Forums: Discussions for entrepreneurs and small business.

I got a call the other day (I’ve been getting lots of calls lately… SuN Rocks!)  from an online retailer wanting to carry Grill Charms™ when they become available.  I would like to hear from my fellow inventor/manufacturers out there as well as my potential customers (IE retailers both online and traditional)

 

Here is my situation… he wanted me to drop ship for him, but from what I understand, that would be offering a customer (online retailer) a wholesale price but I would do the work of fulfilling the individual orders.  Someday I might have a huge facility where a ton of people pick and pack my orders for me, but for right now… it’s me, myself and I.  I most certainly do not want to alienate an entire market because I won’t drop ship, but my time is going to be spread so thin that fulfilling orders for a wholesale price just doesn’t make sense to me when I should be out pounding the pavement.  I plan on fulfilling orders for my online customers that order from my website, but of course the profit margin makes it worth my while to do.  What is one to do????  There is the option of a drop ship fee, but how much should that be, what is customary and acceptable for my time picking and packing?  My business plan is based more on the William Sonoma type retail store target market not online sales, BUT I do want online support from a handful of great online stores.  How do I keep everyone happy and wanting to buy?  (Impossible huh?)  I would like to hear from both sides of the fence please!

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Leslie
Founder and President
Charmed Life Products LLC
Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
Grill Charms
                                                                                                    

I`ve received the same request numerous times.  I`ve chosen to do it as I would have to ship either way--either directly to the wholesale buyer, or to their client.  I think one of the first objectives is to get your product out there and start getting brand recognition.  With on-line stores, you get the benefit of their search engine marketing, at no cost to you.  Most professional fulfillment companies charge a Pick & Pack fee per item--one I know of charges $2.00 for the first order item, then .30 cents thereafter, on top of the shipping charges.  So if someone ordered 3 Grill Charms, you would charge the shipping fee, plus $2.90 for handling.  Hope this helps.

Martha 

You need to do the math first and make sure you are making a profit.  Then you need to say, “Will I make enough to hire the extra help it will take to fill the orders and still make a profit?”  Many see the volume at the onset and do not do the math covering all the possibilities.

You need to make sure you will get paid too.  I hear about deals like this where the drop shipping producer has shipped orders to customer and the company they shipped for never paid them or they stretched them out 120 days+!  This is some of the dangers and you need to make your deal legal and check out the companies you are going to do business with to minimize the risk.  You should also require a minimum number of items purchased over time or give your discount based on the amount they sell.  I would suggest working on their money at first if at all possible.

Something else you should consider is where the customers are located.  Just in the US or around the world?  Shipping internationally can make a huge difference in costs.  Remember the world is getting flatter all the time.

I know a lot of successful companies that do this type of thing all the time but they have done their home work and set the rules from the beginning.  Sadly, I also know of several businesses that have never made any money drop shipping for others because they did not think of all that was involved from the beginning and they got lock into a bad deal.

Now that I have talked too long I have a couple of questions.  What is the retail price of your items and what kind of volumes is this reseller saying they will sell?

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

Hi Leslie

The question i would ask myself is "does this person/company have access to customers that I can`t get to?".
If the answer is yes, then go for it.  Say Frontgate calls, then the answer is YES. They have catalogs and you don`t, but if its someone with a low traffic web site calls, then NO. When you start getting press for "Grill Charms" you want all the key words to point to your site, not that other guys. This is part of the advantage of being the manufacture. You don`t need to keep everyone happy. You choose them, don`t let them choose you.

A second point is, why do they think they can have it at a wholesale price?  If you were retailing at $4 and wholesale at $2 , I would Drop ship at $3. To me wholesale is something like 48+ units at a time. One at a time drop ship is close to retail from my point of view.

Bret has a point about being paid. One of the first things I would bring up would be shipping costs. Companies I`ve dropped shipped for immediately offered their own UPS account # to work off of. It shows a level of professionalism on their part.
Jeff

Leslie,

This is a question we are asked quite often.  Why?  Because many people think it`s a great way for them to make an income without carrying any inventory.  Some have websites that carry a large inventory of products on their website, with no inventory at all. They are having multiple companies ship the product.  What I don`t like about that, is the customers are getting products from many different vendors.  Some of the drop ship companies will set up a credit card account with you, to pay for each order. But as someone said, making sure you get paid is an important part of this.

You would not want to sell it to them as low as your wholesale price. We have drop shipped for a couple of companies, and  I have found it to be just extra work without much profit. It would also depend on how well the company markets your products, as to how many orders you will actually get from them. 

I say pound the pavement! Then maybe look at this again after you get going.

As a retailer I only drop ship my larger items such as furniture and lighting. Freight is expensive and drop shipping prevents me from incurring shipping charges twice. However, my smaller items I keep in stock so that I can control the quality of customer service.  My drop ship items are high dollar items and I will typically pay between $20 to $25 for a drop ship fee, plus shipping and handling.I can`t imaging that drop shipping Grill Charms would be cost effective for you. If there is an online customer who places an order for Grill Charms they will probably buy just a few. A retailer will buy multiple Charms and they will all be shipped to the same place and and you won`t spend so much of your valuable time filling orders for 2-3 Charms. Most of my vendors required me to pay in advance for the drop ship items and after a period of time I earned more favorable terms. It is not unreasonable to ask for advance payment, a drop ship fee, and a surcharge for ordering less than a certain amount. 

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Sharon Murphy
Owner
Northwoods State of Mind, Inc.
NorthWoods

I drop ship but the price is not discounted from my regular selling price to the  distributor.  In fact, the shipping charge is added on to the price!

Prior to drop shipping, I was shipping to the distributor`s warehouse. They in turn shipped to their customers. To get better access to their customers, I offered to drop ship - this was considered a "value added" by the customer :)


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A good idea is a good idea NOW![sup]TM[/sup]

ethnicomm inc. | sales | marketing | web | strategy consulting

Thank you for all of the input.  I`m slowly forming my opinion and strategy regarding this subject.  I truly appreciate all of your honest responses.  You are helping tremendously in navigating the waters of this uncharted route for me.  THANKS!  Keep em coming!  Any counties not heard from?

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Leslie
Founder and President
Charmed Life Products LLC
Grill Charms™… The MUST HAVE grilling accessory that is revolutionizing the American Cook-out AND The perfect gift for any occasion!
Grill Charms
                                                                                                    

If you decide to drop ship, then I recommend a higher than wholesale but lower than retail price.  You need to compensate yourself for the additional time and expense.

jillybeans

In my industry - the very few people that will drop ship, do so at a lower margin for the retailer.  For instance, if I would make a 50% margin selling a product that I have stocked and sent to the customer, then I would only make 30% for having it drop-shipped.  I don`t have to BUY the product myself, package it, go to the PO, etc.  In return, I make less money on it.  The retailer has to weigh the benefits or costs of doing that as does the manufacturer. 

Now, you will always get retailers who freak because you aren`t offering them FULL MARGIN on the product when you drop ship for them.  But, then, who needs those people?  It just proves that they really aren`t that business savvy if they don`t get the simple economics of someone else doing their work for them. 

~Kim