Table of Contents
Introduction … 4
What Is Dropshipping? …… 5
Pros Of Dropshipping …. 6
Cons Of Dropshipping … 6
How Dropshipping Works .. 8
Manufacturers .. 8
Wholesalers ….. 8
Retailers …. 9
Dropshippers … 9
Avoiding Scams . 10
Investigating Companies . 12
Finding A Dropshipper ….. 16
Conclusion .. 18
Resources .. 19
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How Dropshipping Works
Before you can truly understand how dropshipping works, it’s important to understand the basic supply chain. Products you see in stores often go through three, four, five, or even more companies in the supply chain before they arrive in stores.
Manufacturers are the first step in the supply chain. (Unless of course you count the companies that supply the raw materials, but that’s a different arm of the supply chain.)
Manufacturers create the products, but most of them don’t sell directly to the general public. Instead, they typically sell through a wholesaler, or sometimes another middleman brokers the sale of the product from the manufacturer to the wholesalers.
Occasionally, manufacturers may sell directly to retailers, but they usually don’t deal with selling direct to companies.
Wholesalers are middlemen. They buy from the manufacturer and resell at a higher price to retailers. They usually don’t make an enormous profit per item, but they make their money by selling in bulk.
Wholesalers may offer dropshipping, but usually they just sell to retailers.
Retailers buy their products from wholesalers, or directly from manufacturers. They sell directly to the public, often at fairly large markups. They may offer dropshipping, but because they are selling at full retail, they usually don’t.
Dropshippers usually fall somewhere between the wholesale and retail areas of the supply chain. They purchase from wholesalers, or sometimes manufacturers, but sell at near retail prices.
Dropshippers cannot sell at wholesale prices unless they manage to buy their products directly from manufacturers, which is relatively rare. They usually exist on fairly slim profit margins, because they have to sell below retail in order for those who do business with them to also make a profit, and yet they have to buy at the same wholesale prices as most retailers.
Before we get started talking about finding quality dropshipping sources, it’s important to note that there are companies out there that are borderline scams, and others that are nothing but scams.
These companies prey on people who don’t know any better, claiming to offer wholesale prices and actually selling at retail, or even higher, or not even shipping anything to customers at
There’s no way to be certain to avoid scams, but there are a few things you can do to lessen your chances.
First, as a general rule, say no to monthly fees. Those companies that offer monthly fees usually make most of their money on those fees, because they realize that customers will have a hard time finding products to sell that they can make a profit on. Thus the average customer won’t even order anything at all, and the company still makes money via that fee.
Keep in mind there are a few legitimate companies that do require participation fees, but those will usually be easy to spot because they’ll have more positive reviews online than other companies, as well as more recommendations.
Next, be sure to check the company’s prices to be sure they aren’t selling at or very near retail. If they are, you’re not going to be able to make any money with them.
Finally, be sure the company doesn’t just sell directly to the general public. If they don’t require you to apply for an account, often requiring a business license or tax ID number, they usually aren’t legit.
There are so many scams and near-scams out there that it can be quite tricky to find a legitimate dropshipper that isn’t going to scam you.
Even if you find a legitimate dropshipper, you still have to make sure they have prices that will allow you to make a decent profit, and will provide fast shipping and quality service to you and your customers.
It’s vital to check a company out thoroughly before doing business with them. The first step, of course, is to check for online reviews and check their Better Business Bureau report (if they have one).
To check for online reviews, try searching for things like:
Company name scam
Company name reviews
Company name legitimate
These searches should pull up information about the company. If not, it probably either means they aren’t bad enough to have a lot of complaints, OR they are so new that no one has filed any complaints online, yet.
Remember, every company eventually has some complaints. Amazon has been touted as having some of the best customer service there is via many sources, but they have thousands and thousands of complaints. No company is perfect.
Complaints may not even be founded. Sometimes it’s the shipping company that causes the problem, and even when the company goes above and beyond to rectify the problem, the customer still insists it’s the company’s fault and that they are “scammers”.
Sometimes the customer misunderstands some element of the ordering process, or even makes a mistake like forgetting to order expedited shipping. They try to blame the company, and the company’s reputation suffers.Other Details
- 1 Ebook (PDF), 19 Pages
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[YES] Can be used for personal use
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