Dropshipping FAQs

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What is Your Business: Are you like many of our business partners working from home and looking for high quality products?

Is Your Aim: To sell more than your competitors – and control your market?

Your Goals: – Does your home business want the following:

Increased Sales – Higher Profits – Greater Margins

We at HowToDropShip.biz can help you achieve all those goals and more, yes much more!

We can get you access to more top quality products than you could ever have thought possible.

Dropshipping – FAQs

Here is a list of the more common questions we get about dropshipping. Please read this and you will see how dropshipping will change your business and your life forever!

What is Dropshipping?

A dropshipper is a manufacturer or authorized wholesale distributor who will ship single item orders directly to highly targeted customers (this is called the fulfilment process). Yes, it is as simple as that. You get the customer order information, send the details to the supplier and they deliver the products directly to the customer. Simple and highly profitable for YOUR BUSINESS!!!

When and where did the concept of dropshipping start?

The concept of dropshipping is almost as old as the marriage between manufacturing and distribution. Although no one has cited an exact date in history of conception, there are some moments in history when dropshipping gained significant popularity. Most seem to agree that dropshipping started with the large size retail and manufacturing companies. During the period of the Just-In-Time (JIT) movement in manufacturing, the concept of a reduced inventory became popular as a cost reduction method. The practice of JIT in manufacturing brought an “on-demand” type of production to the forefront.

In turn, reduced inventory in factories resulted in a lower risk and extensive cost savings. Likewise, the retail world embraced similar benefits of an “on-demand” type of supply chain with dropshipping methods. Dropshipping enabled many of the retail businesses to eliminate their inventories and enjoy the reduction of risks and cost savings similar to their manufacturing counterparts. In more recent years, dropshipping has continued to become more automated with supply chain technologies bringing real-time inventory tracking and couriers offering real-time delivery tracking via the Internet

Why should you use dropshipping methodology?

Increased Sales – Higher Profits – Greater Margins

What are the disadvantages to dropshipping?

There are very few real disadvantages to dropshipping. However each dropshipper should carefully consider the following:

1. Not all dropshippers have up-to-date supply chain and ERP technology. This means they may not have any ability to track inventory or automate their accounts

2. Unfortunately 21^st century Innovations can make your products obsolete very quickly.

3. There is a danger of over-trading: This scenario means that there are too many orders and not enough products for the consumers who have already paid. This will have serious implications for both parties. However most top quality suppliers already have systems in place to prevent this scenario from happening and have strategies in place to fulfill their orders.

What are the benefits from dropshipping?

There are many ways to benefit from dropshipping. Some of the benefits are as follows:

1. The dropshipper maintains and continues to build a distribution network if that strategy was in the business plan.

2. The dropshipper sets the wholesale price and maintains control of their business model.

3. There are no minimum order requirements.

4. The reseller pays you before the order is fulfilled.

5. Additional marketing costs are absorbed by the reseller.

6. Whole product ranges can be considered for the dropshipping process. Complimentary products can be added to shopping carts very easily.

7. New products can be online in hours of manufacture or available through supply chain.

Increased Sales – Higher Profits – Greater Margins

What kind of profit margin should dropshippers offer potential partners?

While there is no standard on wholesale pricing, many wholesale companies typically will give a retailer between 25-60% discounted off the standard retail pricing (MSRP). The final agreed pricing model is between the reseller and the dropshipper. The best pricing policy will generate maximum returns for both parties.

What is a blind dropshipper?

A blind dropshipper will ship product to the consumer, under your business name only (all your details are kept to ensure you get the full reward for marketing the products and can be assured of future orders). They will not have any of their information (i.e. company name, address, advertising…etc.) on the products they supply to the consumer

Why does a dropshipper need resellers online banking information on file?

The Dropshipper will need the bank details or credit card information of the reseller on file to complete the billing process. Remember, as the consumer (end-purchaser of the product) pays the reseller the retail cost of the products, the reseller will need to pay YOU the dropshipper for the wholesale cost of the products which is to be sent to the consumer (end-customer). It is easier for the dropshipper to simply bill your bank or credit card.

What is the payment and delivery process for dropshipping?

1. The customer buys the products on Yourwebsite.com. You can get a website up and running with fantastic support - see my own website page after reading these details. Payment is made in real time through online banking facility.

2. Yourwebsite.com pays the dropshipper the agreed rate.

3. The dropshipper delivers the products through third party logistics.

Simple: Your website.com SELLS, Customer BUYS, the drop shipper DELIVER.

Do dropshippers offer credit or Net 30 day payment?

However some dropshippers will offer a line of credit or a net 30 day payment. This will very much depend on the products, their business relationships and market forces operating at the time.

What is an over-saturated dropshipper?

This is typically a dropshipper that an overwhelming amount of businesses are using simultaneously in the marketplace. As a result, many businesses have duplicate product offerings creating a saturated market for those products. This often results in price wars between businesses.

Some drop shippers will not do international dropshipping. Why?

While there are some dropshippers who participate in international dropshipping, many do not. Their reasons for not doing international dropshipping vary. Some of the most common reasons are:

1. Profitability

2. Customs issues and audits

3. Taxation

4. Service issues (i.e. unable verify delivery times, tracking…etc.)

5. Higher packaging costs

6. International product licensing limitations

Are importers considered to be dropshippers?

Sometimes they can be. However much of this depends on their distribution objectives. Some importers will retail directly to consumers and do a dropship programs for vendors. Other importers are strictly into the warehousing component of the retail business and need representatives and vendors to distribute their products

Do dropshippers offer exclusives on products?

Many will often entertain the idea of giving you an exclusive right to a product they carry. In most cases, Yourwebsite.com will be required to sell a minimum monthly amount (this number very much depends on the nature of the product and the target market) of that product to get the exclusive rights.

Is a wholesaler the same as a dropshipper?

Not always. Many wholesalers do not participate dropshipping. Some are into dropshipping, but require minimum order quantities. There are some wholesalers who will do single item dropshipping.

What is an Authorized Dealer Agreement (ADA)?

This is a legal document that outlines the rules and guidelines a dealer (online or offline) must follow in order to sell a dropshipper’s products. Some dropshippers will require the agreement to be signed as a protection policy for their business

How have online auctions affected wholesale distributor memberships?

Let’s answer this question with an example sometimes seen:

An online auctioneer lists an item for only $1 (they paid for $15 wholesale). They get one bid. The bidder wins the auction at $1. The bidder is charged $30 shipping for an item that should have cost about $5 to ship. The auctioneer makes about $10 profit.

The real issue begins when other retailers (non-auctioneers) of the same product cry foul to the wholesale dropshipper. The retailer of a similar/same items, sees the items listed and sold on an online auction for only $1. They accuse the wholesale drop shipper of selling to an online auctioneer at prices under the retailer’s wholesale cost. This results in many retailers abandoning the wholesaler as a supplier. The wholesaler ends up losing retail distributors. They lose revenue.

To correct the issue, the wholesale dropshipper will set up an Authorized Dealer Agreement (ADA) to make sure no one is selling their items on online auctions for under wholesale pricing. This does not mean that the product cannot be sold on an online auction. It only means that reselling rules follow the wholesaler’s policy for pricing for online auctions. As always, the relationship with the wholesale supplier is the key as they are a business partner. As a result of unscrupulous traders using auction sites some dropshippers restrict how their products are sold through online auctions.

We have regular correspondence with some wholesale dropshippers who require the ADA due to prior online auction abuse. In a nutshell, they are losing money and dealer memberships. As an example, here is an actual copy of a recent letter from a drop shipper (we have hidden their name with XXXXX):

“To: XXXXX Dealers

As you are aware, a rapidly increasing number of NEW XXXXX Products are being sold far below our minimum advertised pricing (MAP) at online auction sites. It has been happening long enough that some dealers have experienced a dramatic decline in their XXXXX sales. If this continues, many of these dealers, that are working hard to teach and educate the end consumer, may decide to no longer sell XXXXX Products, and if dealers stop selling, they also stop educating. Education is the key to success for XXXXX Products, and the lack of education could destroy our company.

Therefore, we have modified the requirements for dealers to sell XXXXX Products. In order to sell our products, all current dealers must become authorized by us (XXXXX), by completing and signing the Authorized Dealer Agreement (ADA). The requirements are found on the attached ADA.

You as a distributor have the responsibility to send the ADA to all of your current XXXXX dealers. Each dealer must sign, and then fax or send a copy of the ADA back to you. You will then send a copy of every signed ADA to us, to keep on file for monitoring purposes.

To maintain authorized status, dealers must abide by all requirements and restrictions set forth in the signed ADA. Dealers that are found not following the ADA guidelines will lose authorization to sell XXXXX Products until the problem is fixed.”

The online auction world is changing the retail world at a moderate pace.

I recommend you have an Authorized Dealer Agreement (ADA)?

We at HowToDropShip.biz pride ourselves in insisting that all business partners operate a sales policy that protects distribution channels for all our Business Partners involved with the dropshipping process. We feel that close co-operation on pricing enables you the dropshipper to maintain a strong and vibrant distribution network and make further sales through our marketing techniques. We recommend that an appropriate ADA is drawn up to ensure that your distribution networks are not compromised

Does anyone regulate the imported and exported goods pricing?

This is definately the case. It’s not a complete free for all in the world market. The U.S. government has the International Trade Administration (ITA). There is a unit, Import Administration, within the ITA that deals with import pricing to the U.S. Their primary role is to guard and protect the U.S. economy from unfairly priced imports. Other major economies operate similar systems throughout the global market place.

What is an export management company and what do they mean to dropshipping?

An export management company (EMC) handles export operations for a manufacturer that wants to sell its product overseas but doesn’t know how or is not interested in selling on the front-end. So, the EMC goes out and markets to distributors in other countries to get the products sold abroad. An EMC from India for example may search for distributors in the U.S. The U.S. distributor could be a dropshipper for the Indian company which would all be arranged by the EMC.

What is a customhouse Broker and how do they help an import dropshipper?

The customhouse broker is licensed by the U.S. Treasury Department to act as an agent for an import dropshipper. They help prepare and file the entry documents, deposits and releases for goods that the import dropshipper will be carrying.

Does Yourwebsite.com need a reseller certificate or tax number to sell products from a dropshipper?

In order to buy from a wholesale dropshipper, you sometimes need a tax ID number, or resell certificate. The wholesale dropshipper needs to show proof to the government that they can sell without charging us a sales tax. However, not all wholesale dropshipping companies will ask for this information as the tax reporting structure will vary from state to state along with a company’s incorporation or proprietorship. In addition, if you are trying to identify a valid wholesale dropshipping company, you should be extra vigilant. Many middlemen can and will also ask us for a tax ID or resell certificate as they will also avoid the taxation by claiming to sell products at wholesale (or, they are just simply putting on a front for their scam). It is perfectly legal for them to do this practice. The IRS is solely interested in collecting tax from a company’s income, not if a company is a true wholesale supplier with wholesale pricing.

Why are we mentioning this fact? The point is you cannot identify a true wholesale dropshipper by waiting to see if they need your tax ID or resell certificate.

Do you need a tax ID Number if your suppliers (dropshippers) are based outside the USA?

No. However, we recommend that you verify your company name and number with Online Agencies or your Banking providers. We at HowtodropShip.biz aim to give your business the best possible start to your dropshipping business and to that end we recommend the Yourwebsite.com will strive to provide all relevant and legal documentation.

Will a dropshipper supply pictures of their products for yourwebsite.com?

Most dropshippers have pictures of the products they carry. Yourwebsite.com should not consider marketing products without quality pictures. This is a significant part of the marketing process and you should wish to offer consumers the very best service and having exciting and detailed images is of paramount importance to you. Remember this is your business selling products you are recommending and we want to help you market and sell them. Remember this:

Increased Sales – Higher Profits – Greater Margins

What do you at Yourwebsite.com expect in a product picture?

You should actively promote the best quality practise throughout your business and therefore should always where possible insist that dropshippers provide pictures with at least 300dpi resolution. This is particularly important as the pictures are a major part of the marketing strategy and the typical 72dpi pictures found on many web sites do not carry enough resolution for quality print in a magazine, brochure, or other printed media. Yourwebsite.com should also endorse the philosophy of Total Quality Management (TQM). This means the provision of Top Quality Service throughout the logistics supply chain to your highly valued customers. Those cash rich customers are the FUTURE of Yourwebsite.com and REPEAT SALES are your reward.