Drop shipping 101: How to pick a great supplier

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So, you want to start an online business and you’re considering drop shipping as a retail method. Great, but you’re also thinking that it might be challenging and you’re not really familiar with the whole process. Don’t worry, we got you.

Basically, drop shipping is a retail method where a store doesn’t keep a stock of the products it sells, but rather buys the items from a third party (wholesaler/supplier) and have them ship the items directly to customers. So, you as a seller never see or handle the actual products. This means that you don’t even need to stock or own inventory to sell and make money.

In this two-part guide, I will walk you through the fundamentals of drop shipping. This post will teach you how to pick the right suppliers.

Advantages of drop shipping

It’s so easy and cheap to start an ecommerce business with drop shipping because you don’t have to physically handle the products.

You won’t have to worry about:

• Managing or paying for a warehouse
• Packing and shipping your orders
• Tracking inventory for accounting reasons
• Handling returns and inbound shipments
• Continually ordering products and managing stock levels

And because of these, your overhead expenses will be quite low. Some successful drop shipping businesses are run with just a laptop and a home office for less than a hundred bucks. And because it’s a remote business, you can basically run it anywhere.

You can also offer an array of products because you don’t have to pre-purchase the items you sell. If the suppliers stock an item, you can add it to your listing at no additional cost.

Disadvantages of drop shipping

Low margins are probably the biggest disadvantage of drop shipping. Because it’s so easy and cheap to get started—add to that the low overhead cost—most merchants will sell items at rock-bottom prices in an attempt to grow revenue. But you can avoid this problem by selecting the ideal niche.

You’d also need to consider inventory issues. It’s not that easy to keep track of your products when you’re sourcing from multiple warehouses, most of which may also supply orders for other merchants. There may be ways to better sync your store’s inventory with your suppliers’, but they don’t always work, and your suppliers will most likely not have the required technology.

Supplier errors are also unavoidable when you’re working with a third party. The best thing to do in this scenario is to just accept the responsibility. Telling the customer that it’s your supplier’s fault is doing business in amateur hour. Own up to the mistake and apologize.

Don’t worry, your supplier will also take responsibility for undelivered or damaged items. But you may have to give discounts or provide additional upgrades to keep your customers loyal. The costs will mostly be on you, but just think of it as PR or branding expenses.

OK, now that the pros and cons of drop shipping are laid out, you’ve probably made up your mind and decided to push through. Here are the steps you need to take in order to start.

Finding reliable suppliers