Q: I'm starting an online specialty shop that sells gifts
and home accessories. I want to be able to have items dropshipped
to customers through my site. I already have a Web site and
a domain reserved, but I don't have a lot of money to get
this going. Can you offer any insight?
A: Setting up relationships with companies who will
ship merchandise directly to your customers for you - dropshippers,
as they're called - are an excellent way to start your e-business
and, if done properly, don't have to be a costly endeavor.
There are literally hundreds of companies out there that will
dropship products for you, everything from gifts and housewares
to power tools and furniture.
In a nutshell, here's how dropshipping works. You set up an
account with a dropshipper (or multiple dropshippers who offer
different kinds of products) who provides merchandise that
you can sell on your Web site. The dropshipper typically supplies
you with images and product descriptions that you can use
to build your online store or feature on static HTML Web pages.
When a customer places an order for the product on your site,
he or she pays you for the product. You, in turn, place the
order with the dropshipper and pay them for the product. The
dropshipper then ships the item directly to your customer
under your company name. To your customer's knowledge, the
product was shipped by you.
Dropshipping offers many advantages to the shoestring online
start-up. You don't have to pay for an item until it sells,
and your customer pays you, so your personal cash outlay for
the product is zero. You never have to handle or warehouse
the merchandise, as order fulfillment is handled by the dropshipper.
You can also offer a wide variety of items from multiple dropshippers,
and your end customer is none the wiser.
Dropshipping does have its downsides. Since you do not actually
stock the products featured on your site, you have no control
over inventory management, product availability, order fulfillment,
shipping processes and so on. Still, if you do your homework
and establish a good relationship with a reputable dropshipper,
the problems you experience should be few.
Your goal should be to find a dropshipper that will ship items
one at a time instead of requiring that you purchase a fixed
minimum number of items each time (single-unit purchases vs.
minimum-order purchases). With this arrangement, you don't
have to invest your limited cash reserves in inventory that
might not sell (and that sits in your garage for months).
Thanks to the stiff competition the Web has created, many
dropshippers will now do business with you without requiring
that you have a tax ID number. You simply set up a reseller
account (you're the reseller) and start marketing the products
on your site. Account registration can often be done online
at the dropshipper's Web site. With this process, you can
literally be selling products within minutes of setting up
your reseller account.
Be warned, however, that some dropshippers are not as reliable
as others. Also, be aware that some companies who claim to
be dropshippers are really middlemen who have positioned themselves
between the online merchant (that's you) and the real wholesale
merchandise distributor. These middlemen will eat into your
profits and usually don't offer much in the way of customer
support and service. They can actually hurt your business
more than help it, so make it a point to do business only
with - and directly with - established, reputable dropship
companies.
Spend the time to research the dropshippers doing business
in your particular product category, and try to get feedback
from their current customers. Remember that your customer
doesn't know (or care) that the product they are purchasing
from you really comes from a dropshipper. If there is a problem,
your customer will come back to you for resolution, not the
dropshipper, so make sure that the dropshipper you use has
a policy for resolving problems quickly.
Setting up an online store that offers merchandise from dropshippers
doesn't have to be expensive or time-consuming. However, this
brings up the age-old question: If I build it, will they come?
The age-old answer is: Only if you let them know you are there,
but that's another column.
