Wholesale dropshipping is a viable business model wherein a wholesale supplier or manufacturer handles product shipping and logistics for their retailers. In turn, these merchants promote the dropshipper’s products to their consumers.
Any business owner seeking to expand their reach and establish a robust network of wholesale buyers could benefit from this model. But is it right for your company?
In today’s post, we’ll discuss the ins and outs of wholesale dropshipping, including what it involves, its pros and cons, and the factors that can contribute to its success. This will help you determine how best to establish and run such operations so that your business can reap maximum rewards.
What Is Wholesale Dropshipping?
The best way to start a discussion on wholesale dropshipping is to define what exactly this service is.
According to Shopify:
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly.
N Channel defines dropshipping as:
A fulfillment process in which merchants buy goods from a vendor who ships them directly to the consumer who bought them from the merchant.
And here’s how eCommerceFuel defines what a dropshipper is:
Any wholesale distributor who will ship to your customers directly on your behalf is a drop shipper.
All the above definitions express the same concept: dropshipping is when a wholesale supplier or manufacturer ships their products directly to the consumers who purchased them from a wholesale merchant.
As a wholesaler, you’ll be responsible for the procurement, shipping, and logistics of the products. On the other hand, the wholesale customer is the one who’ll display, advertise, promote, and sell your products to their consumers.
Wholesale merchants don’t need to stock up on inventory or store products in a warehouse – these are your responsibilities as the supplier and dropshipper. Retailers will notify you when a consumer buys your products via their online store, at which point you must begin the process of shipping the items to said consumer. This is a win-win scenario for both you and the wholesale customer.
White label dropshipping
So we now know what wholesale dropshipping is. But what’s white label dropshipping?
Also known as private label dropshipping, white label dropshipping is a service wherein the wholesale supplier labels the package as coming from the wholesale merchant. In such a case, the wholesale supplier acts as an anonymous third party between the retailer and the consumer.
In other words, the supplier’s involvement in the transaction is kept secret from the consumer. This can convince consumers to repurchase from the retailer, which is as good for the supplier as it is for their business partner.
For a more comprehensive discussion on white label dropshipping, check out our article: “International Dropshipping: 7 Important Things You Need To Know About White Label Dropshipping.”
5 Key Advantages Of Wholesale Dropshipping
Wholesale dropshipping can offer your e-commerce business many benefits, including the following:
1. Increased consumers
One of the major advantages of wholesale dropshipping is that it can significantly increase the number of consumers doing business with you.
Most wholesale merchants enjoy a solid consumer base. By having many such merchants selling your products to their consumers, you can expand your market and gain more consumers. As a result, you’ll have more product orders, which can lead to more sales and higher profits.
However, we recommend scrutinizing the trustworthiness of any retailer that you’re considering working with. This means researching their background, line of business, track record, target market, and the other companies that they’re working with.
2. Save money, time, and effort
As mentioned previously, your responsibility as a wholesale supplier revolves around the shipment of products to your retailers’ consumers. This means your retailers will be the ones handling the marketing of those products. As a result, you get to avoid the hefty expenditures, time commitment, and challenges typically associated with the promotion and selling of products.
Because wholesale dropshipping allows you to work with many retailers, you get to ship products to a wide range of online stores. This can result in increased flexibility as your income won’t have to rely on a single or a few consumers only.
In addition, this flexibility can lead to more leads, conversions, and sales, allowing you and your retailers to enjoy more product movement and order fulfillment.
To learn more about the benefits of wholesale dropshipping, check out our article: “5 Benefits Of Dropshipping And Why You Should Offer It To Your Wholesale Customers.”
Since wholesale dropshipping balances the sales process between you and the retailer, it can also serve you as a form of leverage.
As the supplier or distributor, you manage inventory as well as handle the packaging and shipment of your products. On the other hand, wholesale merchants deal with the marketing and advertising of those products for you.
For those who want to provide a pleasant buying experience for your retailers, install the WooCommerce Wholesale Prices Premium plugin. This tool allows you to easily manage shipping and tax as well as set wholesale pricing, minimum order quantities, tiered discounts, and so much more.
5. Dropship directories
As a wholesale dropshipper, one of your most crucial tasks is to find wholesale buyers to work with. One way you can do this is by researching potential retailers and contacting those you deem worthy of a partnership.
However, another great way to meet prospects is to list your company in dropship directories.
A dropship directory is a database of wholesale suppliers that businesses can use when searching for dropshippers. When you list your company in such a directory, you significantly increase your chances of gaining new wholesale customers, which can lead to the benefits discussed above.
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.
You can learn more about these directories in our post: “8 Dropship Directories You Can List Your Store In.”
Disadvantages Of Wholesale Dropshipping
Unfortunately, wholesale dropshipping also comes with disadvantages.
- Steep competition
- Low margins
- Inventory synchronization issues that lead to out-of-stock items
- Shipping complexities and errors
- Logistical problems
As you can see, wholesale dropshipping 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.
Which brings us to…
10 Important Factors To Consider When Offering Wholesale Dropshipping
As lucrative as wholesale dropshipping is, it 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 wholesale 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
- 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
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.
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!
As a wholesale 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 wholesale dropshipping 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 wholesale 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 wholesale 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 Wholesale Dropshipping Supplier Should Know
As a wholesale 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.
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.
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.
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.
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, wholesale dropshipping can provide your business with benefits such as:
For your wholesale dropshipping operations to succeed, you must consider the following factors:
- Responsive online store
- Clear terms and conditions
- Wholesale pricing
- Payment and profit margins
- Selling terms
- Return and exchange policies
- Ordering process
- Readily available information and materials
- Customer service
Lastly, every wholesale dropshipping provider should familiarize themselves with the following shipping details:
- Shipping carrier
- Destination country’s regulations and policies
- Shipping rates
- Delivery time
- Electronic invoice
Do you have any questions about wholesale dropshipping? 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!