Dropshipping

[brianm4289]

Does anybody here run an e-commerce business and use a dropshipper for their products? I am just wondering how this is working out for you if you do because I have highly considered this route... but the margin for profit doesn't usually seem that good unless you buy a hugggge amount of products per month most of the time. With a dropshipper, eBay is out of the question from what I have seen, the market is so saturated with everything on eBay that they are selling products below what the best price bracket for most dropshippers is

 

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[Sparlin]

As I understand it, you want to find a niche product that would allow you to net at least $50 a sell. This way you have less orders to process but still a substantial amount of profit. In order to meet this goal you'll have to find something that is light enough not to be cost prohibitive in shipping. You'll also need to target a durable item so people can justify the one time or occasional purchase.

 

[WestCoast]

We drop ship a fair amount of stuff each day, and it's quite a bit more complicated (to do right and make a lasting business out of it) than I think it seems.

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You need to have a good product and know something about it. We just have products that fit in our normal retail/e-commerce product line, so it's pretty easy there.

I can't imagine getting any joy out of drop shipping oil filters if you aren't into cars. It's just not worth it from my perspective...

Margins are obviously important. We get our best margin from vendors we are already large dealers for. At a certain level, they won't charge a drop ship fee, you'll get their highest discount, etc.

Not sure why $50 of profit is a magic number at all, each person will have a difference tolerance for the amount of work they will put in for the rewards.
We aim for a 45% profit margin on our drop ship items, but we'll take 35-40% without grumbling too much.

Obviously, if you are doing this on a $5 item, volume will have to be enormous to justify your time, but again, that's up to you to figure out if it's worth it or not.


YOU NEED TO BE WORKING WITH GOOD VENDORS. Customers are learning very fast how this works, that YOU don't have it in stock, but the warehouse does. So, if the warehouse doesn't have it in stock, you are really hung out to dry.

You need to track a lot of SKUs if you aren't careful, and that can add up to a lot of work quickly.

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Most places are offering free shipping, which is not fun, but eventually that will just get built into the price of goods, so it will work out for the supply chain.


Returns, etc etc, we handle those ourselves, even on a drop ship item. Want to keep customers happy, as they CAN go other places.

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All in all, it's a nice cherry on top of the daily business, but we don't personally rely on it for a large total % of our business.

I know some stores that do, and if they are FOCUSED, they seemed to do just fine. When it is a full shotgun of parts, pieces and apparel, well, I think they make a lot more work for themselves for the given returns.

Good Luck!

 

[wildambitions]

Does anybody here run an e-commerce business and use a dropshipper for their products? I am just wondering how this is working out for you if you do because I have highly considered this route...

BioPhase has many threads on this topic. Look him up in the community and search through his posts.

 

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[biophase]

Definitely try to start a business on something you like or you will hate learning about it and answering questions about it. I used $50 as a magic number because I wanted lower number of orders and higher profit per order. But you can certainly go for high volume and low profit. It's just more work.

 

[brianm4289]

For the most part the items I would be selling are car body parts which can have a hugggge shipping cost which is what makes me fear the returns so much... any advice? maybe find something easier to sell??

 

[biophase]

For the most part the items I would be selling are car body parts which can have a hugggge shipping cost which is what makes me fear the returns so much... any advice? maybe find something easier to sell??

The customer pays for shipping back to you, unless you ship the wrong thing or its broken.

 

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[TaxGuy]

Kenric- I should know this, but did the $50 figure come from 4HWW?

I know it suggests $50-200 is the ideal range b/c it's about quality of customers, not quantity. At the same time he also talks about an 8-10x markup which unless you're creating your own product is nearly impossible. WWB puts the number for dropshipping profit at 15-40% with the cost being total cost of goods(supplier cost, shipping, marketing, dropshipping fees, etc) NOT just sale price - product cost.

 

[biophase]

Kenric- I should know this, but did the $50 figure come from 4HWW?

I know it suggests $50-200 is the ideal range b/c it's about quality of customers, not quantity. At the same time he also talks about an 8-10x markup which unless you're creating your own product is nearly impossible. WWB puts the number for dropshipping profit at 15-40% with the cost being total cost of goods(supplier cost, shipping, marketing, dropshipping fees, etc) NOT just sale price - product cost.

4HWW suggested the product price be $50-$200 I believe because that is the highest cost in which he thinks people will pay without calling the store. I have found that people order anything online, even if its $2000 without calling.

The low end $50 is there because you are probably looking at $20-$35 profit at the most per item.

 

[psynapse]

We drop ship all of our products entirely, and generate over $1M in revenue from it. Amazingly, we are able to sell some products for 80% gross profit, though our average is 45% (we don't sell anything with less than 25% gross margin).

Our model is very similar to CSN Stores and Mercantila.

Key to success is definitely niche ..

 

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