Important Considerations For Drop Shipping

When selecting your drop shipper, there are also several important considerations you need to pay attention to. Such issues can determine the success of your business in the long term.

Wholesale Prices

The first issue to consider is the wholesale prices of the products. Ideally, the drop shipper should offer prices low enough that you can make a substantial profit when selling at the retail price.

Although the pricing points would not vary a lot for drop shippers of similar products, some drop shippers do offer a slightly lower wholesale price than other suppliers for the same product quality. Your business can benefit tremendously if you first scout around for wholesalers offering lower prices, as you can make a bigger profit margin for each sale.

Alternatively, you can also negotiate the pricing points with several of the drop shippers first, as some of them allow greater room for negotiation than others. If your drop shipping business can sell larger quantities of products, you should be able to secure a lower price for the products, similar to the discount given for bulk purchases.

Shipping Costs

The next issue you need to consider is the shipping costs. If your drop shipper is based in the same country of your target market, then you only need to pay for local delivery services. On the other hand, if your target market is located in a different country from your drop shipper, you may incur high shipping costs because of international shipping. It is thus better to select a drop shipper located in the same country as your customer base.

Having a drop shipper in the same country as your market also eliminates the hassles of international shipping, like security checks and slow delivery time. A lower shipping cost also encourages more purchases from your customers, increasing your profits.

Some drop shippers may also charge an additional handling fee for delivering the products to your customers. You should pay close attention to additional costs like this, as they may cut into your profit margin. Be sure to settle on a particular drop shipper after you’ve carefully analyzed all the costs.

Credit And Billing

The next issue you need to consider is credit and billing. Before starting your business, you need to clarify your method of payment. Does the drop shipper send you a monthly bill for all the products for each month? Or can they automatically deduct from your credit card each time a purchase is made?

This is very important for the cash-flow situation of your drop shipping business – the longer you can keep ‘liquid’ credit with your business, the healthier your cash-flow situation. Some businesses have inevitably collapsed due to poor cash-flow management.

Product Returns

Also, you need to take into account whether your drop shipper entertains product refunds and returns. Of course, a drop shipper that has product refund offers is beneficial. In the case that your customer receives a defective or unsatisfactory product, the customer can then return the product to the drop shipper for a new one, giving your business a much better reputation of satisfying the customer’s needs.

Usually, the drop shipper sends your products labeled with your company name, logo and address. Hence, if your customer contacts you for a product return, you should then provide them with the address of the drop shipper.

Credibility

The last point you need to consider when choosing your drop shipper is the credibility. Always choose a drop shipper that has a better reputation and that has been around for a longer period of time. Also consider the customer service of the drop shipper. If the drop shipper does not respond to your information requests professionally, then you should be wary of doing business with them.