drop-shippers can do branded packaging for your orders, so no customer will ever guess you’re using drop-shipping services. Reputable drop-shippers are invisible for the customer.

The majority of drop-ship suppliers receive orders via email. After the order is placed, they send the invoice and the tracking number to the store.

Some of them charge a drop-ship fee per order.

This happens because they normally send products in bulk quantities, and sending a single product takes extra effort. They charge the fee to cover additional expenses and inconveniences, caused by packaging and storage.

That is dealt with in the “Shipping and Handling” part of your invoice. Fortunately, this fee is usually very small and charged per address, not per number of ordered products.

Key Benefits of Drop-Shipping

Arguably, the best feature of drop-shipping is how effectively it can accelerate the growth of your business.

Drop-shipping stores don’t have to worry about high start-up fees, inventory, or deciding which products to sell. Drop-shipping is a great way to test new product ideas.

This freedom allows you to focus most — if not all — of your attention on what your customers want. Your products are extremely flexible, meaning more customers will shop with you.

You’ll be able to sell your products in a number of different markets, which means you can significantly increase your business outreach.

Customers looking for specialty products will come to you because you’ll have what other stores won’t stock. Being able to sell to customers on an individual level will increase your popularity, your business, and ultimately, your success.

You can receive orders from any place on earth connected to the internet. Drop-shippers will cover your back on returns and damaged goods replacements.

Thus, drop-shipping truly gives you an edge in the online retailing market.

Also read: How To Find a Manufacturer for Your Product Idea

Drop-Shipping Complexities You Should Know About

The key to a successful drop-shipping store is finding reputable and trustworthy suppliers.

When major parts of your business are controlled by someone else, you can only wait and hope everything goes well.

You won’t be able to check the quality of orders unless your customers give you feedback.

If you work with several drop-shipping companies, it may cause shipping delays and extra costs.

For example, imagine that your customer ordered five items, and they are distributed among drop-shipping services due to a lack in stock. You’ll have to pay fees and shipping costs twice or more.

Also, be ready to accept responsibility for every error, whether it’s the lack of products in stock, bad quality of the order, or shipping delays.

These complexities might be scary, but adjusting your business processes can help to avoid such situations. Everything comes at a price, and if you want to get your business off the ground quickly, drop-shipping is the way to go.

Related: Where to Find a Wholesale Supplier for Your Online Store

Picking a Drop-Shipping Supplier

While getting started can at times be a trial in and of itself, there are ways to make the process easier.

First, before doing any research, make sure your business has a license. You’ll need a resale certificate and an EIN number.

Second, define your industry. If you’re a small business that sells a specialized item, you don’t want to cooperate with large suppliers. You are better off contacting a local manufacturer.

Next, look for suppliers. But don’t blindly rely on Google. There are many fake companies on the list, and you’ll have to do proper research to find good ones.

Here are some things you should know before you start your research.

Ignore ugly website design. Suppliers don’t care about the look of their website. They have enough clients, even with a simple, “90s-style home on the web.

Most big suppliers won’t work with small business. They meet people like you every day, who promise them they know the main secret of making money, but not many of them are actually worth cooperating with. Plus, suppliers want you to order big volumes — the bigger the volume, the more profit they have. They always have a minimum order value; if it’s $5,000, for example, that won’t work for you.

Good suppliers get overexposed very fast. As soon as they establish a strong internet presence, they will be crowded with orders. That’s why it may be helpful to read about the 7 reasons to treat your supplier well.

If you choose one of the famous suppliers that advertise on the net, be aware that the price may be higher (someone has to pay for the ads).

Be cautious of extra offers. Some suppliers get excited and start to sell extra things like online stores built with their own programs. They will want you to sell on their website or on their online store. The problem here is that they are not good at e-commerce, and they will never provide you with the store of your dreams.

Avoid suppliers that charge an ongoing monthly fee to do business with them. The entry fee is a guarantee that you’ve come for business, and the shipping fee covers expenses. Both of them are legitimate, but monthly charges are not what you want to pay for.

When contacting a supplier, take note of how well the representatives know their business. They must have a clear idea of the whole assortment and all the product categories they sell. Some of the best drop-shippers will provide you with a personal consultant that will lead all your deals. Be careful if you notice that you speak to a different person every time you contact the supplier.

Since most of them are not tech-savvy, appreciate suppliers with real-time inventory, online catalogs, advanced search tools, and email support.

It’s a great idea to place test orders to see how well and smoothly the process goes.
Good suppliers will let you pay with a credit card or send you invoices.

For a start, try looking for suppliers on these trusted directories:

Starting Sales

As mentioned above, you can sell either on your website or on your supplier’s website, for example, eBay.

Selling on your own website won’t give you as much free traffic as the marketplace, but you also won’t have to pay extra money to the supplier. If you choose to sell on a marketplace, most suppliers will ask you to authorize and create an account, and probably charge an initial setup fee.

You need to know that Ecwid allows you to have your storefront on multiple places while running all the storefronts from a single control panel. That means that creating one Ecwid store will let you combine both methods of drop-shipping sales or choose one in particular.

When you’ve started selling, don’t forget to calculate taxes. If you use drop-shipping services, where your products are stored in a third-party warehouse and shipped out when people order, then you could have a nexus in more than one state — check with a tax professional or look on state government websites to find out.

Consider using these tools to get drop-shipping on the go:

      • Aftership helps you track all your shipping processes in one place.
      • Printful is a drop-shipping service of custom printed products.

Your Next Steps

Do you think drop-shipping is the right solution for your business? Here is what you can do now:

Also read: Should You Make, Manufacture, Wholesale or Dropship Your Product?

About The Author
Jesse is the Marketing Manager at Ecwid and has been in e-commerce and internet marketing since 2006. He has experience with PPC, SEO, conversion optimization and loves to work with entrepreneurs to make their dreams a reality.

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