This is Lesson #1 in drop shipping, fulfillment & general business challenges that every one of us either face or will face in the future when out sourcing products and or relying on a vendor to drop ship any type of item for us…
Here is lesson number one for all of you looking to find a “business partner” to drop ship products for you.
1 st rule… BE CAREFUL. Sometime's in our eagerness to bring on a new vendor and get to selling and making money, we rely too heavily on a particular vendor that we have not “tested” yet… That can be paramount to business suicide… Trust me, I have been in sales and business management for over 20 years and have almost always had to rely on some one else to do their part to fulfill a particular need.
For the last 8 years, we have been selling products on a very small scale over the internet (ebay) as a little side business. A little over a year and a half ago I built a website, and left my management job to pursue the dream of working our business full time. We have grown our small $20,000 a year business to over $2,000,000 in sales in less then two years… What an exciting ride it has been! So first let me say to you who are wondering… Can this online business really work… The answer is YES IT CAN!
Many questions have come up about… Where can you find drop shippers and suppliers? And I know you can go to the resources section here and find some qualified “Business Partners” to help with that fulfillment. You can also research and attend conventions and trade show in the particular industries that you are interested in like I did… However, after attending many trade shows and being goggle eyed in hopes of selling a new product, I failed to do proper foot work and testing before I made some very COSTLY mistakes.
But before I tell you about a few of them… You have to understand the nature of product fulfillment. Traditional distribution channels previous to the internet boom were much easier to deal with. For the most part a vendor would load a bunch of product into large boxes and or on large pallets and ship them to a brick and mortar store, where someone would break them down and sell them to the general public… It's been done for many years. However, since the internet boom, things have been changing rapidly. We now have service like UPS, Fed Ex, DHL, etc, that can take single packages to a residential address... Wow, how cool is that? True delivery to your door… Like the old time milk man days! Well, the hard truth and realty of what is being accomplished needs to be recognized for what it is… The general consensus to find a cheaper product on the internet in my opinion is really hard to swallow… For a vendor to take a single product and ship it to your door should in all rights cost you more… After all, it is service that you are paying for, that costs a lot in money and resources to fulfill the need.
If you think of fulfillment from a distributors stand point to send a single item out for some internet dealer at home, working in their underwear is almost ludicrous? Yes… I work in my underwear on many occasions…
The general process of drop shipping is as follows:
Customer searches on internet, finds a product, orders a product, credit card is processes for payment. Dealer (that's you) receives order then processes order to vendor, vendor receives order, processes order through accounting for approval, processes order through warehouse, item is either hand packaged or picked or fabricated and then packaged, item is then processed for shipping method, item is then processed to shipper, or made available for pick up, item is sent, item is now processed through system, emails are (sometime sent) for tracking to dealer (that's us) and possibly to customer directly. Vendor follows shipment. Once shipment is confirmed delivered, vendor submits items to accounting for payment, accounting sends invoice to dealer, dealer receives payment and confirms delivery, dealer processes payment back to vendor, vendors, receives payment, Vendor processes payment to the bank and closes bill.
All for that item that we paid the distributor $30.00 dollars for… Now do you really think the vendor made much money on that $30.00 item? Think about it… How many hands at what hourly rate it cost to process that order? Hmmmmm
Ok, now for the challenges you must consider when choosing a vendor…
How about this scenario #1… I, in my infinite wisdom walked for two days around a trade show handing out business cards in my industry looking for drop shippers, only to get treated like I was scum of the earth because I was an INTERNET DEALER… Are you kidding, people in the patio furniture industry don't want to process two chaise lounges that they make $35.00 on, only to have UPS drop the darn thing and break it… Most of them sneered at me and wouldn't give me the time of day, unless I wanted to buy a full container from China. Wow, was I crushed… So, when I finally found some one who would “try” doing business with me I was ecstatic… I was on cloud 9… Wooohooo! Now I'm rollin… So, I ordered 3 pallets worth of umbrellas, and figured I would ship them from home via UPS. No problem! I mean I didn't think so any way… Well after spending thousands of dollars on Adwords and selling a few pallets of umbrellas out of my garage, that I failed to open and inspect … I now was in the midst of receiving threatening phone calls and emails from dozens of unruly customers saying that they had been ripped off… What you mean. That's not what the sample I checked out looked like? Now imagine, paying to have all of those umbrellas shipped back and then refunding all of those customers… No fun.
Scenario #2 How about having a vendor tell you there lead time is approximately 3-7 days. So you then advertise the lead time on your website, but guess what… The vendors average become 10-21 days… Now you are dealing with many phone calls and emails again from unruly customers.
Scenario #3 What about selling a product so fast, your vendor can't keep up with demand, and now you have a bunch more ticked of customers because they need the product for their wedding, or birthday or family gathering that has been planned for 6 months?
Scenario #4 How about sending some really nice stuff out, but the vendor was new at drop shipping and underestimated the correct amount packaging that was needed. So half of the products being sent are broken before they arrive at your customer's door…
Now the point here isn't that it's all crazy and forget about this business… The point is that you really need to be careful when choosing and “partnering” with a company to fulfill you products. It's a constant communication and it needs to work for both parties for a some what seamless transaction…
Don't be so eager to jump into bed with the first prospective vendor that comes along… Do a few test runs and work with them to ensure what you promise can be delivered… Otherwise, you may be setting your self up for a major fall…. Your customer doesn't care why the vendor didn't get it there… He doesn't care that UPS can't find his house, or that they actually crushed the package…. After all, they did business with you…. And it's your word and reputation that is at stake?
In closing… Don't let this information stop your dreams… Let it sink in a use the information wisely to enrich your business and make wise purchasing decisions. You will be well rewarded for making wise choices! I know I have... |
