Dropshipper Business

Look before you leap: Learn the True Nature of your Dropshipper

What does a dropshipper do?

So, you’ve decided it’s time to make some money on eBay or an online store. You’ve searched the internet and found out about this cool thing called “drop shipping”; a fantastic way of selling products online without worrying about stocking or shipping, and now you can’t wait to get started. But before you start business with the first site you found on Google who offers drop shipping, you should stop for a while to understand who this drop shipping company really is.

Of course you know by now what a drop shipper is, but the question you need answered is who the drop shipper is. Is he a manufacturer? Is he a wholesaler? Or is he a middle man? To understand who your drop shipper is, you need a basic understanding of the Supply Chain.

Understanding the Supply Chain.

The Supply Chain starts with a Manufacturer – the person who makes the product from raw materials. Let’s say there is a demand for hiking boots in a town called Hikers Top. A Manufacturer will spot that demand and start producing a large bulk of hiking boots from raw materials like leather, cloth, rubber etc.

Now, since the Manufacturer is so busy sourcing raw materials for production and looking after his factory, he doesn’t have enough time or money to build a store in Hikers Top and sell his boots directly to the town residents himself. So he finds a Wholesaler who will buy his hiking boots from him in heavy bulk for $50 a case (one case=12 pairs of boots). This price is the Manufacturer’s Wholesale Price.

However, this Wholesaler will not sell the hiking boots to Hiker Top’s residents himself either. He is a Distributor who will distribute the hiking boots to different Retailers. He is the person who links the Retailer with Manufacturer. The Wholesaler/Distributor will work with different Retailers who have shoe stores in Hikers Top town. A shoe store will buy truck loads of hiking boot cases from the wholesaler for the price of say, $100 a case. The Wholesaler makes his profit of $50 per case.

Now the shoe store staff will unpack those cases and display a pair of hiking boots for the price of $20 a pair. The shoe store sells thousands of hiking boots to the residents of Hikers Top because it was just what they were looking for and they love the boots. The shoe store makes a nice profit of $140 per case bought from the Wholesaler ($20 x 12 boots in a case = $240, minus $100 which he paid for every case). The hiking boots reach the end-user and everyone in the supply chain gets what they were looking for.

Types of Drop shipping companies.

Basically, there are two types of drop shippers:

  1. Aggregators
  2. Manufacturers and Distributors

As a person looking to sell on eBay or an online store, you are the Retailer, the third link in the supply chain who sells merchandise to the end-user. Obviously, you will be sourcing your products from either the wholesaler/distributor or directly from the manufacturer.

As you may understand from the above example, manufacturers and wholesalers by nature sell merchandise in bulk, but, since the evolution of e-commerce, many manufacturers and wholesalers have started to offer drop shipping services to home businesses. Alas, they are hard to find. That is why a new “link” found its way in the supply chain, that is, the Aggregators.

These companies put up sites and display millions of products you can choose from their virtual inventory. I say “virtual” because they don’t really have those millions of products stocked in a physical warehouse. They simply find a bunch of real wholesalers offering drop ship services and deal with them.

They are in effect the middle man. As a retailer looking for drop ship products you can come to the aggregators site, choose any and as many products you want to list in your store, and sell them to your customers.

You then buy the product from the aggregator’s site and it takes care of the shipping and handling. These aggregators are not scammers; they just make the hard task of finding real drop ship wholesalers easy for you and charge you for it along with offering some value added service.

Which type of dropshipper to choose.

Now that you know that a dropshipper may either be an aggregator (middle man) or a real manufacturer or wholesaler, you probably understand the importance of choosing the right type of drop shipper to source your products.

spocketIt’s obvious. If you source your products from an aggregator you know that he is NOT the real wholesaler, but rather a middle man who will mark up the price for the merchandise for his own profit. But if you are lucky enough to find a real wholesaler who is willing to drop ship for you, or moreover, a drop shipping manufacturer, you will get a much lower cost prices for your products.

You will get a price that is very close to the wholesale price (of course you will need to pay them shipping and handling fees).

I think now you will be asking yourself: Why would anyone buy from an aggregator (middle man) when you can find a better price in buying from real drop shipping wholesalers? The answer, as I said before, is that it is considerably hard to find a manufacturer or real wholesaler who will drop ship for a small home business. That doesn’t mean there are very little true drop shipping companies.

There are many such manufacturers and wholesalers that offer drop shipping services, but they are hard to find in simple free Google searches because they normally don’t actively advertise their drop shipping service the way aggregators do. That is why you need the help of “product sourcing solution sites” like WorldWide Brands or Spocket that help you find real drop shipping wholesalers to connect with.

If you want to skip the aggregator and get a better drop shipping price by directly connecting with the wholesaler, then taking help from sites like Spocket and WorldWide Brands is a smart way to do it.

Read More About Drop Shipping Companies 

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