Logistics of Drop Shipping

Welcome to the fourth part of this 5-part e-course on drop shipping and how to use it to your advantage. In Step 4 you need to set up your supplier relationship and work together to incorporate the products into your business. You have now selected your suppliers. It’s time to put the relationship to work.

Set Up Logistics

Table of Contents

Set up an account with the drop shipper.

Supplier requirements vary but most drop shippers will ask you to fill out an online or paper seller application. Be prepared to give your company or business ID number (for the UK you can use drop shipping without having a company, whereas most US states and provinces require some sort of business identification number), your formal business name and, possibly, a reseller’s certificate or evidence of VAT or VST registration. The need for the reseller’s certificate or VAT/VST registration is essentially to prove to the supplier that you are a legitimate retailer who should not be charged sales tax or whose VAT or VST tax can be reclaimed, so it is advantageous to be registered for VAT.

Authorised Dealer Agreement

Your supplier may ask you to enter into an authorised dealer agreement (ADA). This type of agreement spells out the products involved, pricing and any other charges, supplier or manufacturer requirements for how you handle the product, dispute resolution, etc. Most of these issues are the typical components of a contract. The special area in an ADA involves product handling requirements. Examples of these special requirements include:

Only approved product descriptions are published on your site to ensure that there are no false product claims.
You may not sell for less than the purchase price to be sure that you do not undercut other resellers.
You may not sell to overseas buyers in order to avoid customs issues.
The supplier may not contact your customers except regarding the status of a particular order, e.g., no “special offer” advertising.

Establish the payment method

As we explained earlier, the shipper may bill you as each item is ordered or may agree to bill you monthly.

Establish the mechanism for transmitting order information

Many drop shippers offer the ability for a direct link to their site to place order information. With many drop shippers you can build your site to incorporate the link into your own ordering page.

Establish a payment collection method for your business

Your website will need to include a method for accepting payments from your customer. Please review our setting up your own ecommerce website for useful information on available options.

Incorporate the drop shipper’s transaction procedures into your site

Be sure that you have carefully identified shipping options, return policies, shipment tracking availability, complaint resolution procedures. If you are buying from a number of suppliers, you may run into the problem of differing policies. If possible, negotiate a set of standard practices across all suppliers. Your ability to achieve that level of standardization will depend on the size of the supplier, the volume of product you sell on their behalf, etc. If you find yourself needing to accommodate differing policies, be sure you communicate those policies to your customers on an item by item basis.

The final logistical step involves incorporating product information onto your site. This step is so key to selling success that we will discuss that process separately.

Product Incorporation

In almost every case, you will be placing pictures and descriptions of products onto your site. That information will come from your supplier. Unfortunately, not every supplier is as good at product promotion as we want you to be so you may have to take some additional steps to be sure that the products you intend to sell are presented in the most appealing way. Here are some tips.

Evaluate the product picture quality. Use large, high quality images of your products, then resize and save them using a lossless format like jpg. If images are fuzzy or not high quality enough, spend the time and money to order samples of all the products and have your own pictures taken. After all, your customer can’t visit a store and touch the product – the only way they can evaluate your product is by looking at the picture. Don’t shoot yourself in the foot with poor quality photography.
Look beyond technical quality to the setting of the product. Yes, you may want a close up, detailed image of those handmade African beads against a plain white background. But, you should also place those beads in a setting that allows the customer to envision how they could be used, in a beautiful hand-crafted necklace or making a striking statement as the edging on a tablecloth with colours that bring out the richness of the beads.
If you are selling a product where dimensions are important, such as a lamp, use a photo of the lamp in a proper living room or bedroom setting so your customer can see how the scale of the lamp fits with a standard sofa or bed.
If you can’t afford professional photography and/or photo styling, you may be able to improve the selling value of a photo by using a photo editing program. For example, you might superimpose pet accessories on a photo (that you own the rights to) of a comfortable family home with Fido frolicking or waiting expectantly for dinner with that hand painted ceramic bowl prominently inserted in front of him.
Be sure that product descriptions are accurate, do not contain any typos, etc. If you feel that the descriptions can be made better, work with the supplier to make changes. Be sure your supplier agrees with any new wording.

Product Promotion

Remember, when you use drop shipping, your selling advantage is not only in the pricing deal you’ve achieved but also in your ability to reach your market and convince them to buy. This e-course doesn’t cover the enormous area of Internet marketing.

What You Have Learned

By the end of this section, you will know:

The step-by-step process for setting up a drop shipping relationship with special attention to the issues that should be discussed and agreed to between you and your suppliers.
The issues you need to address on your site with special emphasis on communicating policies clearly.
The value and importance of well-staged and produced photographs of your product.

In Section V we move our focus from your relationship with the drop shipper to your relationship with your customer.

To our success working together,