The Biggest Myth About Drop Shipping: No Successful Company Uses Drop Shipping

There has been a lot of misinformation spread on the internet about drop shipping

. I've been involved with drop shipping in one form or another for over a decade, and it never ceases to amaze me what people are saying, both positive and negative, about the drop ship model.

I've written extensively on the caveats of drop shipping. However, now I feel like it's time to directly respond to those spreading pretty serious misinformation about drop shipping. A few things I've read:

- No true wholesaler drop ships

- "Middlemen" (those who aggregate multiple wholesale drop ship accounts for easier access) are scams

- No successful online retailer uses drop shipping

- No successful retailer uses "middlemen" as their wholesale drop ship source

That's just a small snippet of falsehoods that has been getting spread around for several years. It's time to tell the truth.

Myth: No True Wholesaler Drop Ships

This is so ludicrous, I almost feel like it's not even worth my time to explain it. But I will.

First, what is a wholesaler? Plain and simple, it's a company that sells product to a retailer. If you buy your product at Wal Mart and resell it online, guess what? Wal Mart is your wholesaler.

"But Stu, Wal Mart is a retailer, not a wholesaler!" Correction: Wal Mart is whatever you make of them. If you buy something for personal use, they're a retailer. If you buy something for resale, they're a wholesaler. Plain and simple.

The whole idea of "true wholesalers" and "fake wholesalers" is little more than marketing speak from those who are trying to sell you something.

Myth: Middlemen Are Scams and No Successful Retailer Uses Them

This has gained a lot of traction on the internet, and I'm not really sure why. If middlemen are scams, then why do some of the largest online retailers use them? I'm talking companies like Best Buy, Sears, Staples, Costco, and many more. Some of these companies use drop ship middlemen to fulfill on all of their online orders while others use them to fulfill on a percentage of online orders.

Why do they use a middleman? Because middlemen are in the business of aggregating multiple wholesale drop ship accounts, sometimes several hundred of them accounting for millions of products, and providing retailers universal access to these hundreds of accounts all in one location.

If you're a retailer and are choosing between managing hundreds of wholesale accounts or managing one account that offers the same number of products, which are you going to choose? I'll be honest. I'm lazy and would choose the latter. It's a no-brainer for me.

There are two major middleman drop ship companies out there. One caters to the very large online retailer while the other caters largely to small and medium-sized businesses. Most people have never heard of the first because, well, most people aren't a large online retailer who is willing to pay several thousand dollars in setup fees plus a monthly fee plus a per-transaction fee. Many of the big retailers mentioned earlier do pay these fees, however, and use this middleman drop shipper to fulfill online product orders.

The latter middleman has gained a bit of a reputation due largely to the fact that their target market is smaller businesses, and the cost of entry is very low (no setup fees, no per-transaction fees, no markup on product costs) and therefore attracts a lot of people with no business experience who think drop shipping is a magical cure.

Truth is, both companies offer nearly identical services, but approach it from a different angle and have different target markets. Thus, one has virtually no reputation -- except amongst insiders -- while you can find plenty of opinions online, both positive and negative, about the other.

As I said earlier, I've written many articles about why drop shipping is not magical and have given many reasons why drop shipping is not appropriate for certain types of businesses. But in some cases, drop shipping is the answer to a retailer's prayers... just not every retailer.

Maybe drop shipping is for you. If so, maybe a middleman is right for you. Maybe not. But if you're going to take a look at drop shipping, you should do so with the truth in mind rather than the angry words of failed businesses or wholesalers who compete against the drop ship model.

by: Stu Wiseman

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