What is drop shipping?
drop shipper is a manufacturer or authorized wholesale
distributor who will ship your single item orders directly to
your customers. You will put the product pictures on your site
at retail and wait for an order. Once you receive an order you
will email or call the drop ship supplier with the customer’s
order information and they will in turn ship the product
directly to your customer.
Why do I need drop shipping?
If you do not plan on carrying
inventory or setting up warehouses for your retail business,
then drop shipping can be a key part of your business.
Are there disadvantages to drop shipping?
Yes. The biggest disadvantages are
some of the following:
You completely rely on the supplier
to send product to your customer on-time
2. Your profit margins are sometimes effected by
fluctuations in wholesale pricing.
3. Not all drop shippers have up-to-date supply chain
and ERP technology. This means they may not have any ability to
track inventory or automate their accounts.
How do I benefit from drop shipping?
There are many ways to benefit from drop shipping. Some
of the benefits are as follows:
1. You don’t carry any inventory
2. You get to set the retail price at whatever you want
for huge profits
3. There are no minimum order requirements
4. You pay the wholesaler only after you receive an
What kind of profit margins
can I make with drop shipping?
While there is no standard on
wholesale pricing, many wholesale companies typically will
give a retailer between 25-60% discount off of standard retail
pricing (MSRP). The final agreed pricing model is between you
and the wholesale distributor. We list wholesale
companies who are either the manufacturer of the product, OR they
are the first tier import distributor. This is important, as you
want to make sure you are getting the right companies for the best
What is a blind drop shipper?
A blind drop shipper will ship
product to your customers, under your name only. They will not
have any of their information (i.e. company name, address,
advertising...etc.) on the products they send to your customers.
Why does a drop shipper need my credit card information on
They will need your credit card
information on file so they can bill you for the products you
order. Remember, as your customers pay you the retail cost of
the products, you will need to pay the drop shipper for the
wholesale cost of the products to be sent. It is easier for the
drop shipper to simply bill your credit card.
Should my customers pay me first before I pay the drop
It is always good practice to have
the customers pay you first before placing your wholesale drop
ship order. Otherwise you risk shipping product to a customer
that will not pay you. Then you will be stuck with the bill from
the drop shipper!
How do you find drop
There are several popular
methodologies for finding drop shippers. Check out Dr.
Beiermann's article entitled "How to Locate Drop Shippers for
Your Success." It can be found at the following link:
Many of the drop ship
directory sites are rip-offs, how do I know a directory is
This is a good question as it has
become a serious issue on the Web. It's unfortunate there are so
many sites promising to have lists of authentic drop shippers,
and yet the lists are full of broken hyperlinks, out dated drop
shippers, wholesalers who do not drop ship and middlemen. The
site creators are more focused on taking your money rather than
maintaining a legitimate research business. The answer to the
question is not straightforward. However, you might want to
check out Dr. Beiermann's buyer's guide
to help you learn about the things you should observe.
advertise the quantity of products they carry, is this
This depends on your retail business
objectives. Typically, the niche target marketed business do
extremely well on the Web. They are focused on one particular
type, or category of product with good quality. So, massive
quantities of products and drop shippers is not a concern to
them. However, if you are taking the flea market approach then
you will want as much product as possible. This method has
proven more often than not to be an ineffective way of retailing
and marketing online. Customers are usually out to buy specific
things. You want to make it easier for them to buy.
In the end, your
ability to market and sell will be more of a factor. With the
proper focus, determination, and methodologies, you can
virtually sell anything. There are people who have made fortunes
selling water and dirt. There have been people who made a
fortune selling a plain rock, and calling it a "pet".
What are middlemen?
Someone acting the role of a drop
shipper. They are working as a liason between you and a drop
shipper. This is not a desired situation as they do not bring
any value to your business. Often they are bumping up the
wholesale price to you and taking it as profit. Check out Dr.
Beiermann's article entitled "How you can avoid the three M's of
drop shipping." It can be found at the following link:
What is a drop shipper agent?
This is another term for a middleman
or someone acting the role of a drop shipper. In most
situations, you will want to bypass these folks as they are
merely taking a slice of the profit pie. Also, you should note
that these middlemen will usually have their company information
on your drop ship order.
Do drop shippers offer credit or Net 30 day payment?
Some drop shippers will offer a line
of credit or a net 30 day payment.
What is an over saturated drop
This is typically a
drop shipper that an overwhelming amount of businesses are using
simultaneously in the marketplace. As a result, many businesses
have duplicate product offerings creating a saturated market for
those products. This often results in price wars between
Are importers considered to be drop shippers?
Sometimes. Much of this depends on their distribution
objectives. Some importers will retail directly to consumers and
do a drop ship programs for vendors. Other importers are
strictly into the warehousing component of the retail business
and need representatives and vendors to distribute their
Some drop shippers will not do international drop
While there are some
drop shippers who participate in international drop shipping,
many do not. Their reasons for not doing international drop
shipping vary. Some of the most common reasons are:
2. Customs issues and
4. Service issues
(i.e. unable verify delivery times, tracking...etc.)
5. Higher packaging
product licensing limitations
Will a drop shipper supply pictures of their
products for my website?
Most drop shippers have pictures of the products they
carry. However, the picture quality varies. For example, not all
drop shippers carry 300dpi photos. If you are going to advertise
in printed publications, they will need photo of at least 300dpi
Do drop shippers offer exclusives on products?
Many will often entertain the idea of giving you an
exclusive right to a product they carry. In most cases, you will
be required to sell a minimum monthly amount (often in the
thousands) of that product to get the exclusive rights.
Is a wholesaler the same as an authentic drop
Not always. Many wholesalers do not participate drop
shipping. Some are into drop shipping, but require minimum order
quantities. There are some wholesalers who will do single item
What is an Authorized Dealer Agreement (ADA)?
This is a legal
document that outlines the rules and guidelines a dealer (online
or offline) must follow in order to sell a drop shipper's
products. Some drop shipper's will require the agreement to be
signed as a protection policy for their business.
How have online auctions
effected wholesale distributor memberships?
Let's answer this question with an example sometimes seen:
An online auctioneer lists an item for only $1 (they paid for
$15 wholesale). They get one bid. The bidder wins the auction at
$1. The bidder is charged $30 shipping for an item that should
have cost about $5 to ship. The auctioneer makes about $10
profit. The real issue begins when other retailers
(non-auctioneers) of the same product cry foul to the wholesale
drop shipper. The retailer, of similar item, sees the items
listed and sold on an online auction for only $1. They accuse
the wholesale drop shipper of selling to an online auctioneer at
prices under the retailer's wholesale cost. This results in many
retailers abandoning the wholesaler as a supplier. The
wholesaler ends up losing a bunch of retail distributors. They
lose revenue. To correct the issue, the wholesale drop shipper
will set up an ADA to make sure no one is selling their items on
online auctions for under wholesale pricing. This does not mean
you cannot sell the items on an online auction. It only means
you will simply have to follow the wholesaler's policy for
pricing for online auctions. As always, your relationship with
your wholesale supplier is key as they are a business partner.
Do some drop shippers restrict how their products
are sold on online auctions?
Our team stays on top
of these issues as we personally meet many wholesale company
owners at the trade shows we attend. They share a lot of
information and personal stories with us you will not find on
the Internet. While you can still sell their products on
online auctions, we have spoken with some wholesale drop
shippers who require the ADA due to prior online auction abuse.
In a nutshell, they are losing money and dealer memberships. As
and example, here is an actual copy of a recent letter from a
drop shipper (we have hidden their name with XXXXX):
"To: XXXXX Dealers
As you are aware, a rapidly increasing
number of NEW XXXXX Products are being sold far below our
minimum advertised pricing (MAP) at online auction sites. It has
been happening long enough that some dealers have experienced a
dramatic decline in their XXXXX sales. If this continues, many
of these dealers, that are working hard to teach and educate the
end consumer, may decide to no longer sell XXXXX Products, and
if dealers stop selling, they also stop educating. Education is
the key to success for XXXXX Products, and the lack of education
could destroy our company.
Therefore, we have modified the requirements
for dealers to sell XXXXX Products. In order to sell our
products, all current dealers must become authorized by us
(XXXXX), by completing and signing the Authorized Dealer
Agreement (ADA). The requirements are found on the attached ADA.
You as a distributor have the responsibility to
send the ADA to all of your current XXXXX dealers. Each dealer
must sign, and then fax or send a copy of the ADA back to you.
You will then send a copy of every signed ADA to us, to keep on
file for monitoring purposes.
To maintain authorized status, dealers must abide by all
requirements and restrictions set forth in the signed ADA.
Dealers that are found not following the ADA guidelines will
lose authorization to sell XXXXX Products until the problem is
The online auction world is changing the retail world at a
Why is balance important in a drop ship directory?
You want to find a directory rich in many
different categories of products rather than the quantity of
products available. Many of the directories try to advertise how
many products are available in their directory (i.e. 1,000,000
products). Why is the number of categories important? A
directory will not serve you well if it has hundreds of
thousands of products, and none of them are in your product
interest category. A directory with a good balance has focused
on their categories of drop shipper products rather than the
quantity. This gives you a better chance of finding something
for your line of business.
Why is the search method important in a drop ship
The directory must explain the methods
they use to find drop shippers. Be careful of directories that
do not publish their search methods. If they do not explain
their search methods, they may not have a solid search
methodology. The directory could be full of a bunch of
middlemen. At that point, the directory would be worthless to
you. Directories using search methods such as trade show
searches and foreign government agency searches are preferred
over directories only focused on Internet searches. Why? Not all
drop shippers and importers have a Web presence. A directory
based on a bunch of Web searches could be missing some of the
best hard-to-find drop shippers.
Does anyone offer custom searches for a specific
Hienote is the only directory company
advertising this type of service.
What are the basic steps an import drop shipper
takes to get item through customs?
Entry. They need to first decide where and how they will
enter their merchandise.
Valuation & Examination. The legality and tariff on duty
value of the goods needs to be determined.
Classifications. The percentage of tax that will be
charged on the merchandise has to be determined.
Liquidation. Finally they need to pay the tariff or
duties on the items.
What is a merchandise passport?
This is often referred to as an ATA
carnet. Import drop shippers often use this to bring products to
a trade show from abroad. The carnet is valid in about sixty
countries and is valid for about a year.
What is a bonded
This is a holding
area used by customs if the import drop shipper does not file
for merchandise entry within 15 days. Customs will classify the
items as abandoned an store them in a special warehouse referred
to as a bonded warehouse.
Some drop shippers sell G.O. goods. What are G.O.
G.O. goods stands for
General Order goods. These are goods that were held in a bond
warehouse for a one-year holding period. After a one-year
holding period the goods are auctioned. Many importers can find
some real bargains at these auctions and carry them for drop
How does U.S. Customs work with import drop shippers
on perishable goods?
In the case of
perishable items such as fresh foods, customs will often issue a
permit for an immediate release of the goods. Import drop
shippers must apply for the permit before the merchandise
arrives. The rules might be changing soon as part of the
terrorists prevention by homeland security.
Does anyone regulate the imported and exported goods
Absolutely! It's not a complete free for all in the world
market. The U.S. government has the International Trade
Administration (ITA). There is a unit, Import Administration,
within the ITA that deals with import pricing to the U.S. Their
job is to guard our economy from unfairly priced imports.
What is one of the biggest threats to import drop
shippers in terms of ecommerce?
Without a doubt, union dock worker strikes have a serious impact
to drop shippers. When the union dock workers go on strike, the
goods sit on the boats until the strike is over. This means an
import drop shipper will not be getting new merchandise until
the strike is over. In terms of ecommerce, this means many items
are out of stock thus creating lost business.
How do I know which countries a particular import
drop shipper focuses on?
Aside from just
simply asking them, many import drop shippers incorporate the
name of the region with which they trade the most. For example,
Middle East Imports or India Traders.
What is an export management company and what do
they mean to drop shipping?
An export management
company (EMC) handles export operations for a manufacturer that
wants to sell its product overseas but doesn't know how or is
not interested in selling on the front-end. So, the EMC goes out
and markets to distributors in other countries to get the
products sold abroad. An EMC from India for example may search
for distributors in the U.S. The U.S. distributor could be a
drop shipper for the Indian company, all arranged by the EMC.
What is a customhouse broker and how do they help an
import drop shipper?
broker is licensed by the U.S. Treasury Department to act as an
agent for an import drop shipper. They help prepare and file the
entry documents, deposits, and releases for good the import drop
shipper will be carrying.
I find a drop shipper and they have already reached their member
Over the years, many wholesale drop shippers have put caps on
the number of retailers they will allow into their program.
There are various reasons for doing this practice, but most of
it has to do with inventory management, production forecasting,
and growth. There is no particular time of year when a cap can
be put in place, or opened up. We have found some wholesalers
who manage their caps with a first-come waiting list. Yet,
others will open up their cap on just a whim for a particular
day without any notification or reason. If you are trying to get
into a wholesaler's program, and a cap is in effect, keep in
contact with the wholesaler to find out when they will open.
During this time, relationships can be built, and the wholesaler
gets a better feel for you as a retailer, and your business
goals. We have often seen "exceptions" sometimes implemented
during caps. We do not track caps as they are changing daily,
and it is a goal to keep the Hienote directory affordable for
those on a shoe string budget. It would be very cost prohibitive
labor wise to get the cap status data as many drop shippers do
not have the systems in place to notify cap status.
How fast can I start making money with drop
Much of this will
depend on how well you have put together things in your business
plan and on your website. Simply having products to sell on the
Web usually will not make money without a solid strategy and
marketing plan in place.
Do I need a resell certificate of tax ID number to
sell products from a drop shipper?
In order to buy from a wholesale drop shipper, you
sometimes need a tax ID number, or resell certificate.
The wholesale drop shipper needs to show proof to the government
that they can sell to you without charging you a sales tax.
However, not all wholesale drop shipping companies will ask
you for this information as the tax reporting structure will
vary from state to state along with a company's incorporation or
proprietorship. In addition, if you are trying to identify a
valid wholesale drop shipping company, be very careful.
Many middleman will also ask you for a tax ID or resell
certificate as they will also avoid the taxation by claiming to
sell you products at wholesale (or, they are just simply putting
on a front for their scam). It is perfectly legal for them to do
this practice. The IRS is solely interested in collecting tax
from a company's income, not if a company is a true wholesale
supplier with wholesale pricing. We have have seen other drop
shipping directories claim, "If they do not ask for a tax ID
number, they are not a true drop shipper."
WRONG! Middlemen can also ask for this tax ID number.
Why are we mentioning this fact? The point is you cannot
identify a true wholesale drop shipper by waiting to see if they
need your tax ID or resell certificate. Folks, if it was
actually that easy, we would not need a fulltime research staff
dedicated to finding wholesale suppliers for you. This is what
make's the Hienote Drop Ship List Directory and our research
valuable to your business. This is also why we research
trade shows for wholesale drop shippers and meet them
face-to-face. This is how we find the real wholesale suppliers.
It also saves you the risk and your time trying to find a
real wholesale supplier.
Do I still need a tax ID number if I am based
outside of the U.S.?
No. However, you will probably need some form of
business registration locally to the supplier.
With the drop shippers in your directory, am I
limited to selling drop shipped items via the Web?
No, there are no
restrictions as you can sell the items offline.
When and where did the concept of drop shipping
The concept of drop
shipping is almost as old as the marriage between manufacturing
and distribution. Although no one has cited an exact date in
history of conception, there are some moments in history when
drop shipping gained significant popularity. Most seem to agree
that drop shipping started with the large size retail and
manufacturing companies. During the period of the Just-In-Time
(JIT) movement in manufacturing, the concept of a reduced
inventory became popular as a cost reduction method. The
practice of JIT in manufacturing brought an "on-demand" type of
production to the forefront. In turn, reduced inventory in
factories resulted in a lower risk and cost savings. Likewise,
the retail world embraced similar benefits of an "on-demand"
type of supply chain with drop shipping methods. Drop shipping
enabled many of the retail businesses to eliminate their
inventories and enjoy the reduction of risks and cost savings
similar to their manufacturing counterparts. In more recent
years, drop shipping has continued to become more automated with
supply chain technologies bringing real-time inventory tracking
and couriers offering real-time delivery tracking via the
How many drop shippers should I have for my
That is entirely up
to you. In the case of an import wholesale drop shipper or a
closeout merchandise drop shipper, you might want to have at
least a couple. In some cases, there are import drop shippers
that sometimes carry similar products.
They are both getting it from the
same manufacturer overseas. If you have a particular
product carried by a couple of import drop shippers, it is a
good idea to use both of them as one of them may run out of the
item. This insures you can possibly get it from the second drop
shipper as they might still have the product in stock.
What is closeout merchandise?
In the retail
industry, shelf and warehouse space are precious commodities.
There are many retailers who cannot afford to have excess
product on-hand when new products are arriving daily. They are
often willing to sell these items at a loss, well below their
wholesale cost so that room can be made for incoming goods.
These goods are commonly known as closeout merchandise. Closeout
merchandise can come from a variety of sources, but the most
common situations are:
1. Factory overrun -
More units were produced than the manufacturer originally
anticipated on the build order.
2. Out of season /
discontinued - A company may want to introduce a new product
line and needs to clear out space for new arrivals
3. Overstock - A retailer's
inventory outpaces local demand for the product
Customer Return merchandise - Often returned for preference or
Where do I get pictures of the products offered by a
The company you
select for drop shipping typically has the pictures of their
products on file. They can send them to you on a CD or copy them
from a location on their website.
What should I expect in a product picture?
Try to get pictures with at least 300dpi
resolution whenever possible. This is particularly important if
you want to have the pictures printed for a catalog or press
released in a magazine. The typical 72dpi pictures found on many
web sites to not carry enough resolution for quality print in a
magazine, brochure, or other printed media.