The Ultimate Guide to Dropshipping :
What is Drop Shipping?
It is a process that ensures you opt for an item that you can buy directly from a wholesaler and then you can ship that item to your customer.
It is just an easy process through which you can spare yourself from purchasing a lot of products and opt for a partnership with a drop shipping supplier. This process enables you to list all the products of your drop shipping partner for sale. So, when you get a request for an order, you simply forward that and your partner will fulfill that order. After receiving the order, your partner will simply ship that product to your customer address and in return, they will charge you the price of that item.
What are the benefits of drop shipping?
There are vast numbers of advantages associated with drop shipping process; they are:
- Lower Capital Requirement: Drop shipping allows you to start your business with the minimum amount of investment. You need to have a certain amount of capital to purchase products from your drop shipping partner.
- Wide Product Selection: In such business, you don’t have to buy all the products that you intend to sell.Instead, you can simply list them on your selling list.
- Reduced Risk: This drop shipping model reduces the risk of loss in business because you don’t have to invest a large amount of money. If your online store business doesn’t work well, then you don’t have to worry about selling the product at reduced rate.
- Location Independence:You don’t have to buy a large warehouse for storing product or you have to worry about fulfillment. You can run this trading process from anywhere in the world and for that, you just need a laptop and an internet connection.
- Highly Scalable: Drop shipping business is comparably easy to scale than other online business because each order gets automatically fulfilled.
Is drop shipping a profitable business model?
Drop shipping is a profitable business in every way because you don’t have to risk a large amount of money. Success and failure are always a part of the business, and it solely depends upon the sales figure. But drop shipping is such a successful business model that you just have to maintain everything in proper order and profits will automatically follow. I started my online business by using drop shopping process that gave me the confidence to leave my corporate job.
How much can I make with drop shipping?
Profit of a business depends on the sales figure, and they are associated with different types of factors like the effort of the owner of its business, reliability, etc. To acquire a good income, you just need good commitment, proper approach and hard work that is sufficient for a successful drop shipping business.
A business such as drop shipping needs months to build but with proper planning, it is possible to build a good business structure quickly. So after it gets a proper flow, it is just a straight forward process to run the business.
What kind of profit margins can I expect with drop shipping?
Your profit will vary according to your sales rate. It depends upon the item you are selling; like expensive electronics provide profit margin between 5 to 10% while low-priced items give around 100%.
Your profit will depend upon your ability to quote a premium price that is better than your competitors. It is an easy process to reach the top tier spot in the drop shipping business. To know more details, you can look into our free eBook that explains creating an online store.
Where are drop shipped products sold?
Drop shipped product can be sold anywhere, and drop shipping business companies fulfill most of the products on eBay and Amazon or any chinese website ( alixpress , , as you can find these items on different large online stores and small ones as well.
Large business companies use the model to expand their product range which allows them to widen their market coverage. To increase the sale of less popular products, large business entities like Sears and Home Depot utilize this business method. This strategy helps them to expand their market but with a limited amount of inventory.
You can sell items using drop shipping business in various ways, but if you build up your online store ( with wordpress + woocomerce or shopify ), you can easily achieve good profit and success in the long run.
What do I need- and How much does it cost – to start a drop shipping business?
To build a proper drop shipping business in the United States, you need to follow the below suggestions:
- You will need an amount of $150 to $300 to start a business with your state.
- From IRS, you have to acquire EIN number which is free of cost.
- If your state charges sales tax, then you have to get a sales tax ID from your state but usually they don’t charge.
- Then, you have to find and build up a partnership a drop shipping company.This is also free of cost.
- After all this, you need to open your eCommerce portal that will cost you around $10 to $50 per month depending upon your server provider.
Most of the cost will vary according to the circumstance but in a general case, $400-$1000 (Fb ads included) is enough to start a proper drop shipping business.
Do drop shippers provide customer service and/or talk with my customers?
A drop shipping business won’t provide any customer service rather you as an owner have to responsible for all the deals. After building your website, you have to promote and build up the market for your online store. You have to create a customer support group that will handle the customer issues, solve problems and deal with an issue that might arise during trading. Basically, you act as a medium between your supplier and customer.
How do I Submit orders to suppliers?
Every drop shipping company takes orders in different ways, but the most common method they follow is by accepting orders through email. There some top suppliers who accept orders online while some of them take through the phone. There are some high-level suppliers who accept bulk orders through specially formatted XML and CSV file.
What is the turnaround time for fulfilling a drop shipped order?
The turnaround time for orders depends upon the quality of the suppliers and location of their warehouse. Most of the suppliers dispatch the ordered item in the same day of order, but it is only possible if the order received by noon or their desired dispatch time.
How do I get tracking information for orders?
Tracking information usually depends upon drop shippers. Most of the reputed drop shippers will provide the location information through email or in specially formatted files like CSV and XML. You will receive the tracking information (Always choose Epacket or Tracked shipping services ) after shipment is dispatched or during processing time. So, after you receive the information, it will be your responsibility to provide the information to the customer. Most of the time, such information is passed through the shopping cart interface.
But a poorly maintained drop shipper will delay in providing you the order verification and tracking information.Worst case scenario, they might even ask you get the tracking number from their main website.
How do I pay my supplier?
You can pay the drop shipping supplier through credit card only as they don’t allow any other method of payment. So you should opt for a business credit card that is associated with Mastercard or Visa because most of the suppliers don’t accept Discover or American Express.
So after you build a good business relationship and a proper track record, you will be offered the option of Net 15 or Net 30 terms depending upon the supplier. By accepting any of these terms, your supplier will extend the credit of yours and keep track of your debts. After this process, you will get the facility to pay your debts within 15 or 30 days through check.
I have established a long-running relationship with many drop shipping companies, but I still pay them through credit card rather than Net terms. It is because I find it more convenient for me pay to pay them through card rather than checks. By paying them through a card, I get a large amount of reward points, and these points have helped me to pay for a trip all around the world.
Who pays for the shipping cost on orders?
The online seller has to pay for the shipping cost. The drop shipper uses their UPS, FedEx or USPS account to pay for the shipping, and later they add that shipping cost in your bill. So it now depends upon you how much you will charge your customer for shipping. Most of the time a customer gets free shipping if their bill amount cross a boundary.
Do orders seem like they came from my company?
Orders appear like they came from your company, and this is one main advantage of having a drop shipping supplier. The package will contain your company’s name and logo including slip, return address, and invoice. Most suppliers follow this process because its helps the online store to build up a good market.
How do returns from customers work?
Drop shippers follow some rules that states the items they can accept, and what they can’t. So it is your duty to provide information to the customers about the return policy of each item. You should clearly mention the return policy for each item on your website.
If the item meets the suppliers criteria, then they will provide Return Authorization number, and this number will identify the return in their system. So after you receivedthe number, you have to pass this unique code and the address of the warehouse to the desired customer.
After the supplier receives the returned item, they will provide you the credit information along with a notification of that they credited you for the returned product. After getting the money, you can simply refund the money in their bank account.
Who pays for return shipping on returns?
The process varies according to the policy of the seller but here are some policies that I follow and are always recommended:
For Defective Item: If any customer receives any detective, then it is the responsibility of the online store owner to pay for the return shipping cost, but some owners disagree with this policy because they feel they are not the manufacturer of the product, and a defective item is the liability of the customer. But according to me, this is a poor way of conducting business, and it hampers the relationship between customer and retailer.
It is recommendthat you pay for the shipping cost incurred by returning an item and sending back the replacement. If the item cost below $20, then often free replacement without asking for the old product is provided. It is an easy and cheap way to provide replacement rather than paying for the return shipping cost.
Most of the time, the drop shipping seller will pay for shipping out the replacement so you will only need to pay for the shipping cost form.
For Non-Defective Item: Sometimes customers return an item due to various reasons, so in that time, they have to pay for the returning shipping cost. But sometimes products are incorrectly promoted or presented in the online portal, so if any customers buy those products and decide to return, then the retailer have to pay for the shipping cost.
Do drop shippers ship internationally?
This depends upon drop shippers policy, which you have to check. Most of the drop shippers I work with, ships products internationally.
Although international shipments are expensive, and it takes a lot of research to provide an accurate amount of the shipping fees, customs charges and duties are different for various countries. For international shipping, drop shippers take some processing time as there is a large number of paperwork.
There is a large amount of anomaly associated with international shipping like returns, and also possibility of fraud. So return policy in international shipment is very costly, and sometimes there are chances that the retailers may find fraud issues.
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