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Dropship Detective

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Table of ContentsTable of Contents . 3Introduction . 4What Is Dropshipping? . 5Pros Of Dropshipping . 6Cons Of Dropshipping . 6How Dropshipping Works . 8Manufacturers . 8Wholesalers . 8Retailers . 9Dropshippers . 9Avoiding Scams . 10Investigating Companies . 12Finding A Dropshipper. 16Conclusion . 18Resources . 19Dropship Detective

IntroductionStarting any type of retail business is never an easy task. It typicallyrequires a large outlay of cash in the beginning to purchase stock,invest in warehouse or store space, and handle initial overhead costs.With all the other expenses required to start a business, buying stock isoften the straw the breaks the camel’s back with regards to finance. It’soften the largest expense of any retail startup, and sometimes it’s justtoo much and the business fails to get off the ground.Plus, there’s always the risk that you’ll spend thousands of dollars onproducts that never sell, and you’ll be out of all that money and stuckwith items you can’t get rid of.But there is a better way!Instead of spending a fortune upfront on product, and then having tofind warehouse space to store it, and figuring out the logistics ofpacking and shipping it to customers, why not just use dropshipping?Dropshipping will allow you to get started with little to no upfontinvestment, while still being able to offer customers the products youwant to offer!In this guide, you’re going to learn the basics of dropshipping, and howto find the best suppliers.So let’s get started!Dropship Detective

What Is Dropshipping?Imagine setting up your own online store with dozens, hundreds, eventhousands of products without having to spend a single dime upfronton inventory.Instead, you find products on another website (let’s use Amazon in thisexample since most people are familiar with it), add products to yoursite, and price them higher than they are being sold on the original size(Amazon).Let’s say you are selling a frying pan that sells for 14 on Amazon. Youprice it at 20 on your website. When a customer orders it, they payyou 20. Then you go to Amazon and order it for 14, having Amazonship it directly to the customer, and you keep the 6 difference.Pretty slick, right?Only dropshipping doesn’t require you to pay full retail price likeordering from Amazon. Instead, you can often get prices that aren’t allthat much higher than true wholesale prices.Of course, you have to be careful. Some so-called dropshippingcompanies are actually selling at or very near retail, so it’s nearlyimpossible to make a profit. Sometimes they charge a monthly or yearlyfee to access their inventory, which cuts into your potential profits evenfurther.You also have to make sure the company isn’t going to be slow withshipping, which could seriously harm your reputation.Dropship Detective

Dropshipping has a lot of pros and cons, so let’s take a look at thosebefore we continue.Pros Of Dropshipping Lower Upfront Investment – Because you don’t have to pay forinventory upfront, your initial business startup costs are muchlower. No Warehouse Space Needed – The dropshipper is the one whodeals with inventory, so there’s no need to rent a warehouse ortake up space in your home to keep your inventory. No Shipping Hassles – The dropshipping company also handlespackaging and shipping products, so that takes a lot of work offyour hands, freeing you up for other tasks, like marketing, andsourcing other products. More Products – If you don’t have to worry about whether aproduct will sell or not because you aren’t paying for it upfront,you can take more liberties with the products you add to yourstore. If a product doesn’t sell, the only thing you’ve lost is thesmall amount of time it took to add it to the store, and you canremove it just as easily.Cons Of Dropshipping Low Profit Margins – Because most dropshippers are not truewholesalers, you’ll find your profit margins are lower than theywould be if you bought inventory directly from wholesalers. InDropship Detective

fact, there’s often a middleman between the wholesaler anddropshipper, which cuts into profits even more. Delivery Issues – Because you will have no direct control overshipping, there may be times when customers don’t get theirorders on time, or receive the wrong product or damagedmerchandise. Because they bought the item from you, they willexpect you to be responsible, and they aren’t likely to accept thefact that you used a dropshipper as an excuse. In fact, they’d likelyjust see that as a reason not to order from you again. Inventory Issues – You may also find that your dropshipper’sinventory control system doesn’t sync with your own, whichmeans there may be times when a customer orders a productfrom your site that is not currently in stock with the dropshipper.In this case, you’d have to either source the product elsewherevery quickly, or issue a refund and an apology to the customer. Higher Shipping Costs – Because you won’t be able to make dealswith shipping companies for volume discounts, and becausecustomers may order products from multiple dropshippers in asingle order from your store, you may run into shipping issues.Shipping costs could eat into your profits pretty badly if you aren’tcareful.It’s a tradeoff, really. You sacrifice larger profit margins and controlover inventory and shipping for a lower upfront investment and lesswork overall. It’s up to you to decide if dropshipping is right for you andyour business.Dropship Detective

How Dropshipping WorksBefore you can truly understand how dropshipping works, it’simportant to understand the basic supply chain. Products you see instores often go through three, four, five, or even more companies inthe supply chain before they arrive in stores.ManufacturersManufacturers are the first step in the supply chain. (Unless of courseyou count the companies that supply the raw materials, but that’s adifferent arm of the supply chain.)Manufacturers create the products, but most of them don’t sell directlyto the general public. Instead, they typically sell through a wholesaler,or sometimes another middleman brokers the sale of the product fromthe manufacturer to the wholesalers.Occasionally, manufacturers may sell directly to retailers, but theyusually don’t deal with selling direct to companies.WholesalersWholesalers are middlemen. They buy from the manufacturer andresell at a higher price to retailers. They usually don’t make anenormous profit per item, but they make their money by selling in bulk.Dropship Detective

Wholesalers may offer dropshipping, but usually they just sell toretailers.RetailersRetailers buy their products from wholesalers, or directly frommanufacturers. They sell directly to the public, often at fairly largemarkups. They may offer dropshipping, but because they are selling atfull retail, they usually don’t.DropshippersDropshippers usually fall somewhere between the wholesale and retailareas of the supply chain. They purchase from wholesalers, orsometimes manufacturers, but sell at near retail prices.Dropshippers cannot sell at wholesale prices unless they manage to buytheir products directly from manufacturers, which is relatively rare.They usually exist on fairly slim profit margins, because they have to sellbelow retail in order for those who do business with them to also makea profit, and yet they have to buy at the same wholesale prices as mostretailers.Dropship Detective

Avoiding ScamsBefore we get started talking about finding quality dropshippingsources, it’s important to note that there are companies out there thatare borderline scams, and others that are nothing but scams.These companies prey on people who don’t know any better, claimingto offer wholesale prices and actually selling at retail, or even higher, ornot even shipping anything to customers at all.There’s no way to be certain to avoid scams, but there are a few thingsyou can do to lessen your chances.First, as a general rule, say no to monthly fees. Those companies thatoffer monthly fees usually make most of their money on those fees,because they realize that customers will have a hard time findingproducts to sell that they can make a profit on. Thus the averagecustomer won’t even order anything at all, and the company still makesmoney via that fee.Keep in mind there are a few legitimate companies that do requireparticipation fees, but those will usually be easy to spot because they’llhave more positive reviews online than other companies, as well asmore recommendations.Next, be sure to check the company’s prices to be sure they aren’tselling at or very near retail. If they are, you’re not going to be able tomake any money with them.Dropship Detective

Finally, be sure the company doesn’t just sell directly to the generalpublic. If they don’t require you to apply for an account, often requiringa business license or tax ID number, they usually aren’t legit.Dropship Detective