Dropshipping essentially means instead of buying inventory you display products – which are housed in a dropshipping wholesalers warehouse – on your own website.
When the sale is made, you purchase the product from the wholesaler who packs and ships the product directly to your customer. As the retailer, your profit is made from the markup you put on the product. It’s that simple – at least most of the time.
The main advantage of dropshipping for entrepreneurs – especially if they’re new to ecommerce – is that you don’t need to carry any inventory. This significantly reduces both the upfront costs and risk involved with starting your new business.
But, as you can expect, there are some pros and cons to this particular ecommerce business model, so let’s examine them further.
While a great entry point to the ecommerce industry, dropshipping is not a business model to enter into lightly, as the reality is, you’ll be in near-constant contact with your dropshipping wholesaler.
And working with the wrong supplier can cause you a world of transatlantic problems that you end up trying to solve while making no money. No bueno.
Saying that, dropshipping is not without its drawbacks. It’s important to consider these disadvantages, especially if your long-term vision is to build a brand that evolves into a household name.
That’s why Oberlo has a strict list of criteria that we use to vet all wholesale suppliers available via our app.
Okay, now that you understand the advantages and disadvantages of dropshipping, you’re probably wondering how you find and connect with the best dropshipping wholesalers quickly and easily.
Ordinarily, you’d just head to Google and start searching. Unfortunately, this approach is often time-consuming and rarely successful.
All types of wholesale suppliers, including dropshipping wholesalers, are often notoriously difficult to find online as they do a pretty shabby job of marketing themselves.
Worse still, even when you do stumble across a vendor you’re often met with an outdated, slow website which doesn’t create the best first impression.
[highlight] Expert Tip: Don’t be put off by first impressions, reach out via email and ask to see more samples of what they offer first [/highlight]
That’s why I want you to check out one of the best videos I’ve found on how to do advanced search on Google.
It doesn’t matter whether you’re looking for a new dropshipping wholesaler or a wedding cake baker – if you take advantage of these modifiers, you’ll find it a lot more effective to find what you’re looking for.
But, even if you become a master at scouring through Google, you might not end up striking gold.
See, as the ecommerce industry has continued to explode, lots of shady dropshipping wholesalers – who are much more internet savvy – have flooded the wholesale marketplace.
It’s worth noting that these are often the wholesale suppliers you’ll come across first. This is why it pays to have some understanding of the difference between fake and legit vendors, as it’s often very hard to tell the difference.
Look out for the following tell-tale signs, which are a dead giveaway.
Most wholesale companies hide their wholesale prices from you until you open a wholesale account. In order to do this, you need to supply them with your resellers licence. That doesn’t mean you won’t find the occasional legit company willing to do business with you without one, but be mindful as this is rare.
Trustworthy dropshipping wholesalers don’t tax their customers a further monthly fee for the privilege of securing their business. Avoid any vendor that tries to charge you any ongoing or repeat fees, as they’re likely to be shady.
That is, unless they’re a wholesale supplier directory – which is different from a wholesale supplier.
Wholesale supplier directories give you access to a large range of vendors categorized by product type and market.
The wholesale suppliers listed are usually vetted in advance to make sure they are the real deal. This means you can feel a little more assured that you’re finding high-quality vendors.
Even if you use a wholesale supplier directory, research vendors before you commit to working with them.
[highlight]Expert Tip: Please note that many of these directories do charge a joining fee. [/highlight]
Sometimes that’s a one-time thing, other times, you may be expected to pay a small monthly fee to retain access.
Annoying, I agree!
But once you’ve nailed your supply chain you can cancel this subscription and draw back that monthly expense into your business.
Here’s something to bear in mind though: there are some fees attached to working with your dropshipping wholesaler that you need to be mindful of throughout the process.
These small costs add up and push up the individual cost of goods price (COG). And, if you want to stay on top of your bookkeeping and remain profitable, you need to have a clear understanding of these numbers.
It’s normal for dropshippers to include a per-order flat rate for each transaction. This can range from $2 to $10 depending on the size, weight, and location of the item being shipped.
I know this can be alarming at first, but if you plan to go the dropshipping route you need to be aware that this is an standard industry fee. This way, you can factor it in when you’re working out the profitability of your new online store.
Then there’s the hurdle which trips up even the best intentioned new online store owner: the infamous and dreaded MOQ (minimum order quantity).
As mentioned in Chapter 3, this is a order size guideline that many legit wholesale suppliers will have in place to deter those who don’t plan to spend enough to be a valuable or long-term customer.
Sad, but nonetheless true.
Remember though, this is just a guideline and it can be negotiated if approached smartly.
If a dropshipper still refuses to deal with you, another way to get around it is to suggest that you pre-pay an agreed sum, which they can then apply to your current and future orders.
Not only does this allow you to meet their MOQ requests – without buying a bulk order. But equally importantly, it helps you build some credibility and goodwill with this wholesale business as they will see that while you might be small, you have a big vision.
[highlight]Expert tip: One way I get wholesale suppliers to be flexible with MOQ is by posing as a buying agent – not the business owner -and asking to make a small sample purchase.[/highlight]
In a word, yes!
But the reality is that it takes a considerable amount of research, luck, and work in order to make a dropshipping business a success. That shouldn’t put you off, though.
You also need to factor in what your budget will be for marketing and promoting your products. I’ve found that many newer store owners tend to overlook or underestimate this cost.
Yes, you can start your dropshipping business without a large upfront investment – but you still need to invest in your online store if you want to turn it into a thriving business.
This article shares some costs you need to consider before you decide whether dropshipping is the right business model for you.
We all start with the resources we have so don’t fret if you can’t come begin exactly how you’d like. It’s a process.
Stay away from structured, complicated products. Think about the processes that need to go into creating the item, as the more pieces that need to be assembled the more room there is for error. This advice applies to everything from clothes to electronics. Buy basics.
Shipping costs vary depending on where the item is coming from and going to. I like light but sturdy items, as they are cheaper to send and can often be cheaper to replace.
Some of the larger wholesalers have warehouses in different locations. Make sure you know what locations they have, and if they use the closest warehouse to ship to your customers. This helps keep your shipping costs down.
Just like space in a warehouse and brick-and-mortar store is valuable, so is space on your online store. People want to find what they like quickly and easily, so get rid of items that are just not selling as quickly as possible.
Sadly, it’s possible to lose your biggest supplier overnight. This isn’t a problem if it’s a product that’s not selling, but when the supplier of your bestseller goes up in smoke, you have a problem. Always have a plan A, B and C.
You can also apply many of the other tips found in other chapters of this guide and modify them to suit your personal situation.
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If you use the advanced Google search tips and still come up empty-handed, then it’s time to delve even deeper. I’m going to share some alternative ways that you can find and buy wholesale clothing both online and in-person.