Drop Shipping: How It Works & Best Practices For Success
It’s a fast-growing way to start an online business on a limited budget, or offer merchandise for your personal creative outlet. It means you don’t have to pay up front for your product, or warehouse and ship your product yourself. Yes, Drop Shipping can be an entirely worthwhile way to start your online business, and operate well into the future.
Want products to sell in your online store?
Need to provide Branded merchandise for your YouTube Channel, band, restaurant, blog or other creative professional endeavors?
Don’t want to carry inventory or mess with shipping?
If so, Drop Shipping can be a perfect solution to your needs. There are literally countless products available from a wide range of companies that are ready and waiting to help you get your products and Branded merchandise out the door, and delivered to your customers and fans without you ever even touching them!
From home and garden goods, jewelry, gifts and electronics to t-shirts, mugs, bags, jackets, cell phone cases and pillows with your logo or Branding, tons of products can easily be Drop Shipped for you these days. There is absolutely no need to do it the hard way or waste your valuable time and money.
So grab a cup of coffee and get ready friends, this post is all about Drop Shipping!
If you’ve been looking for an online business model with low startup or operation costs, chances are you may have heard of Drop Shipping. Or perhaps you need merch for your Youtube Channel, event or band and you’ve come across this idea. And you are going to be seeing a lot more talk of it in the very near future all over the web. I see this has become a hot topic online these days and a lot of people have questions about it. Most especially…
Is Drop Shipping Real?
Yes, it IS real. I can honestly, personally attest to that. Among other things, I’ve been selling Drop Ship products online for over 6 years now, from 5+ different eCommerce stores. I got started back when Drop Shipping was barely heard of by most, and I’ve been very happy with it.
So if you are looking into starting an online store with Drop Ship product I would definitely recommend it. You can also get your Branded merchandise available for your fans and followers fast and at no up front cost to you. The products and merchandise ship when you pass on the order to your supplier, and you don’t pay a dime until you have the money for it in hand. And you are in luck! Because there are a LOT more companies that will Drop Ship for you now. Which is great.
That’s why I decided to write this post; I concluded that this was valuable information and it was time to share it with you here on my blog. Because, while my main goal is to help you create solid websites and blogs, the actual “vehicle” for your online business, I have experience with the Drop Ship fulfillment model. And it can absolutely be helpful if you are starting your online business, or wanting to expand with more products.
After all, you may not already have a product that you make, or source yourself. You may have a physical retail store with products, but are in need of different or additional product to sell if you want to go online. Or you may have a service industry business with no physical products to sell, and would need products for your online store.
Either way, Drop Shipping is a REAL, and relatively easy way to source products to sell online.
Drop Shipping – Beyond The Hype
Now, I would like to address at this point all the information going around about people making Millions online with Drop Shipping. Those fast, over-night success stories look dazzling initially. And this is certainly possible. I won’t say it’s not, because many of those stories are true.
However, if you follow my blog you know I don’t like hype. I always want you to have a realistic idea of what you are getting into so you can make well informed decisions about your online business. So, I want you to know that the figures you hear in those reports are not the average result you can expect from Drop Shipping.
For one thing, you must keep in mind who reported those spectacular sales. I have hunted some of them down and checked into them extensively. I found that several of those huge success stories going around were achieved by professional internet marketing experts who know exactly what they are doing.
Also, I hunted down one of those “12 year old sells $100,000 in product in 1 month Drop Shipping!” stories. It turns out that although she did in fact make a ton of money…her father is a seasoned Internet Marketer. And I’ll just bet that had nothing to do with it.
Yes, a bit of sarcasm there. Couldn’t help it.
Anyway, just know that a lot of those stories are hype, or you aren’t hearing the whole story. But don’t get me wrong, you can do quite well with Drop Shipping. There are lots of people who make a full time living with this online business model. Enough so that the internet is teaming with Drop Ship ecom stores and products.
And the people doing this aren’t entirely all experts at Internet Marketing either. I’m no IM expert, and I’ve sold DS orders for up to $12,000 retail. Yes, for a single order, Drop Shipped for me by my faithful supplier.
But what I get a kick out of the most is doing it without ever laying a hand on any product. Okay, maybe it’s the fact that I can keep my business costs crazy low. Because I just don’t see the point in having a business that’s expensive to operate when you don’t have to. Being tied down to a warehouse 24/7, or having all that upfront cost to worry about making back before you enjoy profits are just a few things I don’t miss…ever.
There are also a lot of savvy Youtuber’s, artists, bands, musicians, and other creatives making good money from their Branded merchandise. Drop Shipping means no more need to scrape the money together to have a few t-shirts printed so you can offer your fans merch. They simply take orders, then quickly place orders with their suppliers, and have it shipped straight to their customers and fans!
You get the point, Drop Shipping IS real. I promise you.
Now, before we move on let’s briefly cover…
What Is Drop Shipping?
Drop Shipping is an online product fulfillment model wherein your supplier fills your orders and ships them from their warehouse. As I mentioned earlier, you don’t warehouse the product and ship orders yourself. All you have to do is use the images and descriptions provided by your Drop Shipper to create your product listings on your website. And when you sell an item, you go place an online order with your Drop Shipper. They do the rest.
The same thing goes for Branded merchandise. There are lots of online companies that will print your logo, slogan or message on t shirts, mugs, and other products and ship to your fans and customers on demand, one piece at a time. You charge what you want, leaving room on top of your cost for profit. They order, you place a quick order, they get their merch, you get your take. Simple as that.
Now, it may sound like non-sense, but Drop Shipping is actually predicted to go mainstream this year. Experts have called it, and they are saying that a lot of big brands will be opening Drop Ship programs in the near future. A lot of them already have. Take a look around – even Nordstrom has a Drop Ship program available now!
Crazy right? It’s just amazing the kind of products and merchandise you can source via Drop Ship now.
So after having my family wonder what the heck I’ve been doing online all these years, maybe some news station or business expert will finally explain it to them. Because it’s really hard to explain how you make money when no one ever sees you handle a product, or ship orders.
But I digress…
Of course, there is some work involved. Just a bit, but you’ll never avoid that. No big deal for those willing to put some effort into making good money. Above all, you must properly care for your customers. In fact, I attribute most of my success to providing excellent customer support. I created a post for you on communicating with your customers and providing professional support, so I won’t go into that any further here.
Suffice to say, when it comes to your customers you’ll need to send out an order confirmation, or set your eCommerce Solution to do this automatically when an order is placed. Then email your customer a shipping notification and their tracking number when your Drop Shipper notifies you the order has shipped out. You are also generally responsible for customer support when questions or issues arise.
Now let’s discuss The Pros & Cons Of Drop Shipping Your Product. I think we’ve pretty much covered the “Pros” of Drop Shipping:
➜ No upfront cost for product.
➜ No warehousing product or shipping orders.
➜ You can operate a sizable online business without employees, facility insurance, utility bills, a warehouse to buy, rent or maintain.
➜ You never even have to touch the product. (although I always highly recommend that you order one of each of the items you select to sell so you can see it for yourself, check the quality and test your Drop Shipper.)
Okay, so nothing is perfect, even Drop Shipping. There are things about it that can cause you big problems if you aren’t careful, so let’s discuss the “Cons” that can sour your business fast if you are just starting out. (Keep in mind that most of these can be easily avoided with some simple, careful “Good Drop Shipping Practices” I’ll go over with you in just a minute.)
➜ No control over your suppliers’ practices. This includes item quality check before shipping, packaging and shipping.
➜ Inferior or fake products being shipped. As in, your supplier switches products out on you once you have tested the product out. (Mostly only and issue when selling name brand merchandise though, and you should avoid this unless it’s coming from a licensed vendor anyway.)
➜ Lost in transit orders. This issue happens mainly for international orders, where packages can more easily get lost, the foreign shipping carriers don’t provide tracking #’s and insurance isn’t an option.
➜ Poor management of inventory. This means errors in supplier inventory reports; for instance, they report that they have 1000 pieces in stock, but when you place an order there are not enough to ship your order.
➜ Customer Fraud. Your customer orders, receives the order, then reports the transaction as fraudulent.
➜ Tax reporting. You DO have to make sure you pay your income taxes on things sold online.
➜ Not enough room in the price for profit; Drop Ship item costs are often much higher than wholesale, + the shipping costs.
➜ Drop Shipper cross promotion. Your Drop Shipper includes their branded materials with your orders, losing you customers.
➜ Fake Trademark items. This involves selling goods that are represented as Trademarked products, like Disney Mickey Mouse items, Harry Potters’ Wand, Game of Thrones merchandise etc.
I know, it looks like a big list. But again, a lot of these issues can be avoided with some simple practices I strictly adhere to. So, let’s move on to my Drop Ship Best Practices Guide I have created to help you out here.
The followinb is an outline of my basic recommended practices for choosing and working with a Drop Ship supplier. This is pretty much how I have run my Drop Ship businesses for over 6 years, and I’ve been happy to have few problems as a result.
Creatives Note: While the following practices do apply to sourcing Branded merchandise via Drop Ship suppliers, that process is much easier because there are many trusted go-to companies for this online. So, sourcing for merchandise you can have printed with your Brand is easier than sourcing ecom store products. I’ll be sure to do a post on that soon,and show you how easy it is!
Drop Shipper Vetting
While it is true that you have no control over your Drop Shippers’ practices, things like item quality checks, packaging and shipping issues can usually be avoided, in my opinion, by proper vetting and testing.
Perhaps I have just been lucky, but I suspect that my lack of issues is due to my careful vetting process for my Drop Shippers. First, I always use US Drop Shippers. Next, I always do my homework and search Google for reviews on the Drop Shipper. Well, scouring the net for anything that looks suspicious is more like it.
I check their online reviews, Facebook account, I check them through ScamAdvisor.com as well as similar sites. I make sure their business is located in the US, like they state it is. I take a good look at those reviews and study them to make sure there are not too many serious issues going on.
So, basically, yes, I stalk them online! It’s the safest, most accurate way to narrow things down initially.
If there are a lot of issues being reported, anything looks weird, or anything big is wrong, I go look for another Drop Shipper. Period.
If not, and things look good, I contact the Drop Shipper in person (I prefer by phone, but email works too) and make sure I have a good back and forth conversation with them. I like to create good relationships with my Drop Shippers. I ask questions I already have answers to from their site just to see if things line up, if they are patient in answering my questions. I make sure they are helpful and polite, and provide accurate information, a good sign they take their business seriously and are legit.
If all is going well, I sign up for their Drop Ship Program if necessary. I find that good Drop Shippers will require your information up front before they do business with you. And they require a tax ID number as well. (I don’t generally bother with Drop Shippers that don’t require this information.)
I then place an order for a couple of the products I intend to sell and have them shipped to my mom so I can test the whole process completely.
When the items arrive, I look carefully at the packaging, check out the products and test them.
Then I place a few more orders and have them Drop Shipped to other family members as gifts. Want to hear something funny?
I started my first few Drop Ship stores just before Christmas back in 2010 (convenient I know), and I simply went Christmas shopping via my top Drop Shipper prospects. Of course, I got reports back from family and friends when the packages arrived, and all had gone well. They loved their presents.
Next, if all goes well I list the products in my store with a inventory of 2-6 and sell them to customers. The products go out of stock on my site after these are sold, and I wait to make sure there are no problems. (This only takes a week or so, and you can work on your email list in the meantime.)
I usually contact the customers via email the day after their orders arrive and ask if everything was satisfactory. If so, I consider the Drop Shipper safe. But I still watch things like a hawk until I’ve had no problems for another 6 months or so.
Like I said, maybe I’m just lucky. But then again, I also consider this a pretty damn good vetting process. And it seems to serve me well, so I stick with what works.
This process also takes care of the second problem, or at least for me anyway; fake or inferior products being shipped. Since the Drop Shipper didn’t know I was shipping to family, and I tested with just a few customers before starting to sell in earnest as well, I have rarely had an issue with inferior products. And I have never had a Drop Shipper send a fake item out.
As for Branded merchandise for YouTube Channels, musicians, artists and other creatives; there are a lot of trusted companies that print and ship on demand. Just be diligent and check them out before you start selling your merch. Test a few orders before you go to large quantities of sales. These suppliers tend to do a good job of shipping, getting you tracking info., handling returns, etc. And this merchandising method generally has few problems when you go with a trusted supplier.
Lost In Transit Orders
To ensure that this is not an issue, I simply do not ship physical products outside the US. International shipping does not allow for tracking #’s or insured packages. I insist that all my orders are insured, and my carefully vetted Drop Shippers will just do this by default. (Oh yea, I don’t do business with Drop Shippers who do not insure their orders.) This way, if an item does not arrive, the Drop Shipper simply files a claim with the carrier and ships out anther order to my customer at no cost to me.
Of course, I take good care of my customers by communicating well with them over the extremely rare occasion when I have an issue. Although with US shipping, I have never had an order go missing. I have shipped to Canada many times with no orders lost in shipping. Even large orders over $2000. But unless I am selling digital products, I don’t sell outside the US and Canada.
Poor Inventory Management
Again, perhaps I am lucky, but I attribute my lack of issues here to my close communication with and careful nurturing of, my relationships with my Drop Shippers. Within a month or so they know me by name, and talk freely with me about our business dealings.
I always ask after inventory in person on my lead items. This way it’s easy to spot the frauds; because unless they are really good, they won’t keep up a conversation they have to keep lying to you to over an over about. Although, I have never had a Drop Shipper I suspected was trying to run a game on me.
I have had some of my Drop Shippers have some inventory issues around Christmas, but just a few. And I really can’t fault them for just a few at such a busy time. After all, everyone makes mistakes. (I have gotten an order or two switched up when I was busy at Christmas time.) And I wouldn’t want to even try to warehouse and ship that many items myself.
So, I cancel those orders that could not be shipped and apologize profusely to my customers “for any inconvenience the issue may have caused”. Maybe give them a discount coupon for their next order “should they choose to shop with me again”.
I find that as long as you are honest, attentive and communicate with your customers properly, they will usually accept your apology. And most of the time, they even come back again, which gives me a chance to make things right! And that brings us to…
I’ve only have that happen about once per year. I attribute this to the types of products I sell, usually higher end items that aren’t exactly cheap. My average order across all of my sites is around $110-$150. I believe this keeps the fraud down to a minimum.
Another solution I believe keeps this issue at bay; I only accept Paypal. Paypal won’t resolve a customer claim and require that you refund their money unless the customer returns the product to you. So most consumer scammers get stopped in their tracks right there, because the scam is to get ahold of free items without having to pay. So problem solved.
I have had a couple of customers try to pull this over the years, but once Paypal insists they send the item back in order to get their refund, they simply retract the dispute, keep their item, and I don’t hear from them again.
Okay, so a lot of people don’t know this, but you do have taxes to pay on your online income. First of all, you must pay 37% self-employment Federal income tax on everything you make online. So just take 37% of whatever you earn right off the top and stow it away in a savings account, or, if you are making a net of more than $1200 or so per month you should check with your accountant about paying quarterly or monthly taxes. And then, you need to check your state, county and city taxes to make sure you don’t owe anything there. If so – pay it!
Not Enough Room For Profit
Yes, this is a frequent problem. And that’s why I tend to go for higher ticket items. Because trying to get a buck or two out of cheap items is really tough, especially with shipping involved. I stick with products that sell for at least $100 so there is room for profit.
Basically, you are looking at the profit you make per sale. I only go for products with no less than a $20 profit after all is said and done; unless it’s a $10-$15 profit and I know I can really move a lot of the item. But I rarely do that. My average net profit per sale is $30-$35.
At any rate, finding a good item with room for profit is the aspect that I find generally makes finding a good Drop Ship product the hardest. Just keep looking until you find a popular product with room to move on the price. (And don’t forget to factor in your shipping costs and taxes!)
Drop Shipper Self Promotion/Cross Promotion
To avoid having your Drop Shipper cross promote to your customers on you, just be sure to find a Drop Shipper that provides something called “Blind Drop Shipping”. This means that the Drop Shipper does not include their branded materials, name or address with your orders. Because true Drop Shipping means your customers won’t know you didn’t ship the item yourself.
I also insist on going with Drop Shippers that will let you include your own branded packing slip with your orders. You generally have to specifically ask for this initially, but most good Drop Shippers will happily print your packing slip and include it in your orders for your customers. Most free of charge. If they won’t include your branded packing slip with your orders, I recommend moving on to another Drop Shipper who is willing to work with you better.
Fake Trademark Merchandise
This is simple; DO NOT sell Trademark Merchandise unless you are getting it directly from the Trademark company. It’s illegal, and you can wind up in big trouble. This means that selling those Trademark Harry Potter Wands or Disney Mickey Mouse pendants from AliExpress is not good practice. Because those Chinese manufactured products are most certainly not made by Disney. A good clue in here is the exceptionally cheap price for such goods. And if Disney or another big Brand company catches you representing your products as their Trademark goods, they could easily nab you for it!
This also comprises what is probably the most frequent reason for customers getting “fake” items. Because it obviously had to have been a Brand Name item in order to be fake. Unless the actual material its self is fake, like they shipped an alloy pendent necklace instead of solid silver. And again, that’s why I test ship a few orders to help ensure you get the item as described.
Well, that’s it in a nutshell. That’s how I vet my Drop Shippers and avoid disaster. And I’ve turned a good profit over the years doing it this way.
Just be sure to be professional, use good common sense, do your homework and check your Drop Shippers well. Do professional business with professional businesses. Connect and communicate effectively with your Drop Shippers, and cultivate good relationships with them. Don’t be lured in by fake Trademark goods. Pay your taxes. Be honest with everyone.
And above all, take good care of your customers and communicate well with them. Because they are what makes your business tick. Without them, you won’t be in business. So take care of any problems with your customers first and foremost, and sort out issues with Drop Shippers second if problems arise.
Drop Shipping can be a wonderful thing when done carefully and properly. It can be an enjoyable experience for everyone involved. At the end of the day, when your orders are all taken care of, your Drop Shipper is happy and your customers are happy, you’ll be very happy!
Your Online Drop Shipping Store
As for your website or store, I have lots of information here on my site about how to build your website. I know Shopify and other similar solutions are available, however I still recommend having your own “shell” site on WP. I use Shopify myself, as my eCommerce solution, integrating it with my WP sites. That way you know you have your business in your hands, your control as much as possible.
Maybe I’m a bit of a control freak, but I like to run a tight ship.
I prefer this method to ensure that my main business remains on my internet property. I know, Shopify is pretty safe. But I’ve been online for a while now, seen some empires rise and fall. This way if things ever went awry with Shopify, they decided to hike up their pricing, if it ever blew up or something, I could quickly set up an eCommerce solution through my WP site and be right back in business, right where my customers know where to find me.
Have a Drop Shipping question? I’m happy to help if I’m able; just leave your question in the comments box below and I’ll let you know if I have a solution, advice, or an answer!
So, that’s all the advice I have for you on Drop Shipping for now. I know this was a long post, but I hope you enjoyed it, and got a lot out of it. And I hope if you try it, you enjoy Drop Shipping, and find it as rewarding as I have.
Until next time…