An Introduction to Drop Shipping Companies in United States: FAQs

by WholDir on 06-19-2015 in Drop Shipping Central

An Introduction to Drop Shipping Companies in United States: FAQs

Many people have reservations when it comes to starting a successful online store due to the huge startup costs and the numerous fulfillment hassles. But what if someone or a company was to foot your upfront inventory costs and manage your fulfillment issues on your behalf? It would be much easier, and you could do business anywhere in the world, right? Yes. It would be, if you know and understand the drop shipping business. Here is an overview of some of the frequently asked questions about drop shipping business to introduce you to this versatile ecommerce concept. 


What’s the difference between a drop shipper, manufacturer and a wholesaler?

A manufacturer is the builder or developer of a product while a wholesaler is any person who buys the products directly from the manufacturer and resells it to retailers—usually at a discount wholesale prices. On the other hand, a drop shipper is anyone who will ship the products to your customers (on your behalf).

So both manufacturer and wholesaler can double as a drop shipper. A manufacturer may be willing to ship products directly to his or her customers; in such a case, he or she will be acting as a drop shipper. On the same vein, a wholesaler who is ready to ship products directly to your customers (on your behalf) is also a drop shipper. 

What do you need to work with a drop shipper?

Most legitimate drop shippers in the United States will not work with you unless you have an established legal business or Employer identification number (EIN). If sales tax is charged in your state, you will also need a sales tax ID.

The good news is, creating a legal business in the U.S is not as complicated as most people believe—it can be done in one hour or less on state department of commerce websites. Again, it costs less than 200 dollars to incorporate a business. 

What fess to drop shipping companies charge?

There are two categories of fees that drop shippers will charge you:

  • Per Order Fee: Most drop shippers will charge you a per-order fee to cater for the expenses involved in shipping and packaging a product. Per order fees are usually in the range of 2 to 5 dollars, though they can be sometimes higher for items that are bulky or difficult to process.

  • Monthly Fees: Some drop shippers will charge you an ongoing monthly fee as form of compensation for giving you a chance to do business with them. In most cases, this is an indication of “fake” drop shippers. Very few legitimate companies will charge an ongoing fee, and you should be wary of any that asks you to.

  • Purchasing Minimums: Some drop shippers (mostly the legitimate ones) may require you to purchase a minimum size or amount of goods on a monthly basis or even on your first order. If you fail to meet the minimum threshold, they charge you a fee. This is done to filter out business owners who are not serious and who are likely to bring more unnecessary troubles.


How do you find drop shipping companies?

You can easily find drop shipping companies or wholesalers via a number of ways:

  • Contacting Manufacturers: If you have identified the product that you want to sell, you can ask the manufacturer to recommend for you some of the authorized distributors that they have worked with before and who may also be willing to drop ship.

  • Subscribe to An Online Directory: Although there are numerous drop shipping directories that you will find online, many are low quality and will never give you comprehensive information. Nonetheless, there are legitimate directories that will give you access to detailed searchable database comprising of thousands of pre-screened and established drop shipping companies.

  • Perform Google Search: You can also get reputed drop shippers by a simple Google search. However, to end up with good results, ensure that you perform a deep Google search. Drop shippers are notoriously aggressive in marketing and you will have to dig through a few pages of irrelevant and spammy listings before you land a legitimate company.



Do drop shipping companies ship internationally?

This varies with the drop shipper; so it is pertinent that to confirm with a company if they do international shipments. However, you need to remember that international shipments are quite expensive and getting accurate quotes in terms of custom duties and shipping fees for every country may be a bit complex. Processing an international order may also take more time considering that more paperwork is involved. Some drop shippers will therefore charge additional fees. 

Should you buy in bulk or drop ship?

When you are just starting out, it is advisable to test the drop shipping market before you commit to purchasing a large amount of inventory. Once you understand everything or a bit more about the market, you can explore the idea of purchasing in bulk. 

How do you track information for your orders?

A reputed drop shipping company will provide you with detailed tracking information via email (in plain text or in .CSV or .XML file). You should receive tracking information for your orders immediately after shipment is processed or at least by the end of the day that your order was processed. Once you receive your order’s tracking number, pass it to your customer via your shopping cart interface. One characteristic of a “fake” drop shipper is delays or postponement of sending the tracking information or making you to track it from their website. 

Who foots the shipping bills?

Although a drop shipping wholesaler will use their FedEx, UPS, or USPS account to pay for the shipping costs, they will eventually transfer the costs to you when they will be billing you for the orders. Consequently, it is up to you know the amount of shipping costs that you will charge your end customer.

Final Word

Drop shipping is not an overnight ecommerce success. Accordingly, to be successful in it, you have to invest in marketing, customer service, and in building a quality website. Nonetheless, drop shipping is a very good platform to get started and provides a great opportunity to leverage on other people’s capital without the investing your own. If properly managed, therefore, it can be your stepping stone to a successful online business. 

 

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