Wholesale dropshipping is a business model where a wholesale supplier or manufacturer takes care of shipping and logistics for their retailers. Meanwhile, these merchants promote the dropshipper’s products to their customers.
If you are a business owner looking to expand your reach and build a strong network of wholesale buyers, this model could be very helpful. But, is it the right choice for your company?
In this post, we’ll go over the basics of wholesale dropshipping, including what it is, its pros and cons, and the key factors that can make it successful. By the end, you’ll have a clearer idea of how to set up and manage this kind of operation, so your business can enjoy the most benefits.
What Is Wholesale Dropshipping?
The best way to start this discussion is to define what exactly this service is.
Britannica says dropshipping is:
An e-commerce business model in which the vendor does not hold the product inventory but serves as an intermediary between the buyers and a third-party supplier.
In other words, NetSuite says a dropshipper is:
A wholesaler who specializes in handling drop shipments, directly supplying products to customers on behalf of retailers.
All these definitions explain the same idea. Dropshipping is when a supplier or manufacturer ships products directly to the customers who bought them from a merchant.
As a wholesaler, you handle the buying, shipping, and logistics of the products. Meanwhile, the wholesale customer is the one who displays, advertises, promotes, and sells your products to consumers.
However, wholesale merchants do not need to stock or store products. These are your responsibilities as the supplier and dropshipper. When a retailer’s customer buys something online, they notify you. Then, you start the process of shipping the items to the buyer.
Overall, this creates a win-win situation for both you and the wholesale customer.
Inclusion Of White Label Dropshipping In Wholesale
White label dropshipping, also known as private label dropshipping, is a service where the wholesale supplier labels the package as if it came from the retailer. In this case, the supplier acts as a hidden third party between the retailer and the customer.
Simply put, the customer never knows the supplier is involved. This can encourage customers to buy again from the retailer, which benefits both the supplier and the retailer’s business.
For more details on white label dropshipping, see our article: International Dropshipping: 7 Important Things You Need To Know About White Label Dropshipping.
With this method, wholesale merchants don’t need to keep inventory or store products in a warehouse. Instead, the supplier and dropshipper handle these tasks. When a customer makes a purchase from the retailer’s online store, the retailer informs the supplier. Then, the supplier starts shipping the items to the customer. This creates a win-win situation for both the supplier and the retailer.
Pros And Cons Of Wholesale Dropshipping
Pros
This business model can offer your e-commerce business many advantages, including the following:
1. Increased number of customers
One of its key advantages is that it can boost the number of customers who buy from you.
Most wholesale merchants already have a strong consumer base. When they sell your products, you can reach more people and grow your market. As a result, you get more orders, leading to higher sales and profits.
However, it is important to check the trustworthiness of any retailer you plan to work with. This means researching their background, business type, history, target market, and other companies they work with.
2. Cut costs and save time
As mentioned earlier, your main job as a wholesale supplier is to ship products to your retailers’ customers. This means your retailers take care of the marketing. As a result, you avoid the high costs, long hours, and challenges that come with promoting and selling products.
3. Flexibility
This gives you flexibility. Because you can work with many retailers, you can ship products to many online stores. This means your income does not depend on just one or a few customers.
Additionally, this flexibility can create more leads, more conversions, and more sales. As a result, both you and your retailers benefit from more product movement and order fulfillment.
4. Balance
It helps balance the sales process between you and the retailer. This can work as a form of leverage for your business.
As the supplier, you handle the inventory, packaging, and shipping of your products. Meanwhile, the retailer takes care of marketing and advertising for you.
If you want to create a smooth buying experience for your retailers, use the WooCommerce Wholesale Prices Premium plugin. This tool makes it easy to manage shipping, taxes, set wholesale prices, minimum order amounts, tiered discounts, and more.
5. Dropship directories
As a wholesale dropshipper, finding wholesale buyers to work with is one of your most important tasks. One way to do this is by researching potential retailers and contacting those you think would be a good fit.
However, there’s another way to meet prospects. You can list your company in dropship directories.
A dropship directory is a database of wholesale suppliers that businesses use when searching for dropshippers. By listing your company in these directories, you can increase your chances of finding new wholesale customers. This can lead to the benefits mentioned earlier.
Some popular dropship directories include Worldwide Brands, Oberlo, Doba, Salehoo, Wholesale Central, A Better Lemonade Stand, Free Dropshipping List, The Watchman Advisors, Drop Ship Access, and Top Ten Wholesale.
To learn more, check out our post: 8 Dropship Directories You Can List Your Store In.
Cons
Unfortunately, this business model also comes with disadvantages.
According to Pixel Union, some of these drawbacks include:
- Margins suffer as dropshipping partners take a large cut.
- High competition with identical products from suppliers.
- Finding trustworthy dropship suppliers is crucial.
- Managing products, suppliers, and customers is overwhelming.
- Limited control over branding during shipping.
- No inventory control; miscommunications cause cancellations.
As you can see, this business model has both pros and cons. Therefore, if you’re considering incorporating the model into your business, you should determine the best ways to minimize the risks to ensure maximum profits. And to do this, you need to thoroughly examine the factors that can boost your chances of succeeding as a dropshipper.
10 Important Factors To Consider
As lucrative as it is, this business model can only produce favorable results if you can fulfill your wholesale customers’ demands. For this reason, you must familiarize yourself with the factors that can lead to the success of this model.
These factors are as follows:
1. Responsive online store
You’re probably well aware of how e-commerce is revolutionizing the business landscape. Unfortunately, an online business model just won’t work if your online store isn’t up to snuff. So don’t even think about offering dropshipping services until you’re sure your store can leverage the power of the internet.
A dynamic and intuitive online store not only draws in more wholesale customers but also retains them. After all, it can give buyers the ability to easily place, process, and modify wholesale orders online. This, in turn, can make a significant impact on their overall experience. And as we all know, great customer experience can help your business not just survive but also thrive in today’s competitive marketplace.
2. Clear terms and conditions
As a dropshipper, you should polish a contract agreement between you and your wholesale clients. This contract agreement and other supporting documents should include pertinent information such as:
- Wholesale pricing
- Minimum order quantities (MOQ)
- Tiered discounts
- Ordering process
- Suggested retail price or markup (case-to-case basis)
- Profit margins
- Processing and handling fees
- Return and exchange policies
- Shipping
- Customer service
💡Remember: You must prepare a contract that’s as clear and comprehensible as possible. For example, when setting the minimum order quantity, you should let wholesale clients know that they can avail of lower wholesale pricing only upon placing an order in bulk. You should also clarify the profit margins between you and the wholesale merchant.
By clearly defining each provision in your terms sheet, you can ensure more effective working relationships and smoother business transactions, In addition, you can prevent confusion and misunderstandings that can lead to serious problems down the line.
You can further protect all parties involved in your transactions by having your attorney and accountant review the contract before presenting it to your wholesale merchants.
3. Wholesale pricing
Since you’ll be manufacturing, procuring, and shipping products directly to consumers, you need to set reasonable wholesale pricing and shipping terms.
The wholesale prices should be offered exclusively to wholesale merchants. It should take into account the materials, labor, costs, expenses, handling fees, shipping fees, and profit margins.
Considering all these factors, this is where Wholesale Suite comes in handy. It’s an all-in-one solution that allows you to effortlessly manage wholesale pricing. With its inner plugins such as Wholesale Prices Premium, Wholesale Order Form, Wholesale Lead Capture, and Wholesale Payments, you can create exclusive pricing for your wholesale merchants, customize discounts, and even set up minimum order quantities, making it easier to cater to different types of buyers.
4. Payment and profit margins
You should clearly define the profit margins between you and the retailer. Since the consumer is paying the retailer, how much will said retailer’s cut be? How does this retailer pay you? What are the payment terms?
Aside from that, when a consumer places an order on the retailer’s online store, does the retailer pay you immediately or after a specified amount of time? How does the retailer place an order on your online store? These are just some of the questions that you should discuss with your wholesale clients.
5. Selling terms
It’s also a good idea to specify how your wholesale customers can sell your products.
For example, you can stipulate that a retailer can only sell your products via their online store and not on other e-commerce platforms such as Amazon or eBay. Such limits and restrictions can prevent your wholesale customers from directly competing with one another.
6. Return and exchange policies
From the start, you should clarify who’ll handle the returns, or, more specifically, who’ll be liable for the costs of product returns and exchanges. Ultimately, the agreement between you and the wholesale merchant will determine the nature of such policies.
Always be prepared for cancellations, the return or exchange of items, and shipment problems.
7. Ordering process
Provide a fast and convenient ordering experience for your wholesale customers. This will lead to the efficient operations required to enjoy increased sales, which can also boost customer satisfaction and loyalty.
As stated by Oberlo, although dropshippers don’t deal directly with the preparation, packaging, and delivery of products, they have to ensure a smooth workflow. This means getting every part of the process right, from sending the correct tracking number to delivering products on time.
One way to make the ordering process as efficient as possible is by providing registered wholesale customers with dedicated accounts. You can achieve this by using WooCommerce Wholesale Lead Capture, a powerful e-commerce tool that automates the recruitment and registration of wholesale customers.
You can also use Woocommerce Wholesale Order Form, which allows you to present your product catalog on one page. In addition, this tool provides an efficient ordering process both you and your customers will enjoy.
Refer to our post on “3 Tips For Increasing Wholesale Order Frequency” for more tips!
8. Shipping
As a dropshipping supplier, you must successfully deliver all ordered items to the consumers’ specified addresses. After all, your retailers depend on you to get this right.
Remember: there’s no room for error. Imagine sending an item to the incorrect address – what a massive blow to your reputation and finances that would be!
However, it’s not enough that your shipments are correct; you must also do so promptly. Orders that arrive late can convince consumers to stop doing business with your merchant, who, in turn, may end up leaving you to seek another supplier.
You must also make sure that you partner with reliable shipping companies that enjoy fast shipping and a wide network. If you offer worldwide shipping, familiarize yourself with every country’s shipment-related customs and tax laws. You definitely don’t want your items to be held at customs.
It’s essential to maintain transparency about the shipping schedule. Moreover, you should allow flexibility for changes in the expected delivery date for customers.
Another shipping-related factor you should consider is the offering of incentives. Simply put, incentives such as discounts or loyalty programs can entice merchants to buy from you more often.
For more information about incentives, check out our article, “How To Offer A Free Shipping Incentive For Wholesale Customers.”
9. Readily available information and materials
As a dropshipping supplier, you must provide your wholesale merchants with all the necessary marketing materials and product information that they need to showcase your products to their potential customers.
Marketing materials include high-quality images and detailed product descriptions. Merchants can use the images to create professional and visually appealing product presentations. On the other hand, product descriptions offer information – such as the item’s features, benefits, and technical specifications – that can convince consumers to make a purchase.
Furthermore, wholesale merchants need accurate and updated pricing information to properly set prices on their own online storefronts. Don’t forget to inform them about any product changes so that they can make necessary adjustments to their inventory and marketing strategies.
Lastly, wholesale merchants want clear return policies and product warranties, which you should communicate to them clearly and transparently. After all, they want to be confident in the quality of the products they’re selling as well as make sure that their customers are protected in case of any issues.
10. Customer service
As a dropshipping supplier, you and your staff must be available almost 24/7 to help your customers out. This is especially true if your retailers are scattered around the globe.
Wholesale buyers expect you to immediately respond to their concerns over the phone, email, live chat, Skype, and the like. In other words, they need to know they can reach you and that you can solve their problems anytime.
Thus, you need to be prepared for cancellations, the return or exchange of items, shipment problems, and a range of other potential issues. At the same time, you must maintain constant communication with your wholesale merchants so that you can provide assistance as soon as any problems crop up.
Offering excellent customer service will pay off in the long run since it builds loyalty and great working relationships.
8 Shipping Details Every Supplier Should Know
As a dropshipping provider, you can opt to ship your products directly to consumers or get a shipping carrier to handle the shipping for you.
Choose the best option that will give you maximum profits. The first option is sustainable for small start-up wholesale businesses that ship products from time to time. On the other hand, those who can frequently ship large packages worldwide would be better off partnering with a good shipping carrier. Although you can expect a cut in your profits, you’ll find the latter method less taxing and worrisome.
Since you’ll be shipping merchandise to consumers, you need to make various considerations, such as:
1. Shipping carrier
You should partner with a shipping carrier that offers wide coverage, reasonable rates, tracking tools, and fast shipping.
To help you choose the best carrier, check your prospects’ shipping regulations. Moreover, you need to consider shipping options, delivery timeframe, shipping fees, package size, and policies.
2. Destination country’s regulations and policies
Familiarize yourself with the import regulations, clearances, restrictions, and policies of the countries you’ll be shipping your products to. Every country has its own importation laws and regulations that you need to comply with. Knowing and observing such rules will help you avoid problems.
3. Insurance
Choose the best insurance available that can cover shipment delays, cancellations, and errors.
It’s wise to get insurance that can cover losses due to factors beyond your control. As such, research different insurance companies that cover shipping, making sure to pay particular attention to their requirements and policies.
4. Shipping rates
Shipping rates vary depending on the shipment’s carrier, size, weight, country of origin, destination country, and other factors. Scrutinize different shipping companies and compare them with one another to determine the deal that will provide you with the most benefits.
5. Delivery time
Delivery time takes into account the period between the shipment of goods from the warehouse and the arrival of said goods at the consumer’s specified address. The delivery timeframe should be reasonable.
6. Electronic invoice
Because international shipping requires you to have a sales invoice, the ability to send electronic invoices is crucial.
Fortunately, many shipping carriers transmit electronic invoices to the customs of destination countries in order to obtain clearances. This will also make it easier for you when you have to deal with taxes such as shipment fees, warehouse fees, tariff rates, and other additional charges.
7. Tracking
Tracking allows you to ensure that your goods are delivered to consumers. It also lets you know when there are shipment errors, delays, and problems.
8. Packaging
Aside from ensuring that your goods are packaged in an appealing way, you should also consider the materials used in packaging. After all, sturdy materials can protect the contents of your boxes.
As the shipping rates vary depending on the package size and weight, you should use lightweight materials to enjoy lower shipping rates.
Frequently Asked Questions
How do you get a supplier for dropshipping?
To find a supplier, you can start by researching dropship directories like Oberlo, SaleHoo, or Worldwide Brands. You can also reach out directly to manufacturers and wholesalers in your niche. Additionally, attending trade shows and using supplier platforms like Alibaba can help you connect with reliable partners.
How profitable is dropshipping?
Dropshipping can be profitable, but it depends on factors like product choice, marketing, and competition. Generally, profit margins range from 10% to 30%. While it’s possible to make good money, success requires smart strategies and consistent effort.
Who is the richest dropshipper?
It’s hard to say exactly, but some well-known successful dropshippers include entrepreneurs like Kevin Zhang and Franklin Hatchett. They have made millions through dropshipping and now share their expertise with others.
Conclusion
Wholesale dropshipping is an order fulfillment process wherein the wholesale supplier ships their products to their wholesale customers’ consumers. It can be a lucrative model for your wholesale business as long as you learn about its ins and outs and take the steps necessary to ensure it benefits all parties involved.
To recap, we discussed how this business model can help your business thrive:
- What is wholesale dropshipping
- Inclusion of white label dropshipping in wholesale
- Pros and cons
- Important factors to consider
- Shipping details every supplier should know
Do you have any questions about this article? How about the WooCommerce tools that can streamline your business for online operations including but not limited to dropshipping? Let us know in the comments section below!
