7 tips to make sure you add the right dropshipper to your back-end
The beauty of dropshipping is that lets you sell products online with very little investment or risk. For businesses that are looking to expand their offerings on their current storefront, open a new one, or test new products outside of those currently handled by their 3PL or warehouse, adding a dropshipper to their fulfillment ecosystem is a commonstrategy. The retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.
While dropshipping is a great way to do business, finding the right dropshipper to add to your mix can be challenging. There are plenty of middlemen and brokers who claim to be genuine but can end up negatively impacting your margins and seller performance. To avoid being exploited, retailers must do their own research to short-list legitimate dropshippers.
Being focused on eCommerce back-end automation and the connections between online storefronts and their fulfillment partners, Hublogix has worked with thousands of dropshippers in many different industries. To assist you, we’ve developed our own short list of important considerations in selecting a dropshipper, plus a more detailed worksheet to help you compare the performance of various dropshippers, once you have begun your search.
#1 Start with the manufacturer.
The more successfully you remove the middlemen from your supply chain, the more success you will have. Figure out who manufactures the items you want to sell on your store and contact them directly to ask them if they can dropship their items. Even e-tailers with large inventories and a variety of products should directly contact the manufacturers of the items they want to sell. They’ll usually have the best prices if they do dropship, and if they don’t, they’ll likely have leads on reputable distributors, who may carry a selection of similar products from different manufacturers you can considering add to your inventory.
#2 Put them to the test.
Ensure your dropshippers are reliable by placing a few test orders with them. Take note of the average shipping time and quality of the items received. Remember – your customers’ experience will reflect on your brand, not the dropshippers.
Keep in mind you no longer have strict control over the look and feel of the package being shipped. While the dropshipper should use the label provided by you, they may not agree to adhere to other packing requirements which are preferable to your brand or which minimize the potential of damage.
If you sell in a marketplace (Amazon, eBay, etc.) make sure that the dropshipper will deliver within the marketplace’s required timeframes. If your product is delivered by the dropshipper outside of the required delivery time, this can result in negative feedback on both eBay and Amazon as well as penalties against your seller accounts.
#3 Ensure they have a competent support staff.
Contact dropshippers who fit your criteria for products offered. If you are not able to quickly connect with a representative on email or the telephone, it can be indicative of the type of customer service you will receive if you use them. Ask if your company will be assigned a representative or if you will be dealing with a different person every time you need assistance. Either type of system can work if the dropshipper’s service is acceptable.
#4 Make sure you are paying true wholesale prices.
Are the product and shipping costs within a profitable range? Many product suppliers claim to do this when in reality their prices are retail or just below retail; which means that you would not be able to have a desirable profit margin.
Legitimate dropshippers rarely require account set up fees or monthly account maintenance fees.
As you identify products that sell well for you, you can invest your profits into purchasing those products in larger volumes to leverage volume price breaks your dropshipper should offer.
#5 Plan for returns and other issues.
Backorders, lost shipments and returns are all part of retailing. These are issues retailers can plan for but when using a drop shipper, some of these issues are beyond your control. Be prepared for these instances by discussing policies and expectations with the dropshipper ahead of time.
Because your customers expect their products to be of a pretty high standard, your dropshipper will need to guarantee you a certain standard of product quality, and be willing to replace any defective products. Be wary of dropshippers that do not offer these guarantees.
#6 Pay attention to the metrics
Be sure to research and compare your potential dropshippers objectively against the metrics that matter most to your business (here’s a worksheet that is popular with our clients that can help). Common questions to be sure to answer include:
- How many sites have used this dropshipper for at least 1 order in the past 30 days? This is an indication of the dropshippers’ competency/size.
- How accurate is their inventory feed? How often is it updated? What is their backorder rate?
- At any given time, what % of their inventory in stock – by SKU and across their total SKU volume?
- Do they support the partial shipping of orders? Do they allow backorders?
- What are their shipping methods & costs?
- What is their average shipment time after an order is processed?
#7 Favor dropshippers who embrace technology.
The more partners you add to your supply chain, the greater the complexity in your order management processes and decision making. If a dropshipper isn’t up to speed with the latest technologies and isn’t willing to be compatible with your technology stack, move on to one that is. Manual handling of issues such as order routing and purchase order generation are simply too subject to manual errors, lost orders, and shipping mistakes, all of which can cost you customers. Automate as much as possible. Remove the manual labor from the equation so you can focus on growing your business. Dropshippers that can make use of emailed or FTP order fulfillment, and provide their inventory in a highly compatible format like CSV can make managing your store and integrating with other eCommerce technology providers much, much easier.