Drop shipping

[martin-s]

Does anyone have any experience with drop shipping? I'm looking to understand a little more about potential margins.

 

[spiderspider]

We did it about 3 years ago, for 18 months or so. Our main aim was to increase the range of products we had within a webstore.

However, the margins were tiny. I have seen some dropshippers who offer a slightly bigger margin, but 9 out of 10 of the ones we looked at were terrible. So much so that many of the products could be brought cheaper from eBay, than the dropshipper.

 

[martin-s]

I'm looking at one specific market and contacting companies directly, rather than via drop shipping agencies or the online stuff you see.

What sort of margins were you seeing?

 

[spiderspider]

We were seeing margins of about 5% IIRC. I know it wasn't alot, and for a few things worked out to be pennies. It didn't really matter to much to us, as it was only there to fill out the store a bit. It was easier to upsell from these products, to our own, where the margins were alot greater.

We did try contacting companies direct, to dropship for us. Most didn't understand the dropship method, and those that did refused to do so, due to the time involved.

 

[martin-s]

5% is pretty miserly. I'd been seeing more like 20-30%..

 

[namealot]

Done it with a number of manufactures etc the margins are miniscule but so is the outlay? Sometimes new to market products you can achieve a higher % but to give away 20 - 30 % without any commitment to volume etc I’d say all you’d find will be products so over priced they’d never sell or scammers just taking the money

 

[martin-s]

Most affiliate companies pay 3-12%. With drop-shipping, yes you're gaining control of the customer data, but you're also taking on a lot more responsibility for customer service, returns, etc. Therefore the margins have to be higher.

I don't think it could be economical if you're not making 20-30%, unless it's an electronic delivery product I guess.

 

[namealot]

Most affiliate companies pay 3-12%. With drop-shipping, yes you're gaining control of the customer data, but you're also taking on a lot more responsibility for customer service, returns, etc. Therefore the margins have to be higher.

I don't think it could be economical if you're not making 20-30%, unless it's an electronic delivery product I guess.

If the product and price etc is right and there's the volume thats what to look for Small % of something is better than large % of nothing ...

 

[martin-s]

But for a small %, you might as well go the affiliate route...

 

[namealot]

You've already answered that yourself "customer data"

 

[martin-s]

Customer data is not enough on its own in most businesses though is it. Maybe in low cost, high volume niches where you plan to sell the data on (urgh). Or maybe low volume, high value niches where you think there's a cross-sale opportunity and a small % is worth a decent amount anyway.

But if a typical product is selling 100-200 units a month at, say, £100, 5% is not worth me lifting a damn finger. The *only* way that can ever work is on an affiliate basis.

Right or wrong?

 

[monaghan]

Have you thought about having your own stock and having a fulfilment company look after the storage and shipping? This gives you a half way house between doing the lot yourself and drop shipping?

I've recently hooked a couple of shopping carts into a fulfilment company system and the whole process seems quite slick, a simple XML message from the cart and the customer's products are shipped - all hands free for the cart owner.

 

[namealot]

Customer data is not enough on its own in most businesses though is it. Maybe in low cost, high volume niches where you plan to sell the data on (urgh). Or maybe low volume, high value niches where you think there's a cross-sale opportunity and a small % is worth a decent amount anyway.

But if a typical product is selling 100-200 units a month at, say, £100, 5% is not worth me lifting a damn finger. The *only* way that can ever work is on an affiliate basis.

Right or wrong?

Obviously what some use data for and others are worlds apart.. looking at steps to future proof your business with affiliate being a mostly one trick pony that’s on its arse and only going to get worse its not a basket many would choose to keep there eggs in

 

[martin-s]

I personally think that affiliate marketing is in its infancy, rather than dead and buried. It's just crappy thin websites which are dead. Sales referrals from genuinely expert content will be around for a while yet I'm sure.

Agree that list building insulates you from search engine rule changes, but affiliates can list build just as well as drop shippers, so long as they're credible experts.

Alex - I've looked at Amazon fulfilment which seems pretty impressive as an alternative to having your own warehouse. However, the appeal of drop shipping to me is the lack of stock (and therefore potential to carry more product lines without more investment).

Is anyone else on here drop shipping?

 

[peacock]

Like others, I have looked into it and couldn't get the figures to stack up once considering returns, payment processor fees etc etc

In addition to which it just feels a bit in-efficient ... adding an extra layer between the customer and the ones who own the stock. Even if you can automate, things can always go wrong and I just can't imagine a drop-shipper could give as good service as a real etailer can.

Definitely seem to get more % for your efforts with affiliate marketing.

 

[martin-s]

Dragging up this old thread, but I've sourced a couple of partner companies in the niche I'm interested in at 30% so am ready to take this forward.

Does anyone have any good suggestions for a .Net based product catalogue?

And if anyone has a tool to collate a shopping cart before redirecting to Amazon too, that'd be useful on a second project.

Thanks.

 

[peacock]

For Amazon redirect --> Cart I have used WP (free) + Woocommerce (free) + paid plugin "prosociate.com"

 

[retired_member34]

I used a drop shipper for a collectable product, with good 35% margins, so custom built an ecommerce site around it. Worked from day 1, enough margin for PPC and was great around Christmas. After 2 years the producer went bust. The company was bought out of administration but stopped drop shipping, and refused to give any terms, wasn't long before they went bust again.

I'd love to find another niche, it was a nice business whilst it lasted - good luck on your venture.

 

[srccode]

From my experience more hassle than it's worth. If you do it be sure to use a reliable supplier, your reputation is in their hands.

Personally, I prefer affiliate marketing it's a lot easier.