One of the most important steps in starting your ecommerce business is figuring out order fulfillment. If you are not manufacturing the product, you’ll need to choose a supplier.
In this quick guide, we’ll focus on dropshipping. It is a method of order fulfillment in which you (the seller) purchase products wholesale from a manufacturer or supplier, list those products for sale, and send orders to the manufacturer or supplier to fulfill directly to your customers.
This fulfillment option decreases your initial investment by eliminating the need to have inventory on hand and allows for a more diverse assortment. However, profits will likely be smaller and competition higher since you are not selling a unique product. If you’re still not sure this is the best fulfillment method for your business, read up on other options for order fulfillment. Have you already decided and don’t know where to start? Read our guide on how to start a dropshipping business first.
So, how do you choose the right suppliers?
You want to find experienced and professional suppliers who respond quickly and help you integrate your back-end processes with theirs.
Three ways to find dropship suppliers:
Find small to mid-sized manufacturers and work directly with them.
Manufacturers typically won’t advertise as dropshippers. Rather, their focus is on creating the products that you want to sell. They may have a poor online presence, because their strength is in making quality products. They need you to help them sell as much as you need them to provide the products to sell. And that’s exactly what you’ll tell them in your pitch. Some tips for using this method:
- Know their industry and tell them how you plan to sell their products.
- Offer a plan based on your track record that shows you will both make money from this partnership.
- Work out terms that benefit both of you, aiming for low MOQs (minimum order quantities) and reasonable pricing.
- Assure them that this will be a long-term partnership, so they understand what they have to gain as well.
You may end up taking a lower margin at first, but renegotiate pricing once you’ve proven that you can sell at high volumes.
Use dropship or wholesale directories.
If you’re relying on a google search for “best dropshippers,” you’ll likely be met with a host of scam-y and unreliable websites just trying to “clean up” at your expense. Sure, there will be a few reliable suppliers mixed in, but, how do you tell them apart?
One good way, is to let someone do the vetting for you. A directory service may cost a little bit, but the value is in the time saved having them screen and research the companies for you. They’ve narrowed it down to the more reliable options, and often provide other helpful services like customer service and integration software.
Some directory services to consider:
- Worldwidebrands has certified suppliers used by known large retail chains, is an American company, and is recognized in magazines like National Geographic, Travel Channel, and Entrepreneur.
- Salehoo is a good starting point for beginners or seasoned business owners. It offers over 1k dropship suppliers and 8k wholesale suppliers, no application fees, and market research to identify seasonal trends and products with high sell rates. Training guides, tutorials and customer support are also included in the membership.
- Alibaba offer hundreds of millions of products across 40 major countries and connects buyers and sellers on their platform.
Look for wholesale dropshippers yourself.
This method is free, but look for red flags. The reliable individual suppliers should not ask you to pay subscription fees or a one-time fee. The real-deal suppliers only charge small fees (a few bucks at most) for items shipped, or set a minimum dollar amount per order. Avoid companies who ask for bulk orders in advance.
For any of these methods, understand your profit margins, and ensure they make sense for your business. Work closely with suppliers (and integrate software if possible) to avoid errors in out-of-stocks or shipping issues. If you don’t already have one, look into a dropship management system, that allows you to route your orders directly to the dropshippers you’ve chosen, and integrate your other shipping methods. Work with domestic shippers if you can, as it makes communication easier and more reliable. Always place a test order with a new supplier. Make sure everything runs smoothly and on time during the test before you move forward with the partnership.