How does dropshipping really work?

Last Update: July 05, 2018

Dropshipping is a method of fulfilling retail without having to keep the products you sell in stock.

Instead of purchasing a large amount of inventory, you simply partner with a dropshipping supplier and list their merchandise for sale.

Every time you receive an order from a customer, you forward it to the supplier for fulfillment.

The supplier will ship the product directly to your customer from their warehouse, and charge you only for the price of the shipped item.

As a result, you as a merchant never sees or handles the product.

Where can I find dropshiiping suppliers?

There are many ways to go about finding a supplier. Below are a list of some common ways;


Contact the manufacturer

I think this is one of the best ways to find a wholesale supplier.

If you know the manufacturer of the product you will like to sell, you can contact them to get a list of all their legitimate suppliers.

Then you can contact these suppliers to see if they will dropship for you and inquire about setting up an account with them,

After making a few calls to the top manufacturers in a niche, you will quickly be able to identify the leading wholesalers in that market.


Alibaba/aliexpress

You can also use Alibaba to find reliable supplies. You need to dig deep and ask for samples of the products you want to sell.

You can determine reliability from how long they take to give you a response. Many of these merchants have business partners who sell using their trade name on several other platforms.

You can visit their stores to see what their feedback score is and how many feedbacks they have received in total.

Usually a big number of positive feedbacks mean they are a big trader and can fulfil your orders with ease.

Many people turn their nose down on aliexpress but I have been able to find good reliable merchants there.

I have also been able to use it for market studies, to determine which products to sell in the future.

Furthermore, I like their free epacket shipping which gets the items to the customer relatively fast. You can take advantage of this to get a sample of the product to determine its quality.

Google

Google is a good place to search for dropshipping suppliers. Be thorough and careful when looking on google. There will be a lot of fake dropshipping suppliers who will pop up on the first page.

  • For some reason, the legitimate supplies won’t show up on the first page. They do not put too much effort into advertising as the fake ones.
  • Do not let the website fool you. The sites of some legitimate suppliers are so retro you will think they were built in the dinosaur age. Look closer before deciding.
  • When searching on google, use a variety of keywords. Just as wholesalers are not very good at advertising, they are also not so good at SEO. So don’t just search for product+wholesalers. Try redistributors, resellers, distributors, suppliers, bulk…


Dropshipping supplier directories.

You can search the data bases of dropshipping directories for suppliers. Supplier directories are a convenient way to quickly search for large numbers of suppliers in one place.

It is also a great place for brainstorming ideas for products to sell or niches to enter. It is however not a necessity, especially if you already know what you want to sell.

Some of the well-known directories are;

  1. Worldwide Brands
  2. SaleHoo
  3. Doba
  4. Wholesale Central

Miscellaneous

  • Order from your competition and when the item arrives, determine from the invoice who the supplier is.
  • Go to trade shows and try to connect with major manufactures and wholesalers

How to spot fake dropshiiping suppliers

  • They charge ongoing fees. Most legitimate suppliers do not charge fees to fulfil orders for you. Don’t confuse suppliers with supplier directories. Most Supplier directories usually charge a recurring fee or a onetime fee (this is normal).
  • They sell to the public. To get genuine wholesale pricing, you need to deal with a genuine wholesale supplier. If a supplier sells to the public, then they are just a retailer selling at inflated prices. Many wholesale supplies have a minimum order size and some charge pre order fee to help upset the price of packaging items individually.

Pros and Cons of dropshiing

Pros

  • Low start-up capital; since you don’t need to buy and stock inventory
  • Access to a large inventory as you can sell almost anything your supplier is ready to dropship for you
  • Less risk as you don’t have to invest in inventory
  • Room for research. As you list the items from your suppliers inventory, you can gather information from the orders you receive and with time will know which products sell better.
  • You can run your business from anywhere with an internet connection. Since you don’t have anything to do with the fulfilment, all you have to do is place the order with your supplier and they will fulfil it for you
  • It is very easy to scale as most for the hard work is done by the supplier


Cons

  • Low barrier to entry means low margins for you as there will be a ton of competition.
  • There is usually inventory issues as it is not easy to keep track of your supplier’s inventory. Often times, you will find out that the order you just received is out of stock and might have to cancel it. This is not very good for business
  • Complex shipping situations arrive some times when a buyer orders multiple items and you have to order them from more than one supplier. You end up having to pay two or more shipping fees.
  • Sometimes the supplier will make a mistake and you will end up taking the blame for it because the buyers only knows you.

Is Dropshipping worth it?

Dropshipping has its ups and downs as listed above. However, with careful planning, you can make a profitable business out of it.

On average drop shipping gross margins are usually in the 5% to 15% range.

Cheers Denise

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bigrog44 Premium
Thanks for sharing, Denise,
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MKearns Premium
Who tracks the shippers and freight forwarders!
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tatihden Premium
Typically, it is up to the dropshipper to track every order and shipping to make sure that items are shipped on time and via the right shipping method.

Customers get tracking information so they can check the status of their shipment. They usually are not aware that the item is fulfilled by someone else.

If a shipment does not arrive within the estimated time frame, you take the blame for it.
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JMerritt1 Premium
Your article on dropshipping is enlightening. I am sure that I will find this useful in the near future.
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BenjisDad Premium Plus
Affiliate marketing had lost startup costs and pays higher margins.

Only thing is going SEO takes a few months. But once it starts it worth it.

Maybe I'm biased.
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tatihden Premium
I agree with your views about affiliate marketing. I actually like my affiliate marketing business.

I however also indulge in dropshipping because it is just a whole different kind of thrill.

We are all made different and some people are better fit for some things than others.

Dropshipping can be another stream of income for a beginner.

Some people give up because writing intimidates the crap out of them.

These people can find hope in dropshipping or other forms of marketing
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NemiraB Premium
Hi, thank you for the information. I wonder about business costs. Did you calculate it? Do you use Shopify?
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VanessaN Premium
Shopify is actually a great place to start. You get a 14-day free trial and after that the monthly fee is $29.00 for the basic plan.

They've also incorporated Oberlo, which is a free APP you can use to watch your stock levels, add the items to your store automatically and all that jazz... They also have an APP called Kit that can help you with the marketing aspect of things but that's $9.95/month.

Just recently they added Shopgate and a few other mobile payment options.

So a basic start up for an online store does not seem that bad and the people who do it right are raking in quite a bit of money.

Hope this helped.
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Nkaujzeb Premium
I have the same question. Or are you using woocommerce?
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tatihden Premium
Hi Nemira,

Initially it didn't cost me anything as I took advantaged of Ebay's 50 free monthly listing for my research.

So, I listed somethings I buy like jewelry and clothing. I listed some winter coats as I started my dropshipping adventure in September.

I made sure to add really good pictures and description. I initially used aliexpress to fulfill my orders.

All I paid was 10% final value fee to eBay and about 3.8% for pay pal.

As I figured out what was selling, I searched for other suppliers and got better prices.

I have not dealt with shopify yet. I hear it is good and you can link your store with Oberlo to get access to a variety of wholesalers.

I'm working on my own store with the tools provided here at Wealthy affiliate. It is time consuming though.
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tatihden Premium
I am currently still using Ebay, Amazon,and Esty to dropship.

I'm trying to build my ecommerce site with woocommerce but it is very time consuming especially as some of the features are not allowed for Wealthy affiliate hosted websites. I might just try shopify.
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NemiraB Premium
Thank you:)
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Nkaujzeb Premium
Wow okay, thanks.
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