Drop Shipping Explained
Drop shipping is a technique used by retailers to avoid the expense of warehousing and the logistics of shipping products to customers. An order is placed on the retailer's website and then transmitted to the drop shipper who fulfills the order by shipping the goods to the customer.
A new emerging trend in the drop ship business is private label drop shipping, in which a manufacturer produces a custom item for a retailer and drop ships it. The range of private label drop shipped items varies from simple keychains and t-shirts with custom logos or pictures to customized formulations for vitamins and nutritional supplements.
How traditional drop shipping works
- Decide on a product or products to sell online
- Locate a manufacturer for the product
- Purchase products wholesale from the manufacturer and have them delivered to the drop shipper's warehouse
- Create an e-commerce shopping cart with product photos and descriptions
- When a sale is made the order is sent on to the drop shipper, who in turn sends the product to the customer.
- The profit that is made is the difference in the price between the wholesale and retail less the drop shipper fees
One Stop Drop Shipping
Drop shipping has gained in popularity with the introduction of the “one stop service” which eliminates the need for retailers to contract manufacturers or even source products, relying instead on a manufacturer's catalogue supplied to them by the drop shipper.
How one stop drop shipping works
- Choose the products you wish to sell from the drop shippers catalogue
- Create an e-commerce shopping cart with product photos and descriptions
- When a sale is made the order is sent on to the drop shipper, who in turn sends the product to the customer.
- The profit that is made is the difference in the price between the wholesale and retail less the drop shipper fees
Drop Shipping and Scams
One of the fastest growing scams on the web today is drop shipping according to the Michigan Department of Information Technology.
Con artists sell whole sale drop shipper lists on the internet through websites and online auctions. The list gives names of companies which drop ship and many of the companies could be the same company in different names or just an individual with a phone without any actual product who uses another drop shipper list to ship products (a victim of the scam).
- Victims, after paying for the drop shipper list, need to do a lot of work and do not make the money they were promised and in fact are helping the actual drop shippers make huge profits.
- The drop shippers price their items extremely high with very little or no profit for the retailer.
- Also most drop shippers charge a membership fee to access their price list.
- Victims need to try to sell these products in various online auctions or advertise on the internet at their own expense, eventually losing money.
The whole idea is that drop shippers can sell their poor products without any advertising, make huge profits, not be held responsible for their bad products and get money from victims as membership fees (and some have yearly membership contracts too). Not all drop shippers are scammers, so choose your drop shippers carefully!
(http://www.michigan.gov/cybersecurity/0,1607,7-217-34396-108704–,00.html)
Consumer Protection Resources
Canadian Consumer Information Gateway
The Canadian Consumer Information Gateway perfectly addresses all of these challenges, thanks to a groundbreaking strategic partnership between more than 400 federal departments and agencies, provincial and territorial ministries and NGO partners. Spearheaded by Industry Canada 's Office of Consumer Affairs, the Gateway allows Canadians to quickly and confidently search for consumer information and services on the Web
. http://www.consumerinformation.ca/
Federal Electronic Transactions Act
Provides information on the law that defines the rules for e-business and e-commerce
http://www.qp.gov.bc.ca/statreg/stat/E/01010_01.htm#section17
BC Consumer Protection Act
The British Columbia Ministry of Public Safety and Solicitor General regulates the Consumer Protection Act, an act that details the rights and responsibilities of buyers and sellers, and deals with issues ranging from the cost of credit to leases
http://www.qp.gov.bc.ca/statreg/stat/C/96069_01.htm
BC Business Practices and Consumer Protection Authority
The Business Practices and Consumer Protection Authority of British Columbia (BPCPA) is the only organization of its kind in Canada .
http://www.bpcpa.ca
Better Business Bureau of Mainland B.C.
Setting the Standards of Ethics and Integrity
http://www.bbbvan.org
Better Business Bureau Online Program
BBBOnLine is the Better Business Bureau program to identify trustworthy web sites in the US and CA.
http://www.bbbonline.org/index.asp
Drop Shippers
Consumers are strongly urged to thoroughly investigate all companies before entering into any agreements
SaleHoo Product Sourcing Directory
http://www.salehoo.com/
WorldWide Brands Drop Shipping
http://www.worldwidebrands.com/
Shopster
http://www.shopster.com/
Doba
http://www.doba.com/
Megagoods
http://www.megagoods.com/
Final Comments from eBay Sellers on the Question of Using a Drop Shipper
“Ebay is saturated with the items from drop shippers and no one is making any money except the drop shippers. When the drop shipper ships the wrong item, it's YOUR profile that takes a hit. When the drop shipper is out of stock, it's YOUR profile that takes a hit. They aren't even wholesalers and most of them you have to PAY them to be able to use them. A real wholesaler requires a tax id number, and you don't have to pay THEM to buy from them. Stay far far away from drop shippers if you want to sell.” - williesales4u2
“Here's another thought. If you have 100 sellers all using the same drop shipper then you are all listing the same items. You have to compete against one another to get the sale. Meanwhile you are lowering your price to beat another seller so you will sell your item. However the drop shipper gets paid the same amount of money regardless of what the item sells for. So who makes out with drop shippers….not you…. the drop shipper. Its no difference than walking into a gambling casino….you are throwing away your money. Run far far away from the drop shipper…far far away!!!!!” - jsloyd0
“If there was money to be made in drop shipping on ebay, don't you think the drop shippers would be selling on ebay instead of offering to let you do it for them?” - hayvicki
