Where To Find Dropship and Wholesale Distributors

Find Dropship and Wholesale Distributors

Without great products from great suppliers your ecommerce business is unlikely to compete in the local or global marketplace. Sourcing products is one of the major tasks that will ultimately determine the success or otherwise of your online store. If you’re starting a retail business and looking for products to sell, you’ll need to find reliable wholesale suppliers.

There are five types of wholesalers, so decide which type works for you before buying anything. The five types of wholesaler are:

• Manufacturers
• Distributors
• Liquidators
• Importers
• Dropshippers

Most small businesses use distributors or dropshippers as their wholesaler.

How to Source Products

So where can you get great products for your online store? Well, there are several possibilities:

Become a Manufacturer and Make it Yourself

It’s difficult to be successful in both manufacturing and retail sales, they are very different skill sets.

• If you can manufacture a brilliant new product which will have high demand and low competition then go into manufacturing but get others to do the marketing.

So unless you have enough staff to cover the requirements of manufacturing and retail sales, a family business perhaps, then I would not recommend manufacturing your own products.

Buy Directly From Manufacturer

Buying direct from the manufacturer is a good idea if you have the financial resources to purchase in bulk and have a guaranteed sales channel. After all, you do not want to get stuck with a thousand widgets the purchase of which has eaten all your capital.

• Definition – Capital: wealth in the form of money or other assets owned by a person or organization or available for a purpose such as starting a company or investing.

For those just starting out, especially sole traders, buying in bulk direct from the manufacturer is often a very poor decision.

Most major manufacturers require large initial orders as well as a minimum annual purchase agreement. For those new to ecommerce this type of contract can be ruinous.

1. You need a lot of capital.
2. A large proportion of your capital will be tied up in stock.
3. You will need to buy secure storage facilities.
4. Unless the product sells quickly you are losing potential interest earned on your capital.
5. If you get the supply and demand equation wrong and the products do not sell, you’ve lost your money.

Even large, established business get into problems when buying niche products direct from manufactures. If you’re selling fashionable items which will date quickly things can turn very nasty overnight. A new version release can make your stock virtually worthless.

So, if buying directly from large manufactures is too tricky what’s the alternative? Buying from wholesale distributors.

Buying From Wholesale distributors.

For most small business buying from wholesale distributors is the best option.

• Definition – Wholesaling or Jobbing, is the resale (sale without transformation) of new and used goods or merchandise to retailers. In general, it is the sale of goods to anyone other than a standard consumer. In the United Kingdom, the Cash and Carry is a term used to describe a wholesale warehouse, particularly those that are open to the general public on payment of a subscription.

Wholesalers are basically warehouses that stock products from a number of different manufacturers in order to resell them to retailers. The wholesaler will buy the products in bulk (1000’s) and then sell the products in smaller batches (10’s) to retailers. As a small business they are your best bet for sourcing products for several reasons:

• Your capital outlay is lower.
• You do not necessarily need to stock items. For example, if you trade via your own online store or eBay you could sell the items prior to purchasing the items.
• You do not need to pay for secure storage facilities.
• You have a greater range of products available.
• If the market changes you are not stuck with out of date stock.

So, presuming you are going to trade via wholesale distributors, what options are available?

Well, buying from wholesale distributors gives you the option of purchasing and shipping the items yourself as orders are received, or using dropshipping.

Wholesale Dropshipping Solution

Firstly, lets be clear how dropshipping works.

Lets say you’ve just received a paid order via your online store for a Cooks Professional vacuum bag sealer. As you are using a wholesale dropshipping solution, you don’t need to stock the item, you simply forward your customer’s order and shipping information to your wholesaler.

Your wholesaler, on your behalf, boxes up the bag sealer and ships it to your customer with your business name and documentation on/in the box. Your wholesaler charges you for the item plus a small fee to cover packaging and distribution.

Having received dispatch details from your wholesaler, you, in turn, pass along the tracking information to your customer.

As you can probably see, the dropshipping business model is a great way to start a small business

Benefits of Dropshipping

The benefits of dropshipping are:

• Lower costs and overheads.
• You don’t have to invest large sums of capital in inventory.
• You do not carry stock, so your don’t have the risks involved with stocking such as price drops.
• Dropshipping allows you to provide more product lines along side your primary products without extra effort.
• With dropshipping, you only buy inventory after a completed sale.
• There is no secure storage, inventory management or insurance requirements.
• Your packaging and distribution cost will probably be lower.
• Your overall risk is greatly reduced.
• Dropshipping is perfect if you have a home based business (or anywhere).

That final item in the list, running your small business from home makes dropshipping ideal for those just starting out.

Downsides of Dropshipping

As with everything in life, dropshipping solutions do have a few problems:

• Lower profit margins. Competitors dealing direct with the manufacturer or wholesaler will have better mark-up and could, theoretically, undercut your prices.
• Increased competition due to lower barriers to entry. The easier it is, the more competition there will be.
• Less control over order fulfilment. Sourcing and delivery of your products are in the hands of your chosen dropshipper. Make sure they are reliable.

Although dropshipping has a few problems, it is still a great choice when starting a new business providing you can find a good wholesaler and trade in a high value niche.

When starting a new business your primary goals should be to;

• minimise any downside risk and
• prove market viability.

With dropshipping both of these targets can be accomplished.

Identifying Great Suppliers

When something goes wrong with your customers order it’s your fault. It doesn’t matter to your customer that your supplier failed to supply the goods or packed the product badly. As far as the customer is concerned you are responsible.

Now, although everyone makes mistakes (no person or system is perfect), you can drastically improve your business performance by partnering with a great supplier. Just following the following guidelines.

Great Suppliers + Technology = Efficiency

Only deal with wholesale distributors who keep up with technology. Automation, efficiency and scalability are extremely important as they help reduce processing errors and make ordering easier.

Look for wholesale distributors with:

• Information-rich websites.
• Real-time warehouse inventory feeds.
• The ability to place orders via email and their online store.
• The ability to cancel orders via email and their online store.
• Dedicated sales reps who understand their industry.
• Shipping flexibility and reliability. Your chosen wholesale distributor needs to be in a position to ship goods to your customers in the time frame allotted. If your delivery commitment to your customer is two days its no good having a wholesaler distributor who takes two weeks to deliver.
• The ability to pay via credit/debit card.

As with all technology, try before you buy. It’s all very well having the latest technology but if it’s not user friendly try somewhere else. You don’t want to waste your time having to learn how to use your wholesale distributors web site HMI.

Supply + Dropshipping = Fees

As dropshipping for clients entails additional costs for the wholesaler it is fairly common for them to charge dropshipping fees. This if fair, provided the fees are justified.

• Wholesalers make most of their money on larger orders, so usually charge a processing fee for invoicing, packaging and shipping smaller orders.

Fees can range dramatically from £2 to £10 per order so it’s important to get these costs up front.

• You can usually negotiate reduced fees with suppliers as your order volume increases.

It should be apparent from the above fees that dropshipping is really only viable for relatively high cost/margin products.

Use Multiple Wholesale distributors

I’m sure know the idiom, “Never put all your eggs in one basket”. If at all possible always have more than one supplier. Being dependent on a single supplier is very risky. The advantages of multiple suppliers are:

• Reduced risk. You are not at the mercy of a single supplier.
• Reduces fulfilment problems. Having several suppliers increases your ability to fulfil orders.
• Flexible geographical shipping options.
• Price leverage. Competition will help keep prices down.

If you can’t find multiple suppliers then make sure you have a backup plan.

Where to Find Wholesale distributors

When researching new wholesale distributors try to get customer references and chat with a sales rep. If possible talk to others in your industry and see if they will recommend a supplier (just remember, they are your competitors, so be careful, especially on forums).

Before placing any large orders try a few small test orders first, you’ll lose nothing, the products (provided you get them) can still be sold at a profit.

Unfortunately, as the wholesale and dropshipping markets are rife with scams, finding quality wholesale distributors can be a bit of a challenge, that’s why I recommend SaleHoo.

• Be very cautious of the “wholesale lists” on sale, there are dozens of disreputable sites looking to make a quick buck selling you bogus and useless lists.

 

Contact the Manufacturer

If you know the manufacturer of the product you want to sell, you can often call them and ask for a list of their wholesale distributors.

Check out all of their policies (returns, damages, backorders), and make sure they have their contact information and physical address posted on their site (not just a contact form – this is a big red flag).

This is the best way to get a comprehensive list of legitimate wholesalers.

Attend a Trade Show

Trade shows are for retailers just like you. At a trade show you can talk face-to-face with manufacturers and wholesale distributors, and avoid all of the inaccurate information which can plague the Web. To find a trade show near you, just do a Google or Yahoo search for, “trade show” and industry, date, city / state / country and/or event name.

Spy on the Competition

If you know a retailer who is dropshipping, place an order with them. When you receive your order, Google or Yahoo the return mailing address. This will tell you where the item actually came from and lead you to the wholesaler used to fulfil your order.

Use Online Forums

Online forums are a great place to get references and ask questions, but beware of members who are simply trying to self promote. You can also check your suppliers out through the Better Business Bureau.

Search Google and Yahoo for Wholesalers

Strangely enough, for someone who wants to sell to you, genuine wholesalers can be tricky to find so you’ll need to do a little digging.

The first thing to try is a Google and Yahoo search for “[niche product] wholesaler”. The first couple of results pages will probably be nothing but spammy supplier lists or companies claiming to be wholesale distributors but are actually retailers acting as middlemen. In the first ten results pages you might find a couple of legitimate wholesalers.

You can recognise legitimate wholesaler because:

• The do NOT sell to the general public.
• In the UK they will require a VAT No. In the US and Canada a business license or reseller’s permit.
• They will generally not disclose their discount prices until you’ve signed up.
• They will NOT charge an account activation, membership or sign-up fee.
• They will generally have a minimum first order amount.
• They will generally have a minimum annual order amount.

 

Pay for Access to a Wholesale Directory

Once you’ve had enough of researching the thousands of bogus dropship and wholesale distributors on Google and Yahoo and the many spam lists available, there are a couple of wholesale and dropshipping directories that are widely regarded as quality resources:

• WorldWideBrands – Wholesale directory.
• SaleHoo – Wholesale and dropshipping for retailers.

Both the above are paid resources, WorldWideBrands being $299 (£182 approx) and SaleHoo $67 (£41 approx).

• As a business, do remember that research expenses and fees are tax deductible.

Both the above companies have a searchable database of thousands of dropshipping wholesalers supplying almost every product imaginable. Both are great resources, with plenty of free helpful tutorials and tips.