Retail Blog

We don’t always recommend drop-shipping to our community. In fact, we recently provided compelling reasons why selling drop-ship products from a single supplier on EBay was a poor retailing strategy. However, don’t throw the drop-ship baby out with the low margin bath water. A well managed drop-ship strategy can do wonders for your business by increasing your product selection without increasing your inventory investment. You can develop a great drop-ship program by following our tips for drop-ship success.

Remember the RetailBlazer formula for success? Here’s a refresher:

Success = Community + Expertise + Relationships + Branding

It should not come as a surprise to learn that relationships are the most important aspect of a good drop-ship program. The first step in selling drop-shipped products is finding a supplier. There is no shortage of companies that claim to be drop-shippers. Unfortunately, most of these companies are glorified retailers. You won’t get good pricing, you won’t get good service, you won’t get good products. Finding suppliers is hard, right? Not anymore! ProductBlazer puts over 27,000 wholesale suppliers and manufacturers at your fingertips. Here’s a list of twenty drop-ship suppliers to get you started.

1. Understand how drop-shipping is different.

This may seem obvious. The main difference is that you, as retailer, don’t have the product you are selling in inventory–the supplier does. But from your customer’s perspective there should be no, or very little, difference. If your customer contacts you with a question about the product you will need to be able to answer the question without having the physical product on hand. “I’ll call my supplier” isn’t a good answer for customer inquiries!

2. Accept that drop-ship does not equal unlimited supply.

This is one of the biggest “gotchas!” for retailers selling drop-ship products. Just because you are not managing inventory does not mean that no one has to manage inventory. The supplier you are buying from is selling the same products to other retailers. Talk to your account manager and understand the supplier’s backorder policy. Make sure that if your primary supplier is out of stock you will have the ability to shop the order to other suppliers, rather than passing the backorder back to your customer.

3. Start with a single product line.

Walk before you run. Select a single line of products, or even a single SKU, and begin your drop-ship career by selling only those products. It is practically guaranteed that you will encounter hiccups that you had not anticipated–better to start slow, learn the ropes, and then expand your drop-shipping. In a year you may never have to manage inventory again!

4. Establish strong relationships with suppliers.

This is a running theme for the team at ProductBlazer. As a retailer you are only as good as your supplier relationships. It is worth spending the time to get on the phone and introduce yourself to your suppliers. Let the account manager know what you want to sell, your expected volume, and what you are doing to build your business. B2B relationships are a two-way street. All suppliers will check your credit before they start accepting your orders–accept that, and be ready for it.

5. Understand how the supplier communicates price and quantity information.

The best way to avoid backorders is to only sell products that you can actually supply to the customer. It sounds simple, but digesting stock quantity information from your suppliers can be a chore if you don’t have the right information systems in place. All high-volume suppliers will provide you with an electronic file that provides a snapshot of their inventory positions. Some will provide information daily, others hourly, and only rarely in real-time. It may be worth the effort to have a consultant create a small application to import the supplier’s stock quantity information into your own inventory management application.

6. Examine your return policy.

Make sure that your return policy is compatible with the supplier’s return policy. You may find that some suppliers will not accept returns for products they sell through drop-shipping. You need to fully understand the supplier’s reseller agreement before you start sending them orders.

7. Check for pricing changes every day.

Unless you were able to negotiate a custom reseller agreement you need to check for pricing changes every day. The supplier will probably communicate these changes to you along with stock quantity information for all of the products the supplier sells–not just the products that you sell. If there are positive or negative price adjustments you need to know as soon as possible, as you may need to adjust your own retail price for the product.

Drop-shipping isn’t rocket science, but it takes effort to get right. The most important thing is to establish strong supplier relationships. Get started today by using ProductBlazer to find new wholesale suppliers!