Drop-shipping problems

I recently paid membership fees to two top 10 wholesale drop shippers as listed on Salehoo. They both have their own set of problems to figure out and deal with. The products they offer at wholesale prices are not lower than what they sell for on the internet then you take their high price shipping cost which makes it impossible to make a sell and if you do your lucky to make a $1.00 profit. Don't forget to account for the 18% Amazon fee and pay-per-click (Adwords) cost to market on Google search.

They claim to have over 100,000 products and SKU numbers in inventory and stocked in the warehouse. When you actually look at the products they offer its ridiculous. For example one of their categories is sports memorabilia and collectibles but all it is is 7,000 products of floor rugs and floor mats with sport logo's.

The data feed they offer has errors when I upload to my site, so i have 1,000's of errors on my site in the title and description fields. They said "we are aware of the problem and currently working on it".

From the looks of it online retail and drop shipping is a joke. I have very low scores for the so called best wholesale drop shippers to use. The monthly fee's are not recouped in profit. Here are the fee's it takes to open up an eCommerce website and sale on platforms:

Amazon Pro $39.99/month
eComm site builder $27.99/month
Wholesale drop shipper $29/month
Wholesale drop shipper $37/month
SSL $55/yr
Forum $57/yr
Google Adwords $300/month on a $10 a day budget

Anyways, please help I must be doing something wrong! I want to do this and not give up.

Damon

Wow no one replied to you.
Looks like you had a rough time.
Are you still trying ?

Hi Damon,

Has this inquiry been serviced through support channels?

I'm a bit confused by your list of outgoings that you have listed, I assume from what you have there that you are operating both an Amazon account and your own website?

Hi Damon,

Have you got the solution from the support channels? Can you share it here? Thanks!!!

Hi Carina,

I'm not sure what you mean by solution?

If you mean how to save on how much he is spending, that's very straight forward. For example, that $300 a month on Adwords is quite clearly a waste of money just to start with. So 300 a month can be saved there just by killing off that strategy.

It's hard for me to comment on the other costs or over all strategy that's in place until I know far more detail than I currently do unfortunately, but on the face of it, it does seem to be a not very well researched approach from the very start and that is now just compounding.

i have noticed the same thing. every drop ship site i am on has the cost for me the same as others are selling it for.

i am also looking into the labs and it shows the product but when i look at the suggested suppliers none of them actually sell the product.

Hi Jennifer and welcome to the forum,

The labs is not synced with any suppliers in the directory. The labs provides data to assist in giving you ideas as to possible markets to explore. If you are unable to find any product from a supplier in our directory, then you can email Link hidden: Login to view with the product/s you are wanting to source and the support team will do their best to find you some supplier leads from outside of the directory you can follow up with if you wish.

Cheers

Hi forum members,

Beginner drop shipper here too and I'm experiencing similar frustrations. As suggested by one of the newsletters, I phoned some very promising dropshipping companies to introduce myself and obtain wholesale pricing. I saw they were retailing their products I their site. When I asked if they had specific fees to drop ship, they said no. I asked for their wholesale price and they said it's the same price on the site and that I would only get a break if I bought in bulk. The margins for standard dropshippers seem impossible.

Another wholesaler that specifically markets themselves to dropshippers, lists retail pricing. Even when asked about any wholesale pricing, they claim that it is they are showing their wholesale pricing. Their prices are the same if not more than market price.

Is this common for dropshippers listed on salehoo?

Thanks in advance,
Kim

Hi Kim and welcome to the forum,

I think it's important to firstly highlight the fact that drop-shipping and wholesale are two completely different supply modes. I always worry when I see people using the two terms of "wholesale and "drop-ship" in the same sentence because there is such a vast difference between the two..

As one of the suppliers mentioned in your post, clarified for you in their response to your inquiry, you would need to buy in bulk to receive a wholesale price on your purchase,

Wholesale is buying in bulk, where as drop-shipping is buying in single item lots and not even doing that until you have a confirmed sale. So wholesale is always going to produce a much greater cost benefit to a purchaser because their is much more risk associated with that type of purchase.

E-commerce is a risk equals potential reward business, those that risk the most stand the benefit the most through the potential rewards in regards to monetary value. Those that use low to no risk strategies supply strategies will always find it much harder to gain the same sort of rewards..

Drop-shipping has its advantages, but price is certainly is not usually one of those advantages. That of course is completely logical from a commerce perspective. For example, if a low to no risk strategy like drop-shipping provided the same potential monetary reward as wholesale buying did, then no one would ever take the risk of out laying so much cash up front.

The second example you mention in regards to a supplier offering you their full retain price as their drop-shipping price is concerning and we would certainly like to follow up on that. It's not unusual for drop-shippers to be also retaining their own products through avenues such as their own website, but the norm is to offer some level if discount to agents for signing up to their drop-ship programs.

If you could post their trading name then I can make sure that is followed up on with support. Feel free to PM me the name if you prefer.

So Mark, after reading your reply, I'm feeling discouraged... dropshipping sounds more like a sales pitch to buy wholesale???

To be honest, I have no idea why you would get that impression.

In my reply, I only highlighted the fact that drop-shipping and wholesale are two different things. Wholesale has its advantages and disadvantages, as does drop-shipping, but those advantages and disadvantages are different.

Wholesale: advantages is price because you get rewarded for spending cash up front by way of cheaper per unit prices. The disadvantages of wholesale include needing to spend that cash up front, as well has needing storage space for the stock and then arranging packing and shipping of orders.

Drop-shipping: advantages are low to no cash up front, no storage problems because you have someone warehousing the products for you and taking care of the shipping of orders for you as well. The disadvantages usually revolve mainly around per unit price being more expensive that wholesale and customer service can also be an area of concern as well.

So on balance, it's very easy to mount an argument that drop-shipping provides more advantages than wholesale, but they are very different advantages and they come at a cost. Drop-ship suppliers aren't running a charity, so they are going to charge for services like warehousing and the labor involved to pick, pack and ship your orders one at a time. So those charges end up being built into the price of the item in most cases, so while you don't see them, they exist.

Combine that premium you are paying for that level for service and then add in the fact that you aren't buying in bulk and then it starts to become clear why drop-shipped prices don't usually compete with wholesale prices. It's not up to me to make a sales pitch for either, it's my job to make sure people understand the differences so they can then make an informed decision on which best suits their needs.

They are two different supply methods that can require different marketing approaches, that's the point I am trying to make. Where I see a lot of people making mistakes is looking at using Drop-shipping to try and compete in wholesale market-spaces, such as the top 5 hottest selling spaces on an eBay for example.

Those spaces are saturated with wholesale sellers and are very price sensitive markets, full of buyers looking for the best price. That type of market for a drop-shipper is a nightmare to try and crack, it's a wholesale playground.

So you have to really clearly identify your market based on your supply model to give yourself the best possible chance.

I'm starting a sellers account on Amazon and buying some lightweight beauty items with low shipping costs from here. With that, i should make a return of 350?

I spent $38.00, so that's not too bad.

Once i make some profit, I'll use that to buy more and then larger items. I've tried other sites like Ali Express and there's so many fake products on there, its discouraging. So now i'm back here to my SaleHoo account because I need to pay bills, as usual lol.

I will make sales, but i think its going to take a while. I think those companies like DSI are a croc or scam of some type. Asking for $2000 once you take the first step into course videos. No way are they making sales of 40 grand worth of profits, unless they do that recruiting in a pyramid type of scheme?

Not possible. If i can make $1,000 Canadian per month, i'd be happy, but I'm aiming for more!

The conversion from CAD to USD is tough too, especially because math seems to hate me lately lol.

Hi Tanya, I should start by saying, welcome back :)

In regards to the profit margin you suggest that is based on spending $38.00. I'm not sure how you can up with that equation, but that's certainly an impressive profit margin if you can turn $38.00 into $350.00. It's not impossible of course, but it will all depend on the market itself as to what your profit margin is going to be, but good luck with it.

You're idea about using your profit to roll back into your business is smart business sense. Rolling profit back into your business is how you build a business, especially from a low starting base. The mistake many make is that they only ever roll the principle back into the business and draw the margin out straight away.

That of course means that you will only have the exact same amount to spend on the next lot as you did previously, so there is no option to build the business. If you can roll whatever margin you make back into the business by way of increasing your stock profile, then you start increasing your business base, which in turn then starts to increase your margins.

It's a compounding effect!

So while it's very tempting to keep pulling the margin out and rolling the principle back in, that's akin to only paying the required minimal monthly repayment on the credit card and only ever paying off the interest, but never making a dent in what you owed to even start with ..... the credit card companies LOVE that btw.

$250.00 a week is possible, but not easy in a super competitive market. I think you're going to have to really get smart with your advertising copy, build up your brand image to give consumers as much confidence as possible to deal with and really focus on your marketing.

Most people making that sort of cash flow per week have a lot of boxes ticked and they spend a lot of time staying on top of that as well.

In regards to companies that charge absurd amounts of cash for so called secrets of online sales success. Well, I've made my own personal views on these types of schemes well known here on the forum plenty of times and nothing has changed. There are no secrets to being successful in e-commerce, it's just a good understanding of business principles and market forces, nothing more.

The biggest problem is, that many people would rather pay absurd amounts of money to be told that there are secrets, rather than be told the truth, because the truth is never as exciting and as enticing as these snake oil peddlers make it out to be!