Drop Shipping

Part
01
of three
Part
01

Drop Shipping Overview

Drop shipping is a method used to facilitate and fulfill online purchasing. It is an attractive business model with few up-front and maintenance costs, and is compatible with many well-known, reliable online suppliers. It is also attractive due to the variety of products that can be offered and the ease of shipping, since packaging and shipping is left for the suppliers to take care of. Downsides of drop shipping include low margins, high rate of competition, and unreliability of suppliers.

WHAT IS DROP SHIPPING
Drop shipping is the term for a method of retail fulfillment. This method generally involves an online retailer who sells products to consumers but does not actually keep those items in their inventory; instead, after an order is placed by a consumer, the retailer forwards the order to a wholesaler (or in some cases, the manufacturer). The wholesaler/manufacturer fulfills the order and mails the product directly to the consumer. The retailer never even sees the inventory. Instead, the retailer facilitates the order with the wholesaler and also handles any customer service issues, such as returns or refunds. Drop shipping retailers make money by buying products at wholesale price and selling them at retail price.

THE PROCESS OF DROP SHIPPING
Drop shipping in itself is a process; the term "drop shipper" can refer to either the retailer or supplier, so for clarity I will be specific in my terminology.

It is important to use drop shipping compatible suppliers or have an agreement with the supplier; their job is to package and send the product, but with the retailer's logo and return address.

The retailer sells a product to a consumer via the retailer's website. The consumer pays for the cost of the product and shipping at the time of the purchase and the funds are transferred directly to the retailer. The retailer forwards the order to the supplier and pays for the order (the supplier will usually have the retailer's credit card on file). The supplier then packages and ships the order directly to the consumer, alerting the retailer with the order's tracking number and invoice. The retailer forwards the tracking number and invoice to the consumer. Communications between the retailer-consumer and retail-supplier are most often done through email. The drop shipping process is complete at this point unless the consumer has an issue with the products in the order, in which case they direct their complaint to the retailer who in turn works out a refund or replacement with the supplier.

COSTS OF DROP SHIPPING
Drop shipping is a very attractive business model due to low up-front costs and overhead. Retailers don't need to invest a bunch of capital in buying inventory up front, since they will already be paid by the consumer by the time they purchase the item from the supplier. Likewise, they do not have to spend money on warehouses since they have no physical inventory to store. The costs that retailers incur include the cost of maintaining their website, marketing, and business expenses like licenses and registrations. When it comes specifically to the cost of drop shipping, it really comes down to the supplier, as some suppliers will charge a fee for drop shipping services or markup the price from the wholesale price.

It's important to note that drop shipping retailer should expect to have low margins, due to the abundance of competition of online retailers.

DROP SHIPPING COMPATIBLE SITES
Most drop shipping-compatible suppliers are online marketplaces, such as EBay, Shopify, and Amazon. AliExpress is another drop shipping supplier that many new drop shippers use, as it connects retailers to Chinese suppliers.

There are several online marketplaces that work specifically with drop shipping retailers. The main feature of these sites is that they connect the retailer to hundreds or thousands of suppliers willing to drop ship their products. Platforms such as Oberlo, Doba, Salehoo, World Wide Brands, and Wholesale Central all operate this way.

ITEMS OFFERED BY DROP SHIPPERS
Drop shipping retailers can offer a much wider variety of products than other online retailers since they don't actually have to wait to have the product in hand to sell it. They can add products to their selection real-time, as soon as suppliers stock it.

While a retailer can choose to list whichever products they want, its best to go about that process logically. The retailer should aim to offer products that, first and foremost, they can make a relatively healthy margin on. The products should also have positive reviews and a healthy sales history. The retailer should be picky and thoroughly researched in the products they offer.

Successful drop shipping retailers emphasize a few flagship items and sell 10-200 products. Offering too many products may overwhelm the consumer.

PRODUCT IMAGES
Having quality images of the products offered via drop shipping is vitally important to the success of the retailer. It builds a sense of value and trust with the consumer and can be used to distinguish that retailer from their competition.

If a retailer only offers a small number of drop shipped products, they should request or purchase a sample from the manufacturer. This way, the retailer actually has a physical sample of the product and it can be used in photographs and other promotional publications. The retailer has full control over the images of the product and can also see the quality for themselves.

More often than not, retailers are offering hundreds or thousands of products and it is not quite reasonable to purchase samples of all those products. Retailers are encouraged to still purchase samples of their most popular items and create their own images. The other option is to use supplier images. High-quality supplier images generally indicate that the supplier is a reliable and quality choice to work with. Sometimes the images may need to be Photoshopped to remove watermarks.

Another popular way of getting images is to encourage consumers to post photos of themselves with the products. A retailer can repost the photos (with the consumer's permission) to their own website. Retailers can encourage consumer photos by offering discounts and special deals.

TIPS FOR DROP-SHIPPERS
-It is super important to have a reliable and established relationship with the supplier. The retailer is the "face" of the business behind the product the consumer buys, but the quality of the product and quickness of turnaround are all down to the supplier. If a delivery takes forever or the order is wrong, the consumer directs their complaint to the retailer, even though the issues are beyond their control. Therefore, retailers must work with reliable suppliers to maintain good business reputations.

-Be careful when deciding on the consumer's shipping rates. It is easy for retailers to charge a flat rate on shipping, but that comes with potential problems. If an order is very small, a flat rate charge may seem too pricey and the consumer may pass on the order. On the other hand, it might encourage the consumer to purchase a bigger order. One option would be to base shipping price on the number of items in the order or by the overall weight of the order. Another important aspect to consider is that a customer may order two products from one retailer, but the one retailer gets each product from a different supplier. The retailer needs to decide whether to absorb the cost of the extra shipping, or to pass it along to the customer.

-Drop shipping retailers are recommended to focus on marketing, due to high competition and low ecommerce conversion rate. The emphasis should be on driving traffic to the retailer's website and also optimizing that website shopping experience. Retailers should also focus on having great customer service to build their customer base and online reputation.

CONCLUSION
To wrap it up, drop shipping is the process of shipping a product directly from the supplier to the consumer, as facilitated by the retailer. The consumer purchases and pay the retailer, who in turn buys the product from the supplier while organizing direct shipment to the consumer. This is usually at a low profit margin to the retailer. Retailers have many options of sites to sell through, including popular online marketplaces like Amazon and eBay as well as drop shipping specific sites. Retailers who drop ship products benefit from having low costs, zero storage issues, and huge product variety, while they must navigate challenges such as unreliable suppliers and the quality of product images.
Part
02
of three
Part
02

List of Top Drop Shipping Companies

In order to best answer this request, we compiled different lists to triangulate the necessary information. All the resulting companies on our list are compatible with Shopify and have publicly released their revenue. Some drop shipping companies that came up in our research were either not compatible with Shopify or did not provide their revenue. In these instances, these companies were omitted from the list.

TOP 7 DROP SHIPPING COMPANIES

The following list includes the top 7 drop shipping companies that are compatible with Shopify. They are:

1. DOBA$15 Million

Sellers have access to over two million products available at wholesale prices in one stream-lined product catalog. Examples of products they sell are automotive parts, apparel, books, electronics, home decor, kids stuff, and sports equipment.

Costs vary based on Plan:

-Basic — $29 per month with $0.99 per–order fee
-Advanced — $69 per month
-Pro -$249 per month
-Enterprise plans are personalized.

Doba is available on: Shopify, BigCommerce, 3dCart, Amazon (Pro only), eBay, Volusion, Magento and more!


2. GOOTEN — $5 Million

Sellers have access to hundreds of products from print-on-demand vendors worldwide. Some examples are apparel, art, bath and kitchen items, home decor, pet products, and kids gear.

Plans and Fees: Products are priced individually

Gooten is available on: Shopify, Amazon, and Etsy.


3. MODALYST — $4.4 Million

Sellers have access to millions of products from over 40 categories. A vast majority of the inventory is hand-picked from select vendors. Customers receive their orders within 5-7 days.


-Basic — Free forever for Chrome Extension only.

-Pro — $45/month. This plan offers users shorter shipping times for those with the "Chrome Extension & Marketplace of US/European Suppliers." Items in the marketplace are handpicked and sourced from suppliers in the US and Europe.

-Premium — $150/month for high-volume stores. Users can increase their margins with the 1% transaction fee plan that is available for the Chrome Extension & Marketplace of US/European Suppliers.

Modalyst is available on: Shopify and BigCommerce


4. TEELAUNCH — $3.2 Million

Teelauch is a leading print-on-demand company. Users designs can be printed on over 65 different physical items at the lowest prices.

Fees: Sellers only pay when they make a sale.

Available on: Shopify and Etsy.


5. PRINTFUL — $2.4 Million

Printful is another print-on-demand company offering a wide variety of products. Orders take 2-7 business days to be fulfilled.

Plans:
No inventory fees. Users pay when they make a sale and decide their profit. They buy the ready-made Printful products at a wholesale price, but can then sell to their customers at whatever price they choose.

Printful is available on: Shopify, BigCommerce, Bigcartel, Woo-Commerce, ShipStation, ecwid, Gumroad, Weebly, Squarespace, Etsy, Amazon, and inktail.


6. KITE — $1 Million

Kite has the most advanced software platform for print-on-demand services. It provides the seller's clients access to over 250 different products to choose from.

Available on: Shopify, custom merchant app, photo print app, web or kiosk, and API.


7. WHOLESALE 2B — $1 Million

Wholesale 2b has the best shipping options and gives sellers access to over 1.5 million products. These products include apparel, electronics, baby and pet supplies, and other consumer products.

Prices:
-Ebay — $24.99 per month or pay yearly $99.99
-Amazon — $37. 99 per month or pay yearly $287.99
-Dropship website — $39.99 per month or pay yearly $299.99
-Dropship data feed — $24.99 per month or pay yearly $149.99
-All 4 Dropship plans are available for a discount of $82.99 per month or pay yearly $599.99
-Copy/paste the product images and descriptions manually and use your account to fulfill orders — $67 per year
-Shopify app- $29.99/month
-BIGCOMMERCE APP — $29.99/month or pay yearly $215.99
-ECWID APP — $29.99/month or pay yearly $215.99
-WOOCOMMERCE — $29.99/month or pay yearly $215.99

Available on: Amazon, eBay, Shopify, BigCommerce, ecwid, Woocommerce, Bonanza, and Google.

CONCLUSION

A list of the top 7 drop shipping companies that are compatible with Shopify was compiled. These companies include Doba, Gooten, Modalyst, Teelaunch, Printful, Kite, and Wholesale 2b. Doba has the highest annual revenue on this list at $15 million, followed by Gooten and Modalyst at $5 million and $4.4 million respectively. Wholesale 2b has the lowest revenue on this list at $1 million. However, Wholesale 2b has a wider compatibility range than some of its competitors like Teelaunch and Modalyst.
Part
03
of three
Part
03

Drop Shipping on Amazon

Drop shipping on Amazon can either be done through third-party merchants or via the Fulfillment by Amazon (FBA) service. Costs associated with the service include account subscription fees, storage fees, and other charges. Best practices in creating good product descriptions for items that will be included in the drop shipping process are the following: populating the item description with well-researched keywords, indicating meaningful but simple words, and highlighting product benefits. Drop shipping advantages are: lower overhead expenses, freed up fulfillment effort, and others. Disadvantages of doing drop shipping revolve around missing customer interactions and lesser control on the fulfillment process.

DROP SHIPPING

Drop shipping is a type of fulfillment method employed when doing retail sales online. With this method, sellers do not need to own inventory and can just have an e-commerce site like Amazon handle the ordering and shipping process on their behalf.
The drop shipping service of Amazon is referred to as Fulfillment by Amazon (FBA). In FBA, sellers can move their products to an Amazon warehouse and the latter will handle storage and delivery to customers. FBA can also handle orders coming from other sales channels for the seller’s inventory in their warehouse. The seller can oversee the inventory movements in Amazon’s warehouse through a user interface. In this method, there is no more need to deal with third-party merchants.
Drop shipping can also be done on Amazon by directly commissioning a third party to fulfill customer orders on the seller’s behalf. In order to use this service, sellers must be listed as the merchant of record in the product listing. Seller’s business name and other information should also be reflected in the packing slips. In addition to this, the seller should be able to handle returns and should comply with the Amazon seller agreement.

TYPES OF PRODUCTS DROP SHIPPED THROUGH AMAZON

Due to individual sellers’ data being confidential, the actual products that they drop ship are not publicly available. I obtained a list from a drop shipping site’s article on some products that are generally sold through Amazon’s drop shipping service. These products include: automotive, beauty products, clothing and accessories, entertainment collectibles, and others. Most of the categories require approval from Amazon though before these products can be posted.
There are also some restricted or regulated products categories that are not allowed to be sold through the Amazon FBA program. These prohibited products include dangerous goods, stolen properties, weapons, and hazardous materials. The full list of these products can be found in the FBA product guidelines.

AMAZON's DROP SHIPPING SETUP

1. Identify first what you want to sell and the possible vendors. Check eBay’s trending products to get ideas on what products are hot in the market. Get some product inspirations also from popular drop shipping sites such as Aliexpress.com and Alibaba.com.
2. Then, determine if you want a professional account or an individual selling plan, which depends on the volume of the products that you will sell. If you chose the individual selling plan, there is a free one-month trial, but once it expires, there is a $0.99 charge per product sold which will entail a huge deduction from your profit margin. A professional account will only charge you a monthly subscription fee of $39.99 and a few additional charges but this is still less than having to pay $0.99 per product sales.
3. Go to the Amazon Seller Central and create a seller account by filling in your name, e-mail, and password. Follow the next steps indicated in the screen to navigate through the seller registration process. You will be further asked to input your business details including address, bank information for payment purposes, tax information, phone number, and other data. Follow the verification instructions to validate your account once you are done inputting your data.
4. Select your product categories from the list provided. If your products belong to a niche that requires approval from Amazon first before you can post them, follow the link indicated for specific approval requirements.
5. Once you are approved, go to your seller central account to add products and manage your inventory.
6. Determine if you will just buy or create products and then sell them via Amazon’s FBL or drop ship products from a third-party vendor.
7. If you decide to use Amazon’s FBL, have your products stored in an Amazon warehouse and install the necessary user interfaces to manage your inventory.
8. If a seller prefers drop shipping via a third-party vendor, the next step is to find a supplier of the items for drop shipping. Ensure that the vendor is fine with shipping their products directly to the customers before listing the products on Amazon. Agree on a suppliers’ fee, payment terms, and payment method.
9. Once the vendor agreement is finalized, seller can now list the vendor's products and sell them on the Amazon site as though the inventory belongs to the seller. When a customer buys an item, it will be up to the seller to collect the retail and shipping costs from the customer.

AMAZON DROP SHIPPING GUIDELINES

Some of Amazon’s drop shipping guidelines are the following:
1. Procuring products from another Amazon online retailer and asking that same retailer to do drop shipping for the seller is not allowed.
2. Shipping documents such as packing slips, invoices, and other shipping documents should have the seller’s name indicated and not any other name.
3. See the full Amazon drop shipping guidelines for more details.

AMAZON DROP SHIPPING COSTS

Typical Amazon drop shipping start-up and subscription costs include the following:
1. Amazon Account: $0.99 for an individual selling plan; $39.99 per month for professional accounts with no per item fee
2. For Amazon FBL arrangements: order fulfillment fees per unit that include picking, packing, shipping and handling, customer service and product returns: range from $2.41 to $137.32 depending on the package size.
3. Monthly inventory storage per cubic foot: vary from $0.64 to $1.15 depending on the size and storage months.
4. Amazon commission fees: Range from 10% to 15% and vary for each product type. In exchange for this fee, sellers will have access to Amazon's huge customer network.
5. Other Amazon fees: referral fees and variable closing fees for each item sold.
6. Refer to the full fulfillment fees table for the specific prices.
In addition to this, there will also be fees that need to be made to a supplier if you will choose to drop ship via a third-party supplier instead of using FBL by Amazon. These usually include the wholesale cost of the product plus shipping fee and handling fee. Vendors may also opt to add drop shipping fees.

Add to these the business registration fees, government fees, marketing fees, product website fees, and other e-commerce associated fees.
Other expenses may include additional drop shipping tools below that can be used to increase drop shipping success:
1. Merchant Words — get search volume and keywords data — $30 / month
2. FeedCheck — Consolidated product review in one page — $19 / month
3. Feedback Express — Enable more feedback on products — $20 / month

SELLER PAYMENTS

Once a store is established and products get sold, Amazon will disburse the funds to the seller’s inputted bank account every one or two weeks. Sellers can then just withdraw the funds from their banks. New sellers will need to wait for 14 days though before the first funds can be transferred. More details can be found in Amazon Seller Central’s site.

BEST PRACTICES: ITEM DESCRIPTIONS FOR DROP SHIPPED ITEMS

Since there is nothing significantly distinct between drop shipped and regular items in terms of product descriptions, the following guidelines from a marketing expert can be considered as best practices in formulating the item descriptions:
1. Ensure that item descriptions are optimized for Amazon’s search criteria guidelines. Include keywords in all the major fields in the product listing like in the title field, bullet points and in Amazon’s keyword fields.
2. Ensure that the product description is also optimized for Google as it ignores some of Amazon’s metadata. Just ensure that all the keywords are included in the major fields when a product description is inputted in the Amazon page.
3. Follow Amazon’s product description guidelines to ensure that the products will not get any sanctions from Amazon.
4. Make product descriptions easy to read by using active sentences and simple but meaningful words.
5. Steer clear of unnecessary words like adjectives that does not help promote the product.
6. Concentrate on highlighting the benefits to the customers and not the product attributes only.

ADDITIONAL DROP SHIPPING INFORMATION

There are about 140,000 small to medium-sized businesses selling on Amazon and their revenues reached $100,000 in annual sales in 2017. Half of all items sold were dropped shipped from marketplace sellers.

Note that products that are included in Amazon's special buy box have more visibility and are most likely to be sold. As a drop shipper, the goal is to win the buy box by meeting sales and review targets in order to increase sales.

DROP SHIPPING ADVANTAGES AND DISADVANTAGES

Advantages of drop shipping: faster shipment delivery provided by Amazon, reduced overhead costs, no need to worry about logistics issues, suitable for large items and sellers with high product volume and variety, and sellers can just focus on marketing their products.
Disadvantages: Multiple fees involved, limited control on the fulfillment process, customer relationship and experience might not be managed well.

CONCLUSION


Sellers who wish to sell products through the Amazon drop shipping process can choose from two options: fulfillment by a third party merchant or availing of the Fulfillment by Amazon (FBA) service. Drop shipping involves various costs that include storage fees, vendor fees, fulfillment fees and other subscription fees.
Sources
Sources

From Part 02