If you are following along with this series, you will now know how to find profitable niches, and how to find the average sale price of items by either using the SaleHoo Research Lab or eBay Completed Listings. So now is the time to find the right supplier!
(Don’t worry if you are still working on finding a product to sell, you can catch up to this step when you are ready, but don’t delay too much – it’s important that you get ready for Christmas now!)
As I mentioned at the beginning of this series, I am going to be focusing on drop ship suppliers for this series of blog posts. There are a couple of reasons for this:
1. Financially speaking, drop shipping imposes no hurdles to getting started: You don’t need a lot of money (or any money at all, really) to get started
2. Because it requires no money up front, it’s a low-risk option for sourcing products
3. You don’t need to store stock or ship items to buyers which is a big bonus for a lot of sellers.
However, drop shipping is not without its drawbacks, but I’ll get onto this later. For now, let’s look at how to find drop shipping wholesalers. If you have ever asked yourself “where can I find wholesale suppliers?” or if you have spent hours looking for drop shippers, the following will be of great use to you!
During this lesson, I’ll cover:
1. How to determine whether a supplier is trustworthy. This will be useful to you if you are not a member of SaleHoo with access to the SaleHoo Wholesale Supplier Directory. Or, it will also help if you are a member of SaleHoo, but you find a supplier that isn’t listed in our directory, and you want to size them up before you pay them any money.
2. My top tips for dealing with drop shipping companies. I’ll answer some of SaleHoo’s most asked questions about drop shipping, dealing with drop shippers and the logistics behind it all.
3. I'll reveal the niche product and the drop ship supplier that I'm using to setup a store and get ready for Christmas
To demonstrate exactly how to spot a scammer, I’m going to show you a supplier website and together we are going to determine whether it is a legitimate supplier, like the ones we have on SaleHoo, or if it is a scammer, just waiting to jump onto vulnerable sellers
The supplier’s company name is Children’s Wholesale. Let’s take a look at their website now which you can find at http://www.childrenswholesale.com/. Play the video below to see how I determine whether a supplier is trustworthy.
The crucial question: The supplier is trustworthy, but do their prices leave room for profit?
After you have checked whether the supplier is trustworthy, or after you have found a supplier on the SaleHoo Directory, you need to determine whether the prices the supplier can offer will leave you room for a good profit when you sell the products to consumers. When you are drop shipping on eBay, this can be a drawn out task. I've already talked about why drop shipping on eBay is difficult, and why selling on another marketplace or your own website is a more profitable option, so I won't go into detail about that again, but here's what you need to be prepared for when you are comparing prices among drop ship companies:
- You may be asked for your Tax ID/reseller's license
- You may need to create an account and login before you can see prices
- You may need to email the supplier to find out more details about their drop shipping program
- You may need to contact a lot of suppliers before you find one that suits you
- This task takes time: Don't forget what I said about niches being hard to find - remember if they were easy to find, everyone would already be selling them and they wouldn't be as potentially profitable as they are
So once you’ve found a trustworthy supplier either on the SaleHoo Directory, or you’ve used my methods I outlined in the video, what’s next? How do you go about placing an order? What do you say to the supplier?
HOT TIP: SaleHoo members – need help finding a supplier? Remember that you can email us with your requirements and we will put together a list of suppliers for you. This service is free of charge, of course, and comes as part of your SaleHoo membership.
Top 5 frequently asked questions about dealing with drop shipping companies
1. How does drop shipping work?
I can see how some newbies get confused by the process of drop shipping. There are a few logistics involved, but it’s actually very simple: You find a drop ship company that you want to work with, and create an account with them.
Then you select the items you want to sell and list them on your own website or whichever marketplace you want to sell on. To list the items, you usually use the product photos and descriptions that your drop shipper provides.
When you make a sale, the buyer will pay you and you will inform the drop shipper. You pay the drop shipper their asking price and keep the profits for yourself. The drop shipper then ships the item out to your buyer. Simple! The diagram below gives an overview of how a drop shipping transaction takes place.
2. How can I make money when the drop ship companies sell products for the same price as the items already sell for on eBay?
When you come to find a drop ship supplier, it’s so important that you actually make contact with them. DO NOT simply go off the price you see on their website. Call them, email them, Skype message them or use any other form of contact they offer. Just make sure you actually talk to them.
Feel free to mention that you have researched the product and that you need to source the products for at least X price per unit in order to make a profit.
Here’s a sample email you can use to contact suppliers. Feel free to steal this and use it for yourself:
I’m [your name] and I found your website via SaleHoo.com.
I’m really interested in drop shipping [product name] and I see that you are a supplier of these. Based on my market research, I need to source these for around $[price] per unit in order to make a profit.
Please advise me on your per unit price. I’m also interested in your bulk-buying prices* and how much I need to spend in order to bring the unit price down.
If you would like to call me to discuss, feel free to call [your phone number].
Thank you for your time.
[Your full name]
*Why ask for bulk prices? It’s worth knowing how much you need to spend in order to get volume discounts because when you purchase at wholesale, your profit margins will definitely increase, in comparison to drop shipping. After making some drop ship sales, you might like to put some of your profits towards a bulk wholesale order which will earn you more profits on each sale.
3. What is a back order?
If you are a retailer using the drop ship method, a back order is a big headache! Back orders occur when you sell an item to a customer that your supplier is out of stock on. Not only are you out of a sale, but you will have to explain yourself to your customer who might not be impressed by this. Sometimes suppliers will get the items back in stock within a couple of days which won’t be an issue with most buyers, but it can be a problem if they bought the item thinking they would have it in the time frame stated on your website or listing.
I’ve personally had major issues with back orders in the past which caused me a lot of anxiety! Although I was making really good money using the particular supplier, I hated letting my customers down, and in the end, I moved on from the supplier.
There are a couple of things you can do to prevent a back order though. First of all, keep open and frequent communication with your supplier so that you know if stock levels are getting low. You should also ask your supplier about inventory management software. Some larger drop shippers have systems that allow you to log in and view their stock levels of any products so you can adjust your listings accordingly.
Your best defence, however, is to take matters into your own hands by purchasing a couple of your top selling items and keep them on hand in case your supplier’s stocks are running short. That way, if you get caught short, you can just ship the item direct to your buyer and avoid the hassles.
4. What happens if the customer wants a refund or exchange?
Everyone gets customer requests for refunds and exchanges from time to time. It’s not usually a big deal, but when you are drop shipping, things might not be so straight forward. All drop shipping companies have their own policies, but generally, all refunds or returns will be processed by you.
For example, if your customer wants to exchange a t-shirt you sold them for another size, they will email you, and you will contact your supplier and let them know. Your customer will usually then ship their original t-shirt back to your drop shipper, and the drop shipper will then send a replacement.
There are variations to how this works so it pays to talk about this with any drop shipping companies you want to work with. Additionally, make sure you fully understand their warranty, especially if you are dealing with anything electronic such as hair curling irons or baby monitors.
5. How much money can I make with drop shipping?
If you plan on selling drop shipped items on eBay, don’t expect a lot. As I’ve already touched on, drop shipping on eBay can be an impossible way to make money. If just one other seller is buying their items in bulk from a wholesaler, they will be able to undercut your drop shipping prices, and they will attract more sales than you. Really, if you want to sell on eBay, you need to purchase at wholesale and buy in large bulk so that you can actually compete with other sellers.
If you want to drop ship items and reap all the benefits of the low risk and low-cost way of sourcing items to sell, you need to sell on another marketplace such as Addoway or Bonanza, or you need to sell on your own website.
Not only does selling on your own website allow you to make the most of the drop shipping method, but you can actually make more money because your sales are not being eaten up by eBay or marketplace fees!
Selling on your own website also gives you the opportunity to build a brand and really get your products out there and create a loyal following of repeat customers. One of the most affordable, fast and easy ways to sell on your own website is to get a SaleHoo Store. Try your own SaleHoo Store for free for just. Cancel at any time, no obligation to renew.
To help you get prepared for the holiday season, we have this amazing SaleHoo Stores bonus package available when you join SaleHoo Stores:
- For August only, get FREE access to the SaleHoo Supplier Directory and Research Lab worth $67
- Plus get a FREE custom logo worth $97 with all SaleHoo Stores - available during August only
My Results: The niche and drop ship supplier I'm using to setup my store and get ready for Christmas!
Hopefully, you will remember from my last blog post that I found that cloth diapers are a great little niche with a good sell-through rate.
Well, using the SaleHoo Supplier Directory, I found a bunch of suppliers who offer these in a drop shipping program and I decided on this one: http://www.salehoo.com/suppliers/510eccb3-7c34-4202-a23d-e40e083f7354 (requires SaleHoo login to view). This supplier offers two packs of cloth diapers for US$33.97 (or US$16.98 per pair). Compare that to the data from the SaleHoo Research Lab which tells me that the I can sell the diapers for $25.10 and I've got myself a drop shipper I can work with!
Important Note: I advise against you using the same niche and supplier as me. If everyone copied what I do (and in my experience, despite disclaimers like this, people still do) this would no longer be a viable niche that you can make money from. I've simply listed this niche item and drop ship supplier to demonstrate that you can find niches and suppliers using the methods that I have shown in the last two blog posts in this series.
Coming soon: I'll show you how to setup your own web store in just minutes and write product descriptions that get found in the search engines, and entice buyers to purchase! I will also cover how you can expand your product range beyond the niche you find using the methods I have covered in my last two blog posts, so you can really expand your market and make more sales. Keep an eye out on your email inbox for details!