A tantalizing ecommerce business model that seems to offer all the advantages of online sales without any of the drawbacks, dropshipping is, in reality, harder than it seems. On the surface it seems like you’re just making money selling other people’s products, but the truth is you have to earn your profits through behind-the-scenes management — namely, product sourcing.
More than any other ecommerce business model, dropshippers rely on the quality of their product sources to succeed. Dropshipping suppliers are not only in charge of providing the products, but shipping them as well. That means you’re not just choosing a place to procure products — you’re choosing a business partner.
We already covered the ins and outs of how to start a dropshipping business in our exclusive ebook, which you can download for free now. Below, we go into more detail on various dropshipping product sourcing strategies.
What Is Dropshipping?
If you’re unfamiliar with the dropshipping model, here’s a quick explanation. Rather than storing the inventory themselves and shipping it out whenever they make a sale, dropshippers partner with suppliers and manufacturers who take care of that for them.
A dropshipper lists their partners’ products on their online stores (or markets like Amazon). Whenever a customer purchases something, they pass the sales order on to the partner, who fulfills the order themselves, giving the dropshipper a cut.
For the dropshipper, this seems like easy money — sell other people’s products for a percentage without having to worry about shipping, storage, or inventory management… not to mention the next-to-nothing startup capital. But in practice, dropshipping is not as glamorous as it seems. The dropshipper’s fee is small, so they have to make lots of sales just to make up maintenance costs.
On top of that, it’s difficult to build a brand when you’re selling other people’s products. A dropshipper’s success depends on their marketing, so without strong branding, the dropshipping model falls short.
Dropshipping works best for companies that already have a strong marketing presence. It’s incredibly effective as a complement to another business model — in particular as a means to test new products or new locations without the risk, as well as offering products that are too cumbersome to store and ship yourself, like furniture.
If you’re trying to break into the dropshipping industry with no recognition, you’re going up against other dropshippers with more experience, trustworthiness, and a bigger customer base — and they’re selling the exact same products as you. If you think dropshipping is easy money, think again.
The Best Product Sourcing Strategies for Dropshipping
When it comes to finding the best suppliers for dropshippers, here are the top strategies:
1. Online Research
Dropshipping is popular enough that plenty of third-party sites have cropped up to join the party. There are tons of dropshipping directories and sourcing platforms that compile lists of suppliers for you, cutting your research time in half. On top of those, there are also plenty of forums for dropshippers to get advice from one another. Some online marketplaces like Shopify even offer dropshipping apps to make the process even easier.
The important thing to remember here is that you get what you put in. If you resign to the first supplier at the first directory you go to, you’re probably not getting the best deal. But the more time you put into searching and comparing prices, the more likely you are to find that perfect deal that gives you an edge over your competitors.
2. Reverse-engineer Supplier Research
Sometimes you can find suppliers by looking at who’s already dropshipping those products. If you find a product you like from a store that you know dropships, chances are you can also dropship that product too. Go to the manufacturer’s site and look for links that say “dropshipping” or “wholesale.” If you’re really adamant about it, you can even call them and speak to someone directly to get answers (see #4).
3. Beware of Scams
Because dropshipping is so popular, it’s become a hotbed for scammers. Be particularly cautious, not just with the supplier, but with third-party services offering to hook you up with suppliers.
Here’s a short-list of suspicious behavior to watch out for:
Membership and Setup Fees. Real dropshipping suppliers make money off sales, so if someone has a signup fee for listing their products, take warning. That also holds true for directories and platforms — there are plenty of free sites that offer the same service.
Fake Middlemen. One common scam is to pose as a supplier and syphon some of the profits. Whenever a sale is made, the fake middleman purchases the product from another supplier rather than fulfilling it themselves. These scammers are hard to catch because they’re good at mimicking the real deal, but one giveaway is that they usually offer a diverse range of unrelated products that wouldn’t realistically sell well for a legitimate company.
Inflated Wholesale Prices. Always double-check wholesale prices to make sure they’re consistent with other suppliers. If they seem overly inflated, you may be dealing with a fraud who’s marking up the price so they make their own profit.
4. Contact the Manufacturer Directly
Because dropshippers work more closely to suppliers than other ecommerce models, don’t be afraid to use more personal methods of communications. Feel free to call up a manufacturer directly and speak one-on-one about working together. You may find that you can strike a deal with someone who hasn’t considered dropshipping before — that’s an exclusive resource that your competitors can’t touch!
As we said above, dropshippers have a closer relationship to suppliers than any other ecommerce business model, which means product sourcing is integral to your success. Always look into your supplier’s reputation before signing a contract or making a payment.
In dropshipping, product sourcing isn’t just about product quality and prices — the integrity of the supplier to meet shipping demands on time and handle returns affects your business just as much, if not more.
Need more help? Check out these tips on how to choose the best dropship products.