How to Choose the Right Drop Shipping Supplier or Wholesaler

How to Choose the Right Drop Shipping Supplier or Wholesaler

Follow these 7 rules for a profitable drop shipping business.

By now you no doubt know that drop shipping is a revolutionary new way of selling products on your web site without having to carry stock or ship orders. It takes almost no capital investment,  it's really easy to get the business going, has virtually no overhead, and you can choose from an enormous number of products.  What makes drop shipping really great is the fact that you get to focus on the most important thing in a profitable business: selling!

As long as you have a good relationship with a reliable drop ship supplier or wholesaler, you can spend all your time bringing customers to your site and when it comes to online businesses, it's all about numbers.

So how do you choose a good drop shipping supplier / wholesaler / distributor ?

There are 7 key things to look for.

Number 1: Watch out for middle men. There are lots of people who position themselves in the middle of the sales process. They pretend to be a drop shipping supplier, but in fact they are buying from someone else and onselling to you. Make sure you are working with an actual manufacturer or at very least a warehousing wholesale company that is stocking and fulfilling products. Look into the history of the operation and check to see if they are a legitimate manufacturer or distributor. I would always recommend sticking with manufacturers as you are going to get the best profit margins and inventory controls with them.

Number 2: Make sure the drop ship distributor you choose to work with has a robust web site with plenty of information about the products. Unless you are selling big brand products like Disney or Nike which do not necessarily need detailed description, you are going to need to both know a lot about your products and be able to inform customers as well. While it's not a deal breaker, it will make a world of difference and save you a lot of time if the supplier has a site with full details and images that you can use. It's something you may not pay attention to while you are searching for suppliers, but forewarned is forearmed.

Number 3: Avoid fees and costs. If a drop ship supplier charges set up fees for an account then I suggest you pass them by. Very, very rarely do real drop ship companies charge for an account with them. And NEVER pay monthly account fees. NO real supplier will ask for it. As for per-order fees, most legitimate companies do not charge these either, although it is slowly becoming more common. While this may be unavoidable depending on the products you want to sell, I feel that there are more than enough proper suppliers that do not charge these fees that you should avoid the ones that do.

Number 4: Minimum order sizes are bad but minimum advertised prices are good. Although not unusual, minimum order sizes is another area I would avoid. If a company requires that you place orders of say $250, you may run the risk of financial problems. A good operation is one that allows any size order of its products, or at least a very reasonable minimum.

On the other hand, MAP or minimum advertised price is a good sign. It means that the supplier values its products and maintains brand value by not allowing price wars. Some manufacturers require that you do not advertise their products for less than a certain price, and that means you will be making profit without constant price cutting to compete. This is a big plus, trust me.

Which brings up another related issue to watch for: low margins. If the profit offered by a drop ship supply company is between 5-15%, then unless the demand for their products is huge, you should avoid them. From my experience, 20% is the very lowest margin that is workable and even then I'd try to find better. That's why dealing with a true manufacturer is better; they will be able to offer you better margins.

Number 5: If they don't ask you for your business EIN number and a copy of your state sales tax and/or resale certificate, then they should be avoided. It might be nice to not to have to supply all your legal paperwork, but the supply company is supposed to be checking for it, so it raises a red flag if they don't.

Number 6: Look for a supplier that values good customer service and relations. If they proud of their products, and care about the customer's experience, they will offer guarantees, rewards for stock outage problems, and generally try to make things right. Ask them how they deal with customer dissatisfaction, shipping problems, loss, destruction, and anything that might create a problem in the shopper's satisfaction.

Number 7: Look for a drop shipping supply operation that is listed on World Wide Brands, SaleHoo, or one of the large drop shipper directories, as these companies do a good job of vetting the suppliers before allowing them into their database. Everyone who is a legitimate supply chain drop ship distributor will be in at least one of these directories. This way you at least know the company has been fully validated. If they're not listed, just say no thanks.

Finally, when it comes to technology, this is an area where you need to be forgiving. This isn't a rule, but a heads up. There are so many different programs running the sites of the drop shippers and their suppliers that you should expect not to be able to have your site seamlessly speak to theirs. Most times you will simply have to manually place orders on supplier sites and manually update your stock levels from their data feeds or their site. This is just the nature of the beast. We are a long way off from any kind of cross-platform standard.

If you follow these 7 rules you will be able to find professional and reliable drop shipping suppliers that you can build a successful business with. This is very important because as you grow, you want to know that your suppliers can handle your growth, and can operate in a way that is consistent with your own business ethics. When things get hectic and stressful, you want the security of a good partner. Good luck and good selling.

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4 Comments

    • Avatar
      Suzanne Keaton
      Oct 12, 2015

      Thanks for the great information! I will use this to find a good drop-shipper.

    • Avatar
      frankie graves
      Jan 22, 2016

      Thank you for the great info. I am new to this business, and i can use all the good advice i can!!!

    • Avatar
      Ted Nestor
      Apr 1, 2016

      Solid article, I appreciate the breakdown. It really helped me in setting up my drop ship based business. Thanks.

    • Avatar
      Khawar Awan
      Mar 20, 2017

      Hello, We are interested in dropship program, please advise the process. Regards, Khawar

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