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7 Questions You Must Ask Potential Drop-Shipping Suppliers

  • Apr 27, 2016 | Avalara

This post is by contributor Karan Johnson.

It’s easy to see the appeal of drop-shipping for ecommerce businesses. Having a third-party manage fulfillment does away with the hassle that comes with handling merchandise and shipping it.

This frees up time to focus on marketing, selling and making a profit. An added benefit is that drop-shipping is highly scalable because there's relatively little effort involved. Cue daydreams about The 4 Hour Work Week lifestyle, with musings of sitting on a beach while your products are shipped to your very satisfied customers.

Although drop-shipping is a viable business model, you should exercise caution when taking the plunge. The first step to realizing the drop-shipping dream is to establish a good relationship with your supplier, who will play a pivotal role in your business' success or failure.

Choosing a reliable drop-shipping supplier is one of the most important things you can do to keep your customers happy and grow your business. Whether you’re an ecommerce newbie or veteran, there are inquiries that you should make when deciding whether a drop-shipping supplier is right for your business.

1. What is the complete fulfillment process?

Your potential drop-shipping supplier should be able to clearly spell-out their fulfillment procedure. Keep your ears open for established systems. The less manual intervention involved, the better. A high level of automation is a good sign that there are tested systems in place. This makes it more likely that things will run smoothly.

2. What happens with customer returns?

You can have the most fabulous products, but the one thing that is guaranteed is that some customers will want to return what they’ve bought. Don’t be surprised if some drop-shipping suppliers won’t accept returns for reasons other than a faulty product. If the product is faulty, it’s the shipper's responsibility to put it right. But you’ll need to weigh-up the effect on your bottom line if you do business with a supplier that doesn’t accept returns when customers change their minds.

3. How does the ‘inventory feed’ work?

The minimum you’re looking for is a structure in place to inform you of inventory levels. Ideally, you’ll be able to choose the frequency at which you receive your updates. This software should also enable you to automatically top up your product levels. Most importantly, the system should notify you in real time when an item is out of stock.

4. Can products be branded?

Building a powerful brand should be a goal for any ecommerce business. This is especially important when selling products that are also being sold by others. Competing on price alone can result in your business taking a serious hit. This is where establishing a strong brand comes into its own. Ideally, your drop-shipping supplier will allow you to use branded materials in the packaging.

5. Is there a ‘drop fee’?

Drop fees are charged to make-up for the cost of shipping and packaging products. The fee starts from $3 per product and can have an effect on your profits. It’s important to scrutinize the drop-shipping supplier’s charges so that everything can be included in your pricing. Furthermore, be on the look-out for additional charges like a monthly fee. This should be a red flag, as most suppliers won’t require monthly payments for working with your business.

6. How much information is provided about products?

You need as much useful information as possible to market your products. Images should be professional and need to be provided in different formats for the best quality. At a minimum, the drop-shipping supplier should provide general descriptions, including information that’s legally required for labels.

7. What is the processing time?

Amazon Prime and similar services have set a very high bar for delivery times. You’ll be competing against same-day or even within-the-hour delivery windows. Your potential drop-shipping supplier’s fulfillment times need to match what you promise your customers. Buyers aren't always willing to wait longer than promised for their orders. Any drop-shipping supplier you partner with needs to make every effort to dispatch products ASAP.

Drop-shipping can and does work for ecommerce stores. Just like most things related to business, your success will depend on your due diligence process. Asking the right questions from drop-shipping suppliers and knowing the answers to expect will put you in the best position. If you do decide to venture into the world of drop-shipping, rest assured that you can get other kinds of help to get your sales tax needs covered.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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Avalara helps businesses of all sizes achieve compliance with transactional taxes, including VAT, sales and use, excise, communications, and other tax types through automation, education and support.