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Dropshipping in and of itself is a legitimate way to run a business, however if your falling for the whole Youtube 16 year old dropshippers making 100k a month non-sense, forget about that altogether.
Many people are trying to dropship from China. They are dropshipping low quality goods, they have no idea what they are sending to their customers ie the quality and shipping times can be upwards of 2 months. That's an absolute joke. If you want to dropship either find a fulfillment partner in the states or contact a company and negotiate your own arrangement.
I own a high end furniture company that I built from the ground up to be designed around drop shipping, here's some basic info:
1) I worked in furniture for many years, so starting this company I already had relationships with a number of manufacturers and shipping companies. This made for very little barrier of entry. I'm leaving money on the table because it is 100% online dropship style, but it allows me to have a day job so its worth it to me.
2) The items I sell are not a dime a dozen on Amazon and eBay, they are hand picked and unique in their own right. I'd think the best way to do it is find a manufacturer on like alibaba who isn't listed as a drop shipper, buy their product, sell it, then work out a dropship plan with them. I once purchased a Kayak bimini top off alibaba that I thought would be perfect for that.
3) I don't sell cheap junk, The cheapest is about $200 and the most expensive I've ever shipped is $7,500. Selling $10 items is a huge waste of time IMO.
4) Starting it is not as easy as the youtube videos make it look. I spent about 5 months working 16 hours a day 7 days a week to get the website built, product listed, paperwork, and just get it up and running and I continue to work on it. I found a different furniture company's website I liked and got pricing from a few places it ranged from $20,000-$40,000... I built the site myself for about $1,500 with all the add-ons. It wasn't easy and there were many sleepless nights trying to trouble shoot things that just weren't working right.
5) I'd much rather sell 10 items for $500 then 1 item for $5,000. I know this seems like the opposite of what anyone will tell you, but in a dropship style business the selling is easy. Its the stress of hoping everyone gets it right for you... If a $500 purchase goes wrong its not the end of the world, if 2-3 of the $5,000 jobs go wrong in a row it could put me out of business.
6) SEO is NOT easy. I have a basic-good understanding of how it works and still struggle to get quality traffic to my site. It also takes time, I've heard ecommerce sites don't start getting "good" ranking for a year or 2.
7) Fee's and Taxes will chew into your profits. So if you think you're gonna make $500 a month and its gonna be great, you really need to make $1,000 to be able to put $500 in your pocket. eBay and Amazon keep like 15%, then you have to pay for all the little expenses of owning a company, then you have to pay taxes. You're lucky if you keep half of your profits
8) Its worth it (for me anyway).. I don't make enough to replace my day job, but I do make enough to fund mine and my wife's IRA. There are tax advantages. There's also that feeling of knowing one day things could really start to take off. If I started doing 5 small items a week ($200 each), 3 medium items a month ($1,500 each), and 1 large item a month ($5,000) it would completely charge our lives... Simply having a 9-5 isn't going to make that a possibility, it's a warm fuzzy feeling to know it could actually happen.
9) I'd recommend products with rock solid margins at least 100% markup, and $40+ profit. Otherwise its probably not worth the headache unless you're doing crazy amounts of volume. People have done it but its prob not easy and will turn into a full time job.
10) I haven't nailed it down yet, but I know there is a price sweet spot. Its a spot where each sale makes solid profit, where your clients are willing to buy it right online and pay you without having a bunch of questions, and where if the deal goes wrong and you're out $ you don't lose sleep at night. I'd have to assume an item you buy for $75 that you can sell for $300 would be right in that area.
I own a high end furniture company that I built from the ground up to be designed around drop shipping, here's some basic info:
1) I worked in furniture for many years, so starting this company I already had relationships with a number of manufacturers and shipping companies. This made for very little barrier of entry. I'm leaving money on the table because it is 100% online dropship style, but it allows me to have a day job so its worth it to me.
2) The items I sell are not a dime a dozen on Amazon and eBay, they are hand picked and unique in their own right. I'd think the best way to do it is find a manufacturer on like alibaba who isn't listed as a drop shipper, buy their product, sell it, then work out a dropship plan with them. I once purchased a Kayak bimini top off alibaba that I thought would be perfect for that.
3) I don't sell cheap junk, The cheapest is about $200 and the most expensive I've ever shipped is $7,500. Selling $10 items is a huge waste of time IMO.
4) Starting it is not as easy as the youtube videos make it look. I spent about 5 months working 16 hours a day 7 days a week to get the website built, product listed, paperwork, and just get it up and running and I continue to work on it. I found a different furniture company's website I liked and got pricing from a few places it ranged from $20,000-$40,000... I built the site myself for about $1,500 with all the add-ons. It wasn't easy and there were many sleepless nights trying to trouble shoot things that just weren't working right.
5) I'd much rather sell 10 items for $500 then 1 item for $5,000. I know this seems like the opposite of what anyone will tell you, but in a dropship style business the selling is easy. Its the stress of hoping everyone gets it right for you... If a $500 purchase goes wrong its not the end of the world, if 2-3 of the $5,000 jobs go wrong in a row it could put me out of business.
6) SEO is NOT easy. I have a basic-good understanding of how it works and still struggle to get quality traffic to my site. It also takes time, I've heard ecommerce sites don't start getting "good" ranking for a year or 2.
7) Fee's and Taxes will chew into your profits. So if you think you're gonna make $500 a month and its gonna be great, you really need to make $1,000 to be able to put $500 in your pocket. eBay and Amazon keep like 15%, then you have to pay for all the little expenses of owning a company, then you have to pay taxes. You're lucky if you keep half of your profits
8) Its worth it (for me anyway).. I don't make enough to replace my day job, but I do make enough to fund mine and my wife's IRA. There are tax advantages. There's also that feeling of knowing one day things could really start to take off. If I started doing 5 small items a week ($200 each), 3 medium items a month ($1,500 each), and 1 large item a month ($5,000) it would completely charge our lives... Simply having a 9-5 isn't going to make that a possibility, it's a warm fuzzy feeling to know it could actually happen.
9) I'd recommend products with rock solid margins at least 100% markup, and $40+ profit. Otherwise its probably not worth the headache unless you're doing crazy amounts of volume. People have done it but its prob not easy and will turn into a full time job.
10) I haven't nailed it down yet, but I know there is a price sweet spot. Its a spot where each sale makes solid profit, where your clients are willing to buy it right online and pay you without having a bunch of questions, and where if the deal goes wrong and you're out $ you don't lose sleep at night. I'd have to assume an item you buy for $75 that you can sell for $300 would be right in that area.
Just curious if I could pick your brain a bit. With higher ticket items I can see people expecting a longer freight delivery time and being willing to wait, especially if the price is significantly cheaper than competitiors.
That said a couple questions...
1. I always thought dropshipping was easier to do or more geared towards with low Dollar impulse buy type items. I feel like higher priced items people really shop around prices, oftentimes like to see the item in person, and or really checkout the vendor, return policies, etc?
2. What's your return policy and how do you handle returns? In my experience the Chinese don't like to take returns and assuming the product isn't defective you probably have to pay for returns. If someone gets an item damaged during shipping or just decides they don't want the item what do you do for returns? Do you have them send it to you and you resell it? Do you have them send it back to the manufacturer? Who pays return shipping?
3. Kind of following up on previous questions but my buddy recently bought a table off wayfair. The wood color wasn't quite what he expected from the picture and the item didn't fit in the area he wanted to put it. Wayfair sent I believe UPS to pick it up for free. How would you handle this? Any way to avoid returns or tips on how to super accurately describe what people are getting?
4. Do you ship air or sea? How do import duties work? Does the Fedex fee for example cover everything or is your customer having to pay some money to have the item released to them?
5. How do you get the sellers to dropship for you? Do you just contact sellers and ask until you find one? Do they put your name or your upcharge on the invoices and customs slips?
Just curious if I could pick your brain a bit. With higher ticket items I can see people expecting a longer freight delivery time and being willing to wait, especially if the price is significantly cheaper than competitiors.
That said a couple questions...
1. I always thought dropshipping was easier to do or more geared towards with low Dollar impulse buy type items. I feel like higher priced items people really shop around prices, oftentimes like to see the item in person, and or really checkout the vendor, return policies, etc?
2. What's your return policy and how do you handle returns? In my experience the Chinese don't like to take returns and assuming the product isn't defective you probably have to pay for returns. If someone gets an item damaged during shipping or just decides they don't want the item what do you do for returns? Do you have them send it to you and you resell it? Do you have them send it back to the manufacturer? Who pays return shipping?
3. Kind of following up on previous questions but my buddy recently bought a table off wayfair. The wood color wasn't quite what he expected from the picture and the item didn't fit in the area he wanted to put it. Wayfair sent I believe UPS to pick it up for free. How would you handle this? Any way to avoid returns or tips on how to super accurately describe what people are getting?
4. Do you ship air or sea? How do import duties work? Does the Fedex fee for example cover everything or is your customer having to pay some money to have the item released to them?
5. How do you get the sellers to dropship for you? Do you just contact sellers and ask until you find one? Do they put your name or your upcharge on the invoices and customs slips?
1) Even cheap items come with problems, just go on ebay or amazon and search "by lowest price" there's just no way to stand out. If you're making $5 an item its going to take 200 sales just to make $1,000 do you really think those 200 orders are going to be completely problem free? A problem is a problem is a problem and will take up the same about of time as a problem on a $200 profit item.
2) My items are very high end and as such they are shipped with added insurance. The shipping typically costs $400-$900 and the buyer pays for the shipping. If damage does happen the furniture is returned to the specialized shippers for repair or replacement. If it can't be repaired it is covered by the insurance and the shipping company can send it to auction or whatever they do with it. In the EXTREMELY rare case the client simply doesn't want the item they understand before the item ships and agree to the terms that they are still responsible for the shipping cost. If they make the choice to buy an expensive item sight unseen they take the risk that they may not like it. We will refund them fully when the item returns to the manufacturer but the shipping cost is gone.
3) Apples and Oranges. Comparing my company, product and logistics to Wayfair is like comparing a Huffy bicycle to a Bentley. I only ship fedex for small items, like $350 custom walking sticks or $800 brass bookends. Larger items ship with specialty service companies. Ever wonder how they ship artwork worth $20 million dollars??? Those are the type of specialty shipping companies I work with. The buyer also agrees the deal is as-is and completed once they sign off on the delivery which I get electronic proof of. After that there are no "returns" there's simply no reason for it. It is delivered and fully setup in the home, you can make the decision to send it back at that time while the shippers are still there, otherwise you own it.
4) I do not ship international, though I will, and have shipped some smaller items to Canada so long as it can be done in a basic Fedex box. See all the stuff I sell is already imported Stateside by the manufacturer, eliminating any of that risk. The furniture is made overseas for the most part but the companies I work with are out of the Carolinas. I ship directly from their warehouses so I don't have to deal with any of the headache or overhead. Best thing to do is build a rapport with 1 person other than your sales rep whos actually involved with the paperwork, become their best friend, so they can update you or help you out for quick answers.
5) For me I already had the relationships. I just told them my plan, instead of having items shipped to my warehouse I just want to have my white glove shippers pickup from their location and take it directly to my clients. I still have to get on the phone, but I can do this on my lunch break or I simply call people after work when they leave me a voicemail and I make the sale. I had a good few weeks recently, shipped 2 smaller items, 1 table and just sold another one. Those 4 sales are going to NET about $6,000. This doesn't always happen, it might be 6 weeks before I sell another large item that nets me $2,500. The nice part is I'm not really laying out my own $. The clients pay, I pay the manufacturer and shipper, and thats it. I don't have to float any capital.
This is how the average deal goes.. small items ($200-$1,000) = checkout online, I make a quick phone call thanking them for the purchase and let them know I'll update their order once the item ships. I email the manufacturer the shipping info, they ship and bill my card and send me tracking. I email the tracking to the client and complete the order. (4 mins of total time)
Mid-Large items ($1,000-$15,000) = Usually a phone call or email comes in asking about it. I call on my lunch or after work. Get them comfortable buying sight unseen and fill them in on the whole process, get their contact info and let them know I'll double check the inventory and get them an updated ETA (I once had a guy wait 9 months for a custom table). I call them back with the timing, if its good for them I take a credit card or I offer a 3% discount for a check. I use Stripe to run credit cards right on the website's admin. I then email my manufacturer all the information and they ship. I update the client with the tracking information, give them the terms of the delivery and what to do should something be wrong and I make sure I'm more or less available during the delivery day to take an emergency phone call. (15 mins of total time)
You have to understand that the clients I work with are the 1%... They make more money via dividends a year than you and I probably make in our lifetime. They really don't care about $, they just want what they want and I have what they want. They're more comfortable dropping $5,000 than you and I are spending $50.
There are literally a million people trying to sell cheap product on 3rd party websites. How can you take that business model and spin it? How can you be a little different? How can you stand out? How is your company going to add value and fill a niche? Do you really want to build something and completely forget about it or do you not mind putting in a few minutes for each deal if the $ is there?
Instead of looking for the cheapest product possible out of china why not look for someone making the best product possible here in the states and sell that? Get rid of the import headache and risk.. Example: Tierod ends, You could probably import some super cheap tierod ends and try selling them on ebay and amazon next to 200 other people who are importing from the same guy to try and make $5 of profit. Or you could talk to the company here in the states building some of the best quality ones, and be the MOST EXPENSIVE person on ebay and amazon and make $100 of profit on each sale. Where are you going to stand out more? Are you really going to get more sales competing with 200 other people just because you're cheap like them?
Yes, It is very profitable for your business. If you really want to grow your business and enhance your business strategy so you can follow the following steps:
1 Increase your cash flow: Since you don’t stock the product, you don’t pay for it until it’s sold (after you’ve been paid for it).
2 Scalability: Test products and add new ones quickly without bearing the burden of ordering in bulk and having something fail (which ties up valuable time and capital expenditure).
3 Increase the lifetime value of customers: With the ability to add new and expanded product selections consistently, you can keep your existing customers engaged and returning to see what new items you’ve acquired. Costco stores offer a great example of this concept, and with a drop ship program, you can offer a similar experience online.
4 Low starting cost: You can start selling without a lot of early investment because you don’t have to buy wholesale or cover the cost of manufacturing your own products.
5 Enable expansion into new markets: Sometimes getting product across international borders can be costly and challenging, but if you partner with strategically located suppliers, you can often access the same or similar product offerings and ship them quickly. This allows you to test the market and validate if a given product is worth importing.
6 Reduce costs: Every time you need to touch a product in the supply chain, there is a cost associated. Ocean freight services, Port Operations, LTL and FTL Services, and warehouse employees all get added to the Cost of Goods Sold. Often, you will find that a percentage of your product offering would net a business higher profit margins if it were drop shipped.
7 Virtually unlimited inventory: One of the main reasons the drop ship industry exists is to help retailers and suppliers combat inventory distortion: the 800 billion dollar problem of over-stock clearances and out-of-stock shelves. By tapping into inventory further up the supply chain, theoretically, you can gain access to virtually unlimited inventory.
I hope these steps are useful to grow your Dropshipping business.
I can tell you that when buying things on ebay and amazon, if I see "item ships from Hong Kong" I will not purchase it. Because A) coming from that far away, it takes too long and B) the items from Hong Kong are often of very poor quality. I think customers are getting wiser to all the garbage being sold online.
I want to start drop shipping business. please some ideas with me.
That is essentially Amazon. Another name for drop shipper is distributor, you just don't house the goods.
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Best Strategy For Grow the Dropshipping Business
