What are some legitimate drop shipping companies
The affiliate dropship strategy
Starting a trading business is not an easy task. As a rule, it requires a large amount of cash at the beginning in order to buy shares if necessary, to invest in storage or retail space and to cover the initial overheads.
With all of the expense involved in starting a business, buying stocks is often a real hurdle. It's often a startup's biggest expense, and sometimes it's just too much - and then the business won't even start.
Plus, there is always the risk that you will spend thousands of dollars on products that will never be sold and you will run out of money and have to juggle products that you cannot get rid of.
But there is a better way!
Instead of spending a fortune upfront on the product and then finding storage space to store it and figure out how the logistics work best in packing and shipping it to customers, one can just try dropshipping.
Dropshipping allows you to start with little or no investment while still being able to offer your customers the products you want to offer!
In this article, you will learn the basics of dropshipping and how to find the best suppliers. So let's get started!
What is dropshipping?
Imagine setting up your own online store with dozens, hundreds, or even thousands of products without spending a single penny upfront on inventory.
Instead, you can find the products on another website (use Amazon for example) and add those products to your website.
Let's say you're selling a frying pan that sells for $ 14 on Amazon. On your website it costs 20 EUR. When a customer orders this, he pays you 20 EUR. Then you go to Amazon and order them for 14 EUR. Amazon sends them directly to the customer - and you keep the profit of 6 EUR.
The difference to normal affiliate marketing is that you act as a seller yourself - while in affiliate marketing you recommend products from other manufacturers.
Pretty awesome, isn't it?
Dropshipping doesn't require you to pay the full retail price like Amazon does. Instead, you can often get prices that are not much higher than actual wholesale prices.
Okay, why doesn't the customer buy directly from Amazon? But more on that later ...
First of all, you have to be careful: some so-called dropshipping companies actually sell very close to the retail price, making it almost impossible to make a profit. Sometimes they charge a monthly or annual fee to access their offering, which will further reduce your potential profits.
You also need to make sure the company isn't slow to ship, which could seriously damage your reputation.
Dropshipping has many pros and cons, so let's take a look before we move on.
Benefits of dropshipping
- Lower upfront investment
Because you don't have to pay for supplies upfront, your initial business startup costs are much lower.
- No storage space required
The dropshipper is the one in charge of the storage so there is no need to rent your own warehouse or look for space in your house to stock the products.
- No Shipping Hassles
The dropshipping company also takes care of the packaging and shipping of products, saving you a lot of work and freeing you up for other tasks like marketing and sourcing other products.
- More products without risk
You don't have to worry about whether a product will be sold or not. Because you don't prepay it, you can be much freer with the products you add to your business. When a product doesn't sell, the only thing you've lost is some time it took to get it to the shop. You can just as easily remove it there.
Disadvantages of dropshipping
- Low profit margins
Since most dropshippers are not real wholesalers, your profit margins will be lower than if you bought goods directly from the wholesaler. In fact, there is often an intermediary between the wholesaler and the dropshipper who makes even more profit.
- Delivery problems
Since you have no direct control over shipping, customers may not receive their orders on time or receive the wrong or damaged product. Because they bought the item from you, they will feel that you are responsible and they will likely not accept you using a dropper as an excuse. In fact, they would probably see that as a reason not to order from you again.
- Inventory problems
It is possible that the ERP system of your dropshipper is not synchronized with your own. This could mean that a customer orders a product from your website that is not currently available from the dropshipper. In this case, you would have to either get the product from someone else very quickly or send the customer a refund and an apology.
- Higher shipping costs
Because you are unable to enter into volume discount agreements with shipping companies, and because customers can order products from multiple carriers in a single order from your store, shipping issues can arise. If you're not careful, shipping costs could melt your profits badly.
It's a compromise, of course. You are sacrificing larger profit margins and control of inventory and shipping for less upfront investment and less overall work. It's up to you to decide if dropshipping is right for you and your business.
How does dropshipping work?
Before you can really understand how dropshipping works, it's important to understand the basic supply chain. Products you see in stores often go through three, four, five, or even more companies in the supply chain before arriving in stores.
Manufacturers are the first part in the supply chain. Manufacturers create the products, but most of them don't sell directly to the general public. Instead, they typically sell through a wholesaler, or sometimes some other middleman mediates the sale of the product from the manufacturer to the wholesaler.
Occasionally, manufacturers can sell directly to retailers, but they typically don't deal directly with companies.
Wholesalers are middlemen. They buy from the manufacturer and sell to retailers at higher prices. They don't usually make huge profits apiece, but they make their money by selling in bulk.
Wholesalers can offer dropshipping, but they usually only sell to retailers.
Retailers buy their products from wholesalers or directly from manufacturers. They sell direct to the public, often at fairly large mark-ups. They can do dropshipping, but because they are retail they usually don't.
Dropshippers are usually somewhere between the wholesale and retail sections of the supply chain. They buy from wholesalers, or sometimes manufacturers, but sell at near end-of-sale prices.
Dropshippers cannot sell at wholesale prices if they fail to buy their products directly from the manufacturers, which is relatively rare. Typically, they get by on relatively low profit margins because they have to sell below retail in order for those who do business with them to make a profit, and yet they have to buy at the same wholesale prices as most retailers.
Why don't customers buy directly from the manufacturer?
First of all, buying from the manufacturer is not always possible. So it is more likely to buy through a distribution channel such as Amazon.
If a product is available on Amazon, it is of course much more difficult to compete with what is on offer, as Amazon often offers very good prices.
But one way out is to put packages together here. With small additions and combination packages, you can also compete with manufacturers on Amazon.
For example, you can find hundreds of offers for coffee capsules for the Tassimo machine on Amazon. The manufacturers always offer 8 to 16 capsules per package. It's going to be tough to compete here.
A resourceful supplier simply bought all varieties 1x and then put together a "trial package" containing each variety 1x. The individual capsules in this package are of course significantly more expensive than in the standard package - but still cheaper than buying 40 or 50 standard packages.
So the key is to think a little further. How can you combine products and create added value?
Before we start talking about finding high quality dropshipping sources, it is important to note that there are companies who are almost scammers and others who are pure scammers.
So be careful.
These scam companies are exploiting people who don't know better and claiming that they offer wholesale prices - and actually retail or just don't ship anything to customers at all.
There is no way to avoid scams, but there are a few things you can do to reduce your risk.
First, usually say no to monthly fees. Those companies that charge monthly fees usually make most of their money on these fees because they realize that customers will have a hard time finding products for sale that will make them profitable. The average customer will not order anything, and the company will still make money with this fee.
Remember, there are some legitimate companies that charge entry fees, but these will usually be easy to spot because they will have more positive reviews than other companies, as well as more referrals.
Next, you should check the company's prices to make sure they aren't selling at retail prices. If they do, you won't be able to make money off of them.
Make sure the company is reputable. If nothing is requested / shown - account, business license, or tax number - they are usually not legitimate.
There are so many scammers out there that it can be quite difficult to find a legitimate dropshipper who won't scam you. Even if you can find a legitimate dropshipper, you still need to make sure they have prices that allow you to make a decent profit, and offer your customers fast shipping and quality service.
It is always important to thoroughly review a company before doing business with it. The first step, of course, is to search for reviews online and read a Business Bureau report (if they have one).
Do the following to specifically search for online reviews:
- Company name fraud
- Company name reviews
- Company name is legitimate
These searches should provide information about the company. If not, it probably means they're not bad enough to have a lot of complaints OR they're so new that no one has filed a complaint online before.
Remember, every business has eventually accumulated some complaints over time. Amazon has been commended, some of the best customer service reviews come from many sources, but: They have garnered thousands of complaints too. No company is perfect.
Complaints don't even have to be justified. Sometimes it is the delivery service that is causing the problem, and even if the company does everything possible to fix the problem, the customer will still insist that it is the company's fault and that these are "scammers".
Sometimes the customer misunderstands an element of the ordering process or even makes a mistake like forgetting to use express shipping. You try to blame the company for this and the company's reputation suffers.
So you should expect there to be complaints about any company. Mistakes happen to every company. But if there are many more complaints than positive experiences, then one should pay attention.
You should also speak to someone at the company before doing business with them. This has the advantage:
- It confirms that the company is indeed responsive to customers and that they are easy to get in touch with.
- You can ask important questions to the company.
Here are some questions to ask companies before deciding to do business with them:
- How long have you been in business? The longer they are in business, the more likely it is that they are a legitimate company that is reliable.
- Which company do you use for shipping? Please make sure they are using a reliable company like UPS or FedEx for shipping as some of the smaller carriers are cheaper but much less reliable.
- Who are your customers? You may not be willing to divulge this information, but if it is being used by some large companies, it is likely a legitimate company.
- What is your return policy? You need to know their return policy inside out. What if the item doesn't fit or the customer doesn't like it? What about defective goods? How do you deal with returns? Who pays for shipping? These are all questions you need to know because if a customer wants to return a product and the company doesn't help, you are responsible.
- What types of payments do you accept? You need to know when payment is expected and which payment types they accept. Some companies offer 30 trial days, which may mean payment isn't due until 30 days after purchase, while others may request immediate payment.
- Do you send shipping notifications? The company should send email notifications to customers when their items are shipped. This prevents you from having to do it. While this isn't a deal breaker, it's a very nice thing to do.
- Do you offer custom packaging materials? You may want to have your own shipping labels on the products, as well as your own delivery note, vouchers, etc. This is a very useful feature.
- What are their prices and are there any fees? You need to know how much they charge for products and if they charge any "membership" fees. Legitimate dropshipping companies rarely charge a membership fee or entry fee. Some do, but that is rare.
- Do they sell to the general public? If so, the prices are probably too high to make a decent profit. Real dropshippers won't sell directly to end customers and usually require a business license and / or tax number before you can access their system.
- Can they integrate with your platform? It is important that the inventory can be synchronized with the products so that customers do not order products that the company does not have in stock. Some companies have inventory systems that can be integrated right into popular shopping cart platforms, which is sure to save you a headache.
You can ask your own questions, and that's great. Make sure to ask your questions beforehand so you don't have to worry about them later.
Find a dropshipper
There are thousands of companies that offer dropshipping, but not all of them are legitimate. I will list a few sites you can start your search from, but please don't think that I personally recommend these sites. As always, take due care before hiring any company.
Dropshipping aggregators generally have a large number of products from many different manufacturers. They often charge a monthly or annual fee for access, but that fee often goes in the direction of automated inventory control built into your shopping cart.
Some may charge higher prices than other dropshippers, but you can generally find some items that can make a good profit. There are some who (only) claim to sell at perfect wholesale prices.
- www.salehoo.com ($ 67 per year)
- www.doba.com ($ 60 per month)
- www.dropshipaccess.com/ ($ 49.95 per month)
- http://www.inventorysource.com/ ($ 25 + per month)
Dropshipping directories are one way to find reputable companies that offer dropshipping.
- www.worldwidebrands.com ($ 299 for lifetime access)
- http://www.wholesalecentral.com (free)
WorldWide Brands have been around for a very long time. They're expensive, but you have lifetime access, and that's why they cost so much: Because they carefully review all companies before adding them to their directory.
This doesn't mean you won't run into the occasional problem, but it does make your job a lot easier. If you can afford this fee, it will save a lot of time.
Wholesale Central is free, but the companies aren't thoroughly vetted, so you have a lot more work to do to review each company before doing business with them.
Starting any type of online business is difficult and often expensive. Buying inventory can be prohibitive, and then you also need to have room to place your inventory and manage shipping to customers. That can be a lot for a whole new business.
Fortunately, dropshipping can help and prevent you from having to buy inventory, find storage space, and deal with packaging and shipping in advance.
Of course, finding dropshipping suppliers who are honest, offer a quality product, and offer great service for you and your customers is tricky.
Some companies charge monthly fees for access to products that you cannot make a profit on. Others offer poor inventory management, slow shipping, or make it difficult to return products. Some are even pure cheaters!
Hopefully, here you've learned how to find the right dropshipper for your business and how to find out which ones are reliable. Make sure to check for reviews of the companies and ask lots of questions before partnering a company. It's time consuming, but it can save you a lot of trouble.
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