How To Avoid The 3 M's Of Drop Shipping
Drop shipping has become increasingly popular among resellers that wish to build
a retail presence without the encumbrances not to mention, cost of maintaining inventory and managing shipping logistics. A drop shipping model allows all participants to focus on core competencies in what can only be described as a win-win situation. The drop shipper gets additional sales at an acceptable margin while the seller gets cost and shipment benefits on a sale carried out under his / her own brand name.
While drop shipping may be an excellent business model in more ways than one, it works smoothly only if you take care to avoid the 3 Ms or mistakes as given below.
1.Minimum Orders: An authentic drop shipper is a supplier of wholesale products who will be willing to drop ship even single item orders direct to your customers without promoting his own brand. Anybody who insists on any kind of minimum requirement has his own agenda which is not in line with a real manufacturer or distributor that drop ships. A real drop shippers margins easily allow absorption of the shipment cost while a supplier posing as a drop shipper cannot support a single shipment cost structure. Naturally as a reseller, you are better off working with the former as there is better goal alignment.
2.Middlemen: Another costly error to avoid is mistaking a middleman for a drop shipper. Middlemen, as the name suggests, play no role except to add to distribution costs. They dont hold inventory and order as required from another distributor. This means that they offer higher costs and lower reliability as compared to a drop shipper with his own warehouse. Not only will this take up your purchase costs, it puts the quality of your clients shipment at risk. At worst, the 'middleman can actually steal your client database or misrepresent your good name by offering a better price to the end customer whose name and address they are privy to. As a precaution, against this kind of fraud, visit the warehouse of the prospective drop shipper, place a sample order (in a customers name) to check quality and delivery time.
3.Membership Fees: This is the drop shippers demand for any kind of registration or membership fee which usually implies some fraud at the so called 'drop shippers end. Drop shipping as a concept is symbiotic, providing returns to both seller as well as the drop shipper; if your supplier-cum-drop shipper is expecting any additional enrolment or processing fee, it implies a hidden agenda which can put your business at risk. At the very least, it indicates a financial dependence which does not bode well for the partnership. While many genuine drop shippers do try and negotiate a nominal monthly fee to shore up their profits, by no means should you be willing to pay to understand fee structure or get any other information.
Once you know how to avoid these 3 common pitfalls, you are well positioned to find yourself a genuine drop shipper. Look out for the below signs that indicate a genuine drop shipper.
A drop shipper will offer true wholesale pricing that allows a reseller to make a comfortable profit. This is because they are either the manufacturer themselves or source directly from the manufacturer.
A drop shipper does not try to steal your client and will not put any of his own promotional material or collateral along with the customers order. This is because they are not into retailing their strengths lie in volume and building scale.
A drop shipper will ship even a single order to a single customer without charging any additional monthly fees or compensation. This is because their cost structure allows for this.
A drop shipper will put your company name on the shipping label on your behalf. This is because they have no interest in promoting themselves in the retail business.
A drop shipper will have access to true genuine inventory in their own warehouse facility. This is because they are either the manufacturers or buy directly from them.
A drop shipper does not mention pricing to the customer or take money in any form from them. This is because their objective is increased whole sale business and not necessarily retail expansion.
by: Jane M Dawson
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