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Drop Ship Distributors, Wholesalers & Drop Ship Companies
Drop ship distributors are everywhere, and so are wholesalers. Drop shipping is a common alternative for non-manufacturing sellers who prefer not to “own” the merchandise outright. In other words, they don’t own the product and therefore do not have to bare the storing/warehousing costs of the inventory.
In any sales related venture, marketing the right product is of most importance. Whether you sell in a brick and mortar store, an eCommerce store or eBay, the basic equation is always to buy your product at a low cost and sell it slightly higher at a margin. Add to this your cost of doing business (overhead) and you can see why selling can be challenging.
Drop shipping is a good strategy for someone wanting to keep the cost of doing business to a bare minimum and yet benefit from being able to sell a product. Before you go any further, be clear on the distinction between drop shipping and wholesaling, and thereby drop ship distributors and traditional wholesalers.
If you buy your product from a wholesaler, you own the product immediately. You bare the burden to store the product and ship it when a customer orders from you.
Drop Ship DistributorsDrop ship companies do not require you to pay for the products up front and therefore you don’t have to deal with inventory hassles of storing the goods. You don’t have to worry of bad/obsolete inventory. You are given permission to advertise the product using its images and information and make the sale.
Drop ship businesses fulfill your orders directly from their warehouse. They drop ship products directly to your customer’s delivery address. Warehousing costs are often built into the per product price that drop ship suppliers charge you. Pay close attention to this. The good thing is that you don’t deal with the product at all and yet are able to make and fulfill that sale to your customer.
You get to set your own price point. What you sell the product at minus the cost you pay your drop shipper is your gross profit from the sale.
Traditional WholesalersWholesalers are nothing more than middle men who sell in bulk. The product is manufactured elsewhere and distributed to wholesalers who sell in bulk. Some drop ship distributors are wholesalers in their own.
Other wholesalers find a way to get a hold of the product and sell it to you in bulk. For example, Sam’s Club is a wholesaler who receives goods from the manufacturer and sells it to you in bulk.
As you can imagine, the wholesaler also has to make a living and therefore products often include a slight mark-up in price despite being sold to you in bulk. Companies that drop ship are no different in the sense that they too make their piece of the pie.
However, with a drop ship distributor you don’t have to bare the burden of paying up front for the product and the costs involved in storing that product until sold. Long story short, you save quite a bit on the “cost of doing business”.
What Option More Popular?Drop shipping is by far more popular. It has become at least in the recent times as eCommerce has developed into the gigantic industry it is today. And for this reason a number of drop ship companies have cropped up over time.
Go to Google and type in “drop ship” or “drop ship distributors” and you will see an overwhelming response. You can browse through each one and view their product offerings as well as the brands they represent. You can then conduct additional research on ones you have short-listed for selection. Of course, it’s always easier to go in knowing what you want to sell online.
There are also many directories out there that list out the various drop ship suppliers available to you. These listings often come at a small cost. I personally don’t think they are worth it.
It’s simply Google results put together and organized for you in one place. It may cut your work down, but it won’t tell you which drop ship company is better than the rest. This you will have to take upon yourself. It’s really not as much work as it sounds. At least not for the type of long term relationship that you might be building with the drop ship supplier.
While at it, throw in a search for a “free drop ship companies” or “free drop ship directory”. There are few and far good ones of these kinds from my personal experience. However, you never know what comes up in searches. It is definitely worth the extra 2 minutes.
Turning Any Company to A Drop Ship CompanyI once received an eMail asking for my suggestion on how to find a drop ship supplier for a particular designer product. The sender claimed that she simply couldn’t find any on the Internet.
Al alternative approach to finding a drop ship business to work with is to create your own. You do this by first identifying the product you would like to sell. Once you determine that you can contact the vendor and ask if they are willing to work with you and drop ship products to your customers. Many vendors may already have their private drop ship programs advertised on their website.
If they don’t, ask them if they will consider it. Just like you are looking for a suitable partner, many vendors are looking for suitable partners like yourself to work with to expand their business.
So don’t assume anything and always ask. The worst that can happen is that you get turned down. Big deal! Just go on and ask someone else. It’s not like you are spending hours meeting with them and driving all the way to their office. All it takes is a simple, sincere and well designed eMail message.
CautionResearch your options thoroughly and weigh out the true costs involved with each drop ship business or wholesaler that you come across. There is no rule saying that your cost will always be lower with a drop ship distributor as compared to a wholesaler.
You need to run the numbers to make that determination. In general however, it is usually better to go with a drop shipper, at least in the beginning. You can explore other resources as you gain more experience with your business.
Be cautious before choosing your drop ship distributor. There are many frauds on the Internet that will tell you they are drop ship businesses and wholesalers but really are just middle men trying to get your business. Once they receive your order, they will turn right back and have the real drop ship company or wholesaler send you the products. Not only will the prices be higher, but you will also pay some type of a fee to utilize their services.
Bottom line is research as much as you can before you make a commitment.
The legalitiesThere is not much to worry about from a legal standpoint when dealing with a drop ship distributor. Your sales and use tax aspects are handled as in any normal course of business.
When you are dealing with a wholesaler however, you are most likely going to be required to show a business and sales tax license. A lot of the legality has to do with passing on sales taxes and who is ultimately responsible for paying taxes on the final sale to the customer. As a reseller, businesses are often exempt from the tax until they sell in to the end consumer in a retail transaction.
Check with your local jurisdiction (State mainly) for the proper license you need to have. The title can vary from state to state. It is fairly easy to obtain. You will have to go to your local county municipal offices (courthouse likely) and file an application for it.
Make sure to take your business documents with you and ask a clerk to assist you with the process. Most jurisdictions are sophisticated enough these days to have this functionality online. So research your locality’s website and you may be able to fill the application online.
ConclusionThe intent of this discussion is to give you a background on who’s who and what’s what. Now that you know the differences between a drop ship distributor and a traditional wholesaler, you can see why drop ship companies are growing and more popular than buying from wholesalers.
You can already imagine that finding a reliable and legitimate drop ship business can be challenging. And admittedly it is. Drop ship and wholesale directories can be good resources as they are one stop guides that list out participating vendors. However it does not make sense to pay up for information you can dig up yourself fairly easily.
You can do market research and run searches on Google to find the same information. With a drop ship directory however, you can narrow down your choices by category, cross selling opportunities identified, overseas goods, tools for market search and demand quantification.
You can also further view if the drop ship distributor has a solid list of suppliers and that the suppliers are pre-qualified and credible. Original product manufacturers are already screened for you by the right drop ship distributor.
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