Becoming a dropship supplier requires learning the different areas of e-commerce such as shipping dropship orders, managing inventory feeds, providing product data and creating policies.
The first step to becoming a dropship supplier is to first find out if you can, well, dropship. This is why I started this guide focusing on the ability to fulfil dropship orders. When it comes to determining whether or not to start a dropshipping program, wholesale suppliers should first be looking at two major areas of consideration: profitability and capacity.
Ability to Fulfill Dropship Orders
Profitability and Capacity
If you are currently operating under business-to-business transactions and shipping large freight orders in bulk to your retailers, you will want to identify if you are able to stay profitable sending products individually. Not only that, but think about if you would be able to handle sending out these orders on a rapid and regular basis.
When starting a dropship program, it opens a whole new door for retailers to build a relationship with you, their supplier. With this comes a large influx of new dealers and orders. Orders will not just be coming from a select few brick and mortar retailers anymore, but from numerous e-commerce shops, which leads to a “new normal” for logistics, and a steady flow of orders. You will want to make sure you have a team that is efficient enough to be able to support this. If you are not able to fulfil orders in a timely manner, you will not be able to keep those customers for long. The average turnaround time to ship out for South African-based suppliers is 1-2 days. And now in the age of Takealot, shipping times are becoming more and more important to consumers (and businesses).
A great way to help determine if your business has the capacity to handle these orders in a timely and profitable manner before starting a dropship program is to open a direct-to-consumer online store. This will help your business get accustomed to taking these types of individual orders and is an excellent way to gauge staff capacity as well as to garner data to determine if your business can stay profitable fulfilling those orders. It is common for wholesalers and distributors to test this “direct to consumer” sales channel under a different brand name and website to reduce channel conflict with your business partners and confusion in the market.
Shipping Your Dropship Orders
Once you have determined you feel confident in your ability to fulfil orders for dropship retailers, you will have to make decisions on how you want to go about actually shipping those orders in a way that makes sense for your business.
One of these decisions you as the supplier are going to have to make is determining which shipping account to use: yours or the dropship retailers. Most commonly; brands, wholesalers, distributors, and therefore “dropship suppliers” have their own shipping accounts with uAfrica, CourierIT, Dawnwing, Courierguy, Fastway, Globeflight, Churchillsinternational, etc, which they can use to ship out the dropship orders. However, a lot of dropship suppliers also allow their retailers the ability to add their own shipping carrier account to their dealer account upon request.
Using Your Own Carrier Account
By using your own account, you often can negotiate lower shipping costs for your retailers, which is a bonus to them because shipping costs can make or break their businesses. Using your own carrier account also allows you to start building profitable shipping margins for your business. However, retailers often want transparent, predictable shipping that they can then relay back to their own customers. It can be hard to do that when they only have the ability to utilize your account since it negates the retailer’s capabilities to obtain further insight into their own shipping costs and remain profitable with their orders.
Also, if you choose to use your business’s own account, you will have to create more complex shipping policies since you will be handling that portion of the dropshipping order process. This can be time-consuming and complicated depending on how you want to charge for shipping. There are different options such as flat-rate, weight-tiered and price-tiered shipping. Oftentimes, you will want to provide your shipping cost policies upfront to your retailers, which as you can see, can take time and a lot of effort to create.
If the retailer is already accustomed to shipping and has their own carrier accounts, it is often preferred by retailers to use their own account since they can conveniently integrate it into their checkout process on their e-commerce store and control their shipping costs. However it’s worth noting, “startup retailers” who are new to selling online may find value in not having to set up their own shipping carrier accounts.
Allowing Retailers to Use Their Carrier Account
Allowing retailers the option to connect their own shipping carrier accounts help in keeping a trusting and flexible relationship with your business. Also by doing so, retailers have a lessened shipping cost risk by being fully aware of the costs carriers are charging them. As mentioned before, this is vital in today’s e-commerce industry as shipping cost is one of the most important strategies an online business can use to stay competitive with other stores in the same product niche. So, knowing these exact costs can help retailers build a strategic shipping policy in which they have all the information needed to establish profitability.
So really, as with anything business-related, there are pros and cons of using your own shipping carrier account or allowing retailers to use their business’s. When beginning a dropship program, you will get requests for both of these options. So, you will just have to determine which methods are easiest and worth managing from your perspective, if not both.
Providing an Inventory Feed and Product Data
Providing good product data is a challenge that traditional wholesale suppliers don’t have to face, but it is critical when becoming a dropship supplier. Once you have determined your company has the ability to fulfil dropship orders and chosen your shipment policies, you will now have to decide how you are going to provide an inventory feed and product data to your retailers. Luckily,
Typically, inventory counts matter in dropship. Unless you manufacture on-demand, you are going to need to provide accurate and up to date inventory quantity numbers to your dealers. The retailer has no way to know if items have been purchased through other online stores until they see an item is sold out when it’s time to place an order for a customer. This is why inventory data feeds are so crucial – it bridges the gap of information among a supplier and their numerous retailers. If a retailer doesn’t have this quantity level information, they can end up selling out-of-stock products to their customers. And, if costs are not kept up-to-date in their feed, retailers can find themselves losing money. Both of these issues in turn will cause them to drop you as a supplier.
Quantity levels mean nothing if you are not able to provide your product feed in a file format that is easily accessible by your retailers and their software. A data feed can come in a wide variety of formats, which you may be familiar with. The most common and easy-to-access formats include a simple CSV file or an XML document accessible via an HTTP link. For the more technologically advanced suppliers, you may consider providing the feed through an API or FTP where retailers can connect directly and pull the data. A common method widely used on Dropstore is API integration through a Shopify plugin, Woocommerce plugin, API to stock2shop, and API to TradeGecko.
One of the most common complaints we hear from retailers when it comes to selling from dropship suppliers is the lack of good product content data. Quality product title descriptions, categories, and images are critical in selling online; and when dropshipping, the retailer often has to rely on suppliers to provide this as they do not physically store or handle the products. A retailer trying to sell products online without good product data is a like a bird trying to fly without wings. In order for customers to be able to search, evaluate and ultimately purchase a product from a website, they need content. The better the content, the more sales they can convert for your products. Consumer website listings aside, you need to be able to pitch your products to your retailers as well. Unlike traditional wholesale, you are not handing them a product or walking them through a catalogue at a tradeshow – you have to provide “web-ready” content and data for your retailers to evaluate the products you have to offer. They rely on you as a dropship supplier to provide descriptive information that depicts products accurately in order to feel comfortable listing them on their website.
It is also highly recommended to include images within the product data feed as well. Think about when you are on a website wanting to purchase an item – would you buy a product that doesn’t have an image? Chances are, probably not. So, if you don’t provide an image in your data feed, your retailer either will have to find and upload the product pictures, or they won’t include your product in their store.
Good product data can be an area that sets you apart from other suppliers in the same product niche. A way to do this beyond product titles, descriptions and images is to offer more in-depth data such as variations, product categories and other attributes. Consider how the retailer will be setting up your dropship products on their website and the way categories will fall in their navigation. Without variations, there could be five listings of the same product, just different sizes, which doesn’t make for an easily navigable website – it just appears cluttered. This in turn leads to lower customer conversions and less profit for you. In addition to that, product categories that make sense as well as are tidy and consistent also make all the difference to retailers. By doing this, your retailers will have a much easier time sorting and organizing their online stores with your dropship products.
As you expand and grow your dropship product sourcing business, a highly requested and often essential strategy is providing tiered inventory feeds with differing products and costs for your best customers and higher-end retailers. This may be difficult to do when you are just getting started with supplying a dropship program, but it is definitely an area that should be explored in the future. By making these tiered products and costs available, you will be able to incentivise large-scale retailers to use your program meaning more sales and profit for your company. It also encourages your other retailers to step up their game and try to drive sales for your products to be able to obtain lower costs and access to exclusive brands.
You can probably see now, inventory data feeds are an integral part of becoming a dropship supplier and building a reputable dropship program. Additionally, good product data within your feed is absolutely essential in garnering retailers that will actually list your products and drive sales for your business.
Automating Inventory and Orders
The automation of your inventory and orders for your dropship retailers can really set you apart from other supplier competition. So far on your journey of learning how to become a dropship supplier, you should have already figured out if you first have the ability to dropship products in high volumes as well as establish your shipping policies. In addition, you now should realize how important providing an easy-to-access, up-to-date and detailed inventory feed is for your retailers. Now, you have to put the two together and take into account the automation of your inventory and orders.
Accepting Dropship Orders
As a supplier of products, one of the first things you should consider is, “how do I accept orders?”. In the dropship world, this can be a challenge as you are receiving orders from a business that may expect “business type” treatment such as net terms, multiple order methods and various payment options. However, these orders are small, frequent and shipped parcel so you still have the “consumer type” potential issues such as return risk, credit card fraud and payment delinquency. Therefore, you need to be strategic about how you fulfil your dealers ordering needs while not exposing your business to risk and operational inefficiencies.
The old and tedious was dropship suppliers used to accept orders is email. This sucks because email is unstructured, free form and inefficient. Emails will be nothing but a headache for you.
The best way suppliers receive orders is through a dealer portal or essentially a B2B website such as Dropstore. This is a great method that many of your dealers will be used to and able to pick up quickly as they probably buy online today as a consumer. There is more structure and process to website ordering allowing you to receive the order information in the way you expect it and in a piece of software in which you can manage it. However, you’ll have to remember these are your business partners and not consumers. They hopefully will be sending you dozens if not hundreds of orders per day. Because of this high volume of orders, retailers do not want to input each order they receive through those two manual processes every time. It is far too much work and takes too much time. Being that these large-scale retailers are the ones you want to keep around to maximize your profits, you should consider how you can help in automating their dropship experience.
When it comes to your high-volume retailers, they are going to want to automate the sending of their orders through an API via Dropstore. This is the holy grail as it can be completely automated and allows you and your retailer to easily manage orders at significant sales volume. However, this takes upfront investment and ongoing maintenance to ensure your “automation” is dialled in and your orders are being properly managed and fulfilled.
You’ll want to make sure you’ve got all four tires on the car before you put the turbo engine in it.
By using a file-based or API approach, the retailer will be able to automatically know when each order is received and shipped out. This is crucial for large-scale dropship businesses because they are taking in such a high influx of orders, and it keeps everything organized and clear to avoid miscommunication. Without shipment tracking sent automatically, retailers have to parse through emails in order to confirm an item was shipped, which does not make for an efficiently-run business.
Automating Inventory Feeds
Orders aren’t the only aspect of the dropship business that retailers want to automate – inventory management comes into play here as well. Many of these high-end retailers do not have the time to manually upload inventory feeds from their supplier to their online store every day. And even manually uploading an inventory feed every day doesn’t guarantee accurate quantity counts and prices since many other retailers are using the same feed and it’s not being automatically updated throughout the day. So, automating inventory is just as important as the automation of orders.
Now you may be thinking – okay, so how do I set up inventory and order automation? Well, as mentioned earlier, you can do this through an API or cheaper; integration into Dropstore via any of the integrations methods mentioned. Normally, it would cost a lot of money to integrate via an API but if you are already on any of the integration platforms mentioned, the integration is completely FREE into Dropstore. Dropstore is a company you can partner up with to automate all of your inventory and orders for your retailers without the upfront costs of building it out yourself. By implementing dropship automation software and leveraging pre-built API exchange processes, you can now offer your retailers to connect directly with you, the dropship supplier, to completely automate their inventory feeds and route their orders with little time and effort – perfect for attracting those high-volume retailers you want!
Hopefully, now you realize that having an option for your retailers to automate their inventory and orders is just as important as providing an inventory feed and good product data. Since dropship automation is essential for large-scale online retailers, this is definitely something you want to have in place when starting out with your dropship program.
Invoicing, Payments & Returns
Efficiently handling invoicing, payments and returns of dropship orders are essential to running a successful dropship program. The whole point of becoming a dropship supplier is to make more profit for your company, so this is a very important step – as with everything else we have learned so far, right?
Invoicing & Payments
Traditional business-to-business wholesale relationships you have already established are inherently stronger than a brand new dropship partnership. With the stronger and more trustworthy relationships, these retailers will most likely be on “net terms”. Therefore, you are probably already accustomed to the “ship then pay” principle. However, with dropshipping, “pay then ship” is actually the norm in most cases when first starting out. Of course, you can eventually move to net terms for certain dropship businesses after they gain more trust to where you’re confident they will be able to pay their bill.
But, we are going to focus on the “pay then ship” method since it is the most common approach in the dropship industry. So, because the retailer has to pay you before you can ship out an order, you will need to figure out how you are going to invoice them. Being a dropship supplier, you will likely want to incorporate order fees and shipping costs into your invoice to the retailer.
Business-to-business dropship orders should be treated, in most cases, the same as business-to-consumer orders. This means there should be the same level of attention and resources dedicated to dropship orders to make sure everything runs smoothly and efficiently for your retailers.
Returns & Refunds
Ah, returns and refunds. The part of retail just about everyone would like to avoid, but I am almost certain you’ll have to deal with. Establishing a return policy is absolutely essential as a dropship supplier as with any other aspect of the e-commerce industry. Dropshipping returns can be tough to get sorted because retailers have to determine what type of returns they are willing to allow, and you as a supplier have to determine what returns you are willing to accept as well. Sometimes, retailers will completely mimic your return policy on their online store or modify their own policy to fit within yours. Additionally, some retailers will create different return policies and sometimes have to take a loss on returned items depending on what your policy entails.
When determining your return policy, you should simply make it in line with the Consumer Protection Act. You will also need to create a Return Merchandise Authorization (RMA) form that your retailers will need to fill out before they are able to send the product back. Using an RMA form allows you to be able to accept, deny and manage returns based on certain criteria so you don’t just get a large flow of orders being shipped back to you on a regular and unmanaged basis.
For damaged items, it is recommended that you request an image and description of the damage on the RMA form as well as a shorter time frame than your normal return policy since most damage happens during the shipping process. You will also need to decide if you are going to implement any restocking fees, whether you will pay the return fee and if you are going to accept returns for mistake orders such as wrong sizes. This all varies from supplier to supplier and must make sense for your specific business since there is no right answer for the best policy across all companies.
Some dropship suppliers don’t even offer the option to return items but may offer refunds in certain cases. Usually, this will be for damaged items, as mentioned above. So, you will have to determine if your company is ready to handle an actual influx of returns, or if you will simply just provide a refund in some cases. By not offering a return policy, you could have the ability to shift time and resources to other areas of your business that they would otherwise be spending on the returned inventory, however, you may lose customers from this “hard-line” policy and also face several consumer councils so that is not recommended.
Cancellations go right along with returns and refunds. You will need to establish a cancellation policy that gives retailers a notice on how long they have to cancel their order before it gets shipped out. Most dropship suppliers ship out their orders within 1-2 days, which doesn’t give retailers a lot of time to cancel their orders. Be sure to make the cancellation policy very clear to your retailers when they first apply to resell your products to avoid unnecessary mishaps and miscommunications in the future.
We have now concluded that in order to become a dropship supplier, you need to establish your ability to fulfil orders, create shipment policies, provide a detailed and easily accessible inventory feed, supply a solution to automate inventory and orders, arrange invoicing and payments and organize return and cancellation policies. Easy as pie, huh? Offering a dropship program as a part of your wholesale company does require a lot of work, but in the end, it could make a significant impact on your sales and bottom line.