guest post: drop shipping

A few people asked about drop shipping advice in recent comments, so today I’m excited to bring you a guest post from Tammy Cody.  Tammy has graciously agreed to share her experiences with drop shipping.

Tammy Cody runs Dignity Regained, a shop bringing attention to the Fair Trade movement and the positive effect that it has on the fight against human trafficking.  There is a section of the shop dedicated to independent artists called “Indie Edition” because Tammy believes in supporting alternatives to mass production as another avenue of fighting labor trafficking.  Dignity Regained is passionate about knowing where a product comes from and knowing the story that they are supporting.

What is drop shipping?

An arrangement between the supplier and retailer which allows the retailer to list an item in their catalog or online store, but purchase it from the supplier only if a customer purchases it.

Pros

• Get your foot in the door. Some of our suppliers have started out as drop ship only and we realized they sold so well and started buying wholesale instead.
• Pricing.  You can create different wholesale prices for your drop ship customer.  Normally a wholesale account is 50% off your retail price, but since drop shipping is more leg work on your part you may be able to negotiate to 40% off your suggested retail price.

Cons

• Consignment. A drop ship arrangement is much like consignment in that your product is reserved for a particular store to sell, but that store has no obligation to actually purchase it from you if they don’t sell it to their customer.  It is different than consignment because you keep the product until it is actually sold.  So in some cases, you may be able to make the item to order.  Or you may have a large quantity of this item which will allow you to reserve a certain amount for drop ship accounts.
• More leg work. Instead of shipping out one box of products to your retailer, and billing them once, you will need to pack and ship out products to each customer and bill the retailer each time.

Developing a good drop ship strategy:

1.  Make it easy.

Check out the photography of other products on the retailers website.  Do they have a completely white background, or are they displayed in a setting? Are they square pictures, all a certain size?  Once a retailer has agreed to work with you (or before if you feel extra ambitious), take a couple pictures of your product to fit their website.  It takes away a lot of headache for the retailer.

Write a description.  Again, take a look at their website and see if the description you already have is a good fit.  If not, tweak it a little and include it with your photos.  Including measurements is important!

2.  Show that you are professional and reputable.

Retailers don’t want a raw deal for their customers.  If they get an order for your product, and you ship it late, in poor packaging, not at all or if the product isn’t all that it should be, then the retailer is not only going to get frustrated quickly and drop you, they will also tell the online retail community about their experience.

3.  Be on the same page.

Make sure that there is some sort of written agreement that you are both comfortable with.  If the retailer you are working with does not already provide one, you should create one.  This can either be in an email, an attached word document, or you can print, sign, and fax a copy so that you have a signature from both parties.  Include all factors that the retailer agrees to, and all factors that you the supplier agrees to.

Here is an example of some of the points we have used in the past.  Of course you would enter in the retailers business name instead of “Retailer” and your business name instead of “Supplier”.

Retailer agrees to:

• Post given picture(s) to web site under category “Jewelry” for a minimum of two months.
• Notify supplier as soon as possible when an item is sold and provide them with all information needed for shipment.
• Link the supplier’s business website in all item postings.
• Provide payment upon sale to the supplier for any items sold at an amount agreed upon in advance plus shipping within a reasonable amount of time.

The Supplier agrees to:

• Provide the retailer with clear high resolution pictures of items for sale.
• Keep specified items and amounts available to customers of the retailer for a minimum of two months, or give proper notification of removal three days before the retailer would be required to remove item and amounts from their website.
• Ship items sold by the retailer in a reasonable amount of time to the customer.
• Not send out any promotional material along with the package or use the address for future promotional advertising.

If you have a lawyer you would want to ask them to make up an agreement for you.  I’m guessing this would be much more detailed or complex, but these are the basic points that have worked for us in the past.

4.  Have excellent communication.

Does the retailer have your phone number or just your email?  Give them your number, email, and address.  Make sure they have a way to get a hold of you.  Give them a call to introduce yourself to give them reassurance.

It doesn’t have to be all business.  Ask them how their kids are doing, how the weather is, if a conference or event went well, etc.

5.  Bonus.  More advertising.

If you have a website, blog, twitter, facebook…all good things!  Get on the horn and honk about your new partnership.  Draw more traffic to the retailer’s website and make sure the retailer knows you are routing for them.  Most retailers will have a way to view where traffic on their website is referred from.  They will love you if they see views coming from your social networking pages.  So if you have a large following, use it!  Plus, a large following assumes a reputable business.

Find Dignity Regained online at their blog, Twitter, and Facebook.