The idea of drop shipping is that a wholesale drop shipper (the supplier) offers you the option of selling products without buying them first. They also act as service providers who prevent you from having to:
But they don't do all that for free! When you buy from a wholesaler offering drop shipping services, they add a fee to cover the costs involved with offering this service.
This is usually US$2-US$5 per item, which means you must be careful when you think about the products you want to drop ship, as there are some items which are much more suitable for drop shipping than others. We suggest going for:
You need to explore a few different possible suppliers. Try our own SaleHoo Directory which is full of reputable sellers stocking a wide range of products from cosmetics to farming equipment.
For local suppliers, try flicking through your Yellow Pages in the Wholesale or Suppliers sections. Look for ones who have plenty of experience in drop shipping and who understand the importance of sending out your items in a timely manner.
Before negotiating a deal with them, ask:
This step could also be Step 1 those who know exactly what they want to sell. Start by trawling through your suppliers product range and pick out a few items which interest you and do some market research. Find the best selling items by:
If none of your products match up, go back and find something else to research or try searching the same product under different key words and categories.
Not all eBay sellers need a tax ID (also known as retail or resellers license, tax ID, resale number resale certificate or vendor's license) but some wholesale suppliers require you to have one before they will do business with you.
You need to get a sales tax ID if you are inside the US or Canada and running a business (not just selling items from around the home).
Note that some US states including Alaska, Delaware, Montana, New Hampshire and Oregon do not require sales tax IDs. So let your wholesaler know if that’s the case, as they may have another form for you to fill out.
Applying for a tax ID is easy and inexpensive; you can do it by visiting your local county clerk’s office or online – just Google “[your state] + sales tax ID”.
To get a sales tax ID, you may need to be a business entity; a company or a sole proprietor (which applies to a lot of at-home online businesses), and to have a Federal Tax ID number.
The obvious selling platform is eBay but there are plenty of other online auction sites out there which are growing rapidly and getting a lot of traffic (and some are even fee-free or much cheaper to use than eBay!)
Learn More: Dropshipping on eBay
Check out sites like Bonanza.com or Amazon.com and see if there is a market there for your product range. It's a good idea to diversify when it comes to selling on online auction sites as each site has its own unique visitors (not everyone checks eBay first!) and with most sites being free to join, there is no reason not to give others a try.
For sellers who are really looking to diversify, consider setting up your own eCommerce site such as a SaleHoo Store which is the fastest and easiest way to open your own store. You can get a free 30 day trial of SaleHoo Stores right now and try it for yourself.
When drop shipping, you will list your items in the same way you would if you had the stock on hand, but when selling on eBay (and some other sites, you must check individual policies), you must disclose in your listing to all potential buyers the location of your item.
For example, if your supplier is based in Hong Kong, you must display this in your listing so that buyers are aware that there may be longer than expected shipping times.
Drop shipping orders work a little differently than regular wholesale orders. Here's what a typical drop ship order will look like:
Good luck with your drop shipping business! For more information check out our free drop shipping advice.