Believe it or not, drop shipping, despite all its negative connotation nowadays offers a lot of ways for you to get creative and have a stable and legitimate business when you learn how to do it right.
Anton Kraly of Dropship Lifestyle (DSL) believes that drop shipping does not mean you’re ordering a product from China with no brand, no company behind it and still have to wait three weeks for the product shipment. For him, if you play your cards right, you can actually build something from it that’s a real asset and turn it into a profitable and sustainable e-commerce store. “AliExpress is not equal to drop shipping.”
ProTip #1: When you buy from a local supplier or vendor, look for the manufacturer because this is where you get the best terms and the most profit.
“Most good manufacturers that you want to partner with, should have a MAP (Minimum Advertised Price) enforced.” The reason for having a MAP pricing policy is to protect the brand and the retail partners by not disrupting the perceived value of the product in the market because this becomes an added value that benefits both the manufacturers and retailers.
Charles asked one of the most poignant and frequently asked questions about this business model which is what happens when you have return products or chargeback. For Kraly, one of the strategies you can model is to have an “Average Order Value” in place. This is one of the most important key metrics in e-commerce optimization as it gives you more insight into customer’s buying patterns and reduces your costs.
In terms of benefits, one of the good things in selling other people’s brands using the dropship model is you get their search traffic. For DSL, that means you can get search terms that people buy from other brands and the traffic source becomes organic with those long tail keywords.
Google’s Product Listing Ad (PLA), although a very high-quality source of traffic, can get really expensive as you pay for each click with little assurance of it ever converting into actual sales. For Kraly, it is more strategic to use the negative keyword and use a tiered campaign approach as it is cheaper and gets the job done with the conversion. You pay less for the clicks that don’t convert and reduce your costs.
Another benefit of getting your product from a domestic supplier is you get credit terms. Usually, these are the ones that have a good MAP (Minimum Advertised Price) policy. Basically, it means if you get invoiced today, you could pay them 30-60 days depending on your relationship. This is especially great for those that are just starting out. At DSL however, being in the business for quite a while now, they give their credit cards to their supplier and have them charge before they ship the product. This way, they also rack up a lot of points and rewards.Kraly breaks down these suppliers into three categories:
BRONZE - These are the suppliers that don’t have a MAP policy and sometimes would ask you for a fee to be a retailer. Move on.
SILVER - This is where the majority of the suppliers fall into. They have good customer service. They are usually the ones that make up your business.
GOLD - This is the kind of supplier that may take years before you get approved but they only have a handful of retailers. Sometimes they would even list you on their site as go-to resources to buy their product. They’ll send customers to you. This is obviously the one you should go after.
ProTip #2: For those that are just getting started with drop shipping, it’s best to choose a product that has at least 20 suppliers. This way, you will still have something to work on if half of them rejects you.
The stair-step approach is great to apply if you’re a newbie that have bigger plans of selling your own product line. Find the best products that you can dropship for, list their products and sell them, use e-commerce optimization metrics and KPIs to identify what people are buying from you then use the money you make from your store plus the money you wanted to invest anyway and create your own product line based on that because you have the traffic already. It’s basically a bit of circumnavigating the traffic of the products you sell to your benefit. So that’s one way you can evolve your business from dropshipping.