In part 2 of our series on dropshipping (found HERE) we went over how to analyze data in a way that should allow you to find a micro niche. By this time, you should have an idea of what products you’d like to sell on your dropship site.
Now we’re going to focus on finding reliable suppliers within your newly found micro niche and how to deal with them. For most wannabe e-tailers, this is the most difficult part to overcome.
Finding Manufacturers vs Middlemen
Do you enjoy being ripped off? No one does. In order to maximize profit margins, it is important to locate and deal with the actual manufacturers of your products.
Believe it or not, there are countless companies out there that advertise dropshipping services and pose as manufacturers, but are actually middlemen. They purchase items directly from the manufacturer at low, wholesale costs and then resell them to unknowing dropshippers at a much higher price point.
This can literally eat away at potential profit. By cutting these middlemen out of the equation, you are assured the lowest prices and the maximum return for your efforts. With a bit of research, you should be able to spot which suppliers are manufacturers and which are not.
For the most part, a manufacturer will offer products at a fraction of the retail price. If a potential supplier offers products for a measly 15% less than market value, then they are most likely a middle man that is attempting to bank on your ignorance.
Avoid Sites and Directories that Sell Lists
Often times in their frustration to find suppliers, people will turn to sites such as World Wide Brands that offer lists of “manufacturers”… for a price. With a bit of time and some reasonable “Googling” skills, all of these manufacturers could be found quite easily online for FREE.
Avoid Sites like Doba
Doba and other similar sites promise to give you access to countless products for you to sell … for a price. Unfortunately, all of these products are ridiculously overpriced, making it near impossible to gain a profit from the sales. You sell the product, Doba makes the money.
Importing Goods vs Looking Local
A readily available option that many dropshippers use is to actually import the goods from China. There are numerous sites such as Alibaba.com that offer hordes of foreign companies that are eager to do business with you.
There are plenty of pros and cons to this decision that make it either a viable option for some or not such a great idea for others. The profit margins that can be made from importing goods are astronomical as you can purchase them directly from the manufacturer for incredibly cheap.
It’s important to realize that a large percentage of the goods we use were originally manufactured overseas. So it is highly likely that if you do find a company within the US that is willing to dropship, they are actually a middleman.
For some, this is acceptable, but if you plan on creating a multimillion dollar empire (which is highly possible), then you need to find the original manufacturer as they will offer the highest return for your investment.
Most Foreign Companies do not Dropship Per Se’
You will actually have to purchase the goods and have them shipped in bulk. I know what you’re thinking, “If I have them shipped to me, that isn’t actually dropshipping. I want to dropship so I don’t have to deal with products.”
Well you’d be right and wrong. You do not necessarily need to handle the products yourself. With a quick Google search, you can find countless warehouses that offer order fulfillment.
This means that when someone makes a purchase from your site, you notify the warehouse of the address; they will slap your logo onto the box and ship it out for you. These order fulfillment warehouses are relatively cheap. Amazon, for instance, offers order fulfillment.
Unfortunately, even foreign suppliers can be middlemen. It is important to note, although sites like Alibaba give out certifications that show that suppliers are verified, these certificates are purchased at a relatively low price and really don’t mean anything.
Far too often people fall for middlemen from foreign countries because they offer cheap merchandise, however, if you were dealing with the actual manufacturer, the prices would be even cheaper. So, it’s important to shop around a bit.
This stands for “minimum order quantity.” Most foreign manufacturers require a minimum order amount as the cost and effort to ship single items would be bad for their business. Some require rather high MOQ’s as you first begin to deal with them. However, most will drop the amount significantly if they see you as a reliable customer. This requires a bit of disposable capital to get started.
Shipping Times / Cost
For larger items, it may take several weeks for a shipment to come in. This can kill business if not timed correctly as you could run out of stock and have to wait weeks before your new shipment arrives, all the while missing out on sales from consumers on your site. A site that is constantly “out of stock” is unlikely to receive return customers.
The timeframe may be delayed even further if your order gets delayed at customs. If it is a high risk item, then there is always the possibility that it will be seized as well.
The cost of shipping can often times be fairly large, especially if the products you ordered are extremely heavy or bulky.
Possibility of Being Ripped off
There is always the chance that you will place an order and never hear from the so called “supplier” again. Our laws do not apply overseas, so there is not much that you can do except to do your due diligence when researching overseas suppliers and ALWAYS use a payment service such as Escrow that offers some sort of buyer protection.
Some of this information may sound scary, but it is extremely profitable to work with overseas manufacturers.
How to Deal with Overseas Manufacturers
When first contacting an overseas manufacturer, there are specific ways to get a slight edge in your dealings with them. In Chinese business culture, they are typically very upfront. This may come off as pushy or demanding, but they are not attempting to be rude, it is just their custom.
A HUGE mistake that e-tailers make when first contacting a potential supplier is to immediately ask them what their MOQ is. This sends up a red flag for them as they now view you as a small time dealer that is not interested in making large orders.
A good idea is to act as if “this isn’t your first rodeo.” You don’t have to tell them anything about you. They don’t care what your marketing plan is. They don’t care if you have some sort of “edge” on your competitors. All this will do is send further red flags, causing them to offer some ridiculous MOQ.
In the initial contact, it is important to confidently and politely inquire about their products. THAT IS IT. They will send you the relevant information. You should continue to correspond back and forth, asking the about specifications, materials that they use, etc.
This shows them that you are a serious buyer and not some inexperienced hack. Try to learn the lingo that they use as well. After multiple correspondences, you may then ask them what their MOQ is. Most likely the amount they quote you will be significantly higher than what they are actually willing to send.
At this time, feel free to haggle a bit and perhaps ask for a sample. Some manufacturers will drop the MOQ, while others will require you to make multiple orders over time before they are willing to budge.
An easy way to spot out scammers is to ask for a sample. Scammers will not have a sample to send as they don’t actually have a product to sell, while real manufacturers will be happy to do whatever it takes to earn your business.
Dropshipping is Awesome
I know a lot of this post detailed the shadier side of dropshipping. However, there are countless online stores that are making great fortunes without actually having to deal with the products themselves.
I put a lot of emphasis on digital marketing. I know this, but there are other methods out there to make a living other than selling digital goods. There will be a lot of trial and error, but if you follow a few of the basics that I’ve presented in the last several posts, you will be far ahead of the game.