Home – New Forums Selling online How does drop shipping work?

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  • #997329
    Ethicaltrade
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    Hi all,

    I am in the final stages of setting up an online fashion store. Several Australian suppliers have agreed to drop ship and asked for my drop shipping model. I’m not sure what this means! My understanding is when I get an order I’ll email it through to them, they’ll package in my supplied packaging and post to customer on my behalf. I will them pay them the wholesale price of that item plus postage costs. Do suppliers charge to drop ship?? Thanks in advance!! #justlearning

    #1211479
    StarShipIT
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    Hi Ethicaltrade:

    If you have an eStore selling a wide range of goods, but you don’t want to hold stock of them all, you can use a drop shipping model. This way, when a customer purchases something from your eStore, the wholesaler sends it to them on your behalf and then invoices you for it. This is Drop Shipping. This sounds like what you are planning to do.

    The benefits are as follows:

    Drop Shipping means you don’t have to accurately forecast sales, pay for stock up front, or pay to have it shipped from the wholesaler to your distribution centre. Drop Shipping means companies of all sizes can sell a wider range of products than ever. If you’re just starting out it’s a great way to get your store running while minimising your set up costs and risk. If you’re already an established retailer it’s also a low risk way to trial new products.

    Many wholesalers are now offering Drop Shipping and our updated StarShipIT shipping integration software makes drop shipping simple. StarShipIT automates the logistics of Drop Shipping with its ‘Parent-Child’ functionality.

    Within StarShipIT, you can set your wholesaler up as a ‘Child’ with their own login to your StarShipIT panel so they can see the orders they need to fulfil on your behalf. Your wholesaler can ship the order direct to the purchaser and include a customised packing slip with your company name, logo and contact info. At any time, from anywhere (with an internet connection) you can login as the ‘Parent’ to see all of your orders in one screen, get an overview of their shipping status and even search individual suppliers (Children) to see how they are performing.

    Using a shipping app like StarShipIT will give you better visibility of your orders and how quickly they are being fulfilled, meaning you can see potential customer services issues ahead of time – but you probably won’t need this sort of technology until you’re doing a decent volume (rule of thumb 20 per day).

    Hope this info helps and good luck with the new venture!

    Miranda

    #1211480
    Ethicaltrade
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    Thanks heaps Miranda :)

    Do you happen to know what wholesalers charge on average to drop ship an item?

    #1211481
    StarShipIT
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    No worries :) It will really depend on your wholesaler and where they have to ship to unfortunately – each supplier will have their own pricing model etc.

    Just make sure you have all their charges up front so you don’t get any nasty surprises!

    There may be some other experienced drop shippers on here who can give you some estimates based on type of product, location etc…

    #1211482
    bb1
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    the simple answer is yes drop shippers do charge to drop ship. You are right there is a wholesale price plus postage, but then they add another fee for the work required (or they charge higher wholesale). You need to talk to each supplier, and get an itemised list of all their costings to you.

    The other big question you need to ask is do they hold sufficient stock on hand to cover all there retailers. A common complaint I hear from people doing drop shipping is that the order went through and although the drop shipper said they had stock they didn’t. And remember your client doesn’t care what your business model is, if they have placed an order and you fail to supply, they are grumpy with you, they have given their hard earned dollars to you not the dropshipper.

    #1211483
    Mischelle
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    Bert beat me to it :)

    Drop shipping is a good way to save costs up front and be able to offer a range of products BUT….. You need to establish some type of stock control management with them. IE automatic feeds of stock control to your store.

    As Bert said it’s one of the most common issues with Drop Shipping, when a customer orders and pays online in your store and then there is actually no stock.

    Also ensure that the supplier adds your business name and invoice details to the packaging, NOT their details, this would be part of your DS Model.

    Many businesses adopt the combined model, some products in stock (normally the higher turnover products, so you can get a lower wholesale rate and make more money) and other products drop shipped.

    Buying product outright and keeping them in your stock is cheaper as the wholesale price is lower, as the Drop Shipping is factor in the cost of dispatch.

    Every drop shipping supplier charges differently, it’s a matter of speaking to a few different ones to get your pricing right.

    Good luck
    Cheers
    Mischelle :):)

    #1211484
    bb1
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    Just another observation from 2 online business’s that I have looked at purchasing, who both used holding their own inventory and dropshipping. They openly admitted that they made very low margins on the drop ship items, but they more included them to extend their range to make the overall buying experience better for their customers. But if they relied solely on dropshipping they would be out of business.

    Successful dropshipping models I think (and this is from a very small sample size), works best with high volume turnover, where you are getting small margins, but plenty of sales.

    #1211485
    Ethicaltrade
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    Thanks everyone! That’s really helpful. I would like to hold stock, but need to build up some revenue first. I have 2 products I have imported in stock but the whole start up has been so expensive, with web design issues etc that I’m looking to do what I can to get everything started now. I have one more question… How does the photography of items work with dropshipping? Would the wholesaler provide images that I then edit to fit my e-store? Thanks :)

    #1211486
    bb1
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    Ethicaltrade, post: 253211, member: 101113 wrote:
    How does the photography of items work with dropshipping? Would the wholesaler provide images that I then edit to fit my e-store? Thanks :)

    Simple answer is some will, some won’t.

    The best way is to contact each wholesaler and ask them (get it in writing), I have a 50/50 hit rate on mine. One provides photo’s but they are of such poor quality I wouldn’t use them, others have high quality photo’s. Others say get your own.

    #1211487
    Ethicaltrade
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    Thanks Bert!

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