Wholesale Suppliers: How to Offer Dropshipping Services

Drop shipping is becoming a popular option for Canadian and international online sellers. In many countries, wholesale suppliers and distributors have recognized the opportunity and found success after implementing a drop shipping program. Entire businesses have been built around the demand, in fact, from distribution networks to apps.

In Canada, entrepreneurs, wholesalers and distributors have been slower to explore this opportunity. One of the biggest ecommerce challenges we hear about is how difficult it is to find Canadian drop shippers. There are plenty of Canadian online retailers of all sizes who would love to work with Canadian wholesalers, but they’re forced to import or skip the Canadian market altogether.

“While not every retailer intends to adopt e-commerce and dropshipping, it is becoming increasingly difficult to find a retailer that has not at least considered how such technology could be incorporated into their business model to better support buyer needs,” concludes the study, Supply Chain Collaboration in Transformative Vertical Industries.

The study also found 73 percent of respondents have been utilizing drop shippers for over two years.

High Demand + Low Competition = Opportunity

What is Drop Shipping?

Drop shipping is a hands-free, wholesale fulfillment option available to online sellers of any size, working under a variety of business models. In short, the wholesale supplier fulfills orders on behalf of the retailer and ships them directly to the customer.

Arrangements are usually made to make it appear that the order has come directly from the seller. There should be nothing about the shipment that identifies it as being drop shipped from your company. The retailer may require additional services, such as their return address and the inclusion of their branded packing slip.

Drop Shipping / Wholesale Cycle for Canadian Sellers

Why Offer Dropship Services?

Suppliers are finding Direct-to-Consumer (DTC) sales add another layer of profit to their bottom line, while also diversifying their revenue sources. They can provide the service, yet continue to avoid the time-consuming and costly side of dealing directly with consumers. You can tap into online retail, yet remain behind the scenes.

Basically, retailers and wholesales have found a non-competing way to split the expense of the online sales process, and then share the higher margins. That leaves more profit for both parties and a happier customer.

Will a Dropship Program Work For You?

Ask yourself:

  • Do you have the space to fulfill individual orders?
  • Do you have enough staff to fill orders?
  • Can you maintain enough inventory throughout the year? Online sales are unpredictable, but you must have enough inventory on hand to support the number of orders arriving via online retailers. Anyone can sell out, but your merchants will quickly drop you if it becomes a habit. You can limit the number of retailers you accept to help control order volume.

Is Dropshipping Profitable?

Your products must have large enough margins to cover the discount given to retailers, plus the costs associated with shipping (labour, packing materials, etc). The actual shipping cost can be charged to the retailer with each order, or you can offer free shipping.

Note that these are individual sales so you can charge more than you would for volume wholesale purchases. However, there must still be enough margin for the reseller to make a profit.

To better ensure profitability, you can have multiple discount levels that reward your most profitable sellers. An additional discount or free shipping can be perks that keep these star sellers interested in promoting your product. At the same time, you’ll protect yourself by not giving away too much to less profitable partners.

Data Sharing is Critical

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Sharing updated, accurate data is the basis of every successful dropship program. It’s also the most intimidating part of getting started. There are easier solutions than developing your own app or hiring a programmer to customize an API, which we’ll go into below.

You don’t want to miss the opportunity to be picked up by a store, for something as easy to fix as adequate data. It will also give you an advantage over competitors who don’t provide stellar images and product information.

You can start with something as simple as a product feed with the inventory you have available, quality photos and information about each product. Accurate data should include the product name, description, high-quality images and the product category. This critical information will be used by the merchant when they research products, as well as the customer who wants to buy it.

However, you’ll also need a solution for automatic inventory management, and integrated shipping options that can be accessed by the retailer’s customer. Inventory is the most critical part of today’s product feeds. Online sellers need to know if you have the product in stock and how many are available for them to sell to their customers. Otherwise, they might sell an item that isn’t available. At that point, they’ll either have to scramble to find another source of the product or cancel the order.

The most frequently-used product data feed formats include:

CSV – Comma-Separated Values file can be used with virtually any spreadsheet.

XML – Extensible Markup Language is basic text used for structured data.

API – An Application Programming Interface “defines the kinds of calls or requests that can be made, how to make them, the data formats that should be used, the conventions to follow, etc,” explains Wikipedia. “It can also provide extension mechanisms so that users can extend existing functionality in various ways and to varying degrees.”

FTP – Website with File Transfer Protocol (FTP) access for extracting data.

Your ecommerce platform must be compatible with the type of feed or app you use. Shopify is popular with Canadian dropshipping retailers and has a thorough understanding of the practice.

If you deal in personalized or made-to-order products (like print-on-demand T-shirts, mugs, pet products or home décor), things will operate a little differently. You’ll still need to track inventory, such as a variety of shirt styles & sizes. You’ll also require different functionality, such as the ability to design product mockups. Check out other successful POD wholesalers to figure out the best method for you.

Making it all Work

As mentioned, one of the biggest challenges with the dropshipping model is the need for automation. Automatic order processing, tracking and inventory updates are critical. You can try developing your own API or app, or join an existing app as a supplier. Additionally, there is automation software that does it all for you.

Automated Inventory Management

You can start inventory management with manual product feeds, but you’ll still run into objections from sellers and problems with inventory updates. That leaves you with two choices:

1. Hire a programmer with wholesale ecommerce expertise to build and maintain an API, EDI or app.

2. Use existing software to automatically manage your inventory and orders for dropshippers, along with associated tasks. You’ll also enjoy built-in features, such as integration with all major ecommerce platforms. This is the most practical solution for the majority of drop-shipping suppliers.

Inventory Source, for example, integrates with over 25 ecommerce platforms. You’ll immediately connect with thousands of resellers who want to add your products to their store. You’ll also gain access to the US Direct B2B reseller network through Inventory Source. US Direct handles reseller approval, MAP enforcement, returns, customer support, and related tech like inventory feeds, order automation and channel integration.

Getting Paid

Usually, your dropshippers will pay you when they order the products. The total will include the wholesale price, plus shipping and any fees you charge. Once you’ve established a relationship with some of them, you can offer them different payment terms.

Additional fees are usually added after the order is received, so having a payment method on hand will make things easier. The supplier will often keep a credit card on file to bill additional fees to simplify the process and optimize efficiency.

Policies & Procedures

You’ll need to establish policies right out of the gate, so everyone knows what is expected and what they can expect. Publish clear policies and make sure there’s a big, bold link to them on your website.

Some policies you’ll need are:

  • Payment policy
  • Fulfillment & shipping policy
  • Cancellation policy
  • Returns & refunds policy
  • Privacy policy

Once you’re ready to go, let us know! Our community is always looking for more Canadian drop shipping suppliers.

It isn’t for everyone, but if you’d like to enter a back door to retail as a drop shipping supplier in Canada it can certainly be done. There’s an overwhelming demand for it in our growing digital landscape.

Please share your experience or questions in the comments below, or join us in the Online Business Canada Facebook group.

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Melody McKinnon is an internet entrepreneur with 25 years of experience in a wide range of online business models, backed by a formal business education and enhanced by training and mentorship. She has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available from all major ebook retailers.

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It’s much like retail but the price would have to be lower (not wholesale) plus the cost of the shipping process? Would anyone care to share how much profit they’re making after all is said & done?