Home / March 2008 Archive
The Seven Secrets to Drop-Ship Success
We don’t always recommend drop-shipping to our community. In fact, we recently provided compelling reasons why selling drop-ship products from a single supplier on EBay was a poor retailing strategy. However, don’t throw the drop-ship baby out with the low margin bath water. A well managed drop-ship strategy can do wonders for your business by increasing your product selection without increasing your inventory investment. You can develop a great drop-ship program by following our tips for drop-ship success.
Remember the RetailBlazer formula for success? Here’s a refresher:
Success = Community + Expertise + Relationships + Branding
It should not come as a surprise to learn that relationships are the most important aspect of a good drop-ship program. The first step in selling drop-shipped products is finding a supplier. There is no shortage of companies that claim to be drop-shippers. Unfortunately, most of these companies are glorified retailers. You won’t get good pricing, you won’t get good service, you won’t get good products. Finding suppliers is hard, right? Not anymore! ProductBlazer puts over 27,000 wholesale suppliers and manufacturers at your fingertips. Here’s a list of twenty drop-ship suppliers to get you started.
- Understand how drop-shipping is different.
- Accept that drop-ship does not equal unlimited supply.
- Start with a single product line.
- Establish strong relationships with suppliers.
- Understand how the supplier communicates price and quantity information.
- Examine your return policy.
- Check for pricing changes every day.
This may seem obvious. The main difference is that you, as retailer, don’t have the product you are selling in inventory–the supplier does. But from your customer’s perspective there should be no, or very little, difference. If your customer contacts you with a question about the product you will need to be able to answer the question without having the physical product on hand. “I’ll call my supplier” isn’t a good answer for customer inquiries!
This is one of the biggest “gotchas!” for retailers selling drop-ship products. Just because you are not managing inventory does not mean that no one has to manage inventory. The supplier you are buying from is selling the same products to other retailers. Talk to your account manager and understand the supplier’s backorder policy. Make sure that if your primary supplier is out of stock you will have the ability to shop the order to other suppliers, rather than passing the backorder back to your customer.
Walk before you run. Select a single line of products, or even a single SKU, and begin your drop-ship career by selling only those products. It is practically guaranteed that you will encounter hiccups that you had not anticipated–better to start slow, learn the ropes, and then expand your drop-shipping. In a year you may never have to manage inventory again!
This is a running theme for the team at ProductBlazer. As a retailer you are only as good as your supplier relationships. It is worth spending the time to get on the phone and introduce yourself to your suppliers. Let the account manager know what you want to sell, your expected volume, and what you are doing to build your business. B2B relationships are a two-way street. All suppliers will check your credit before they start accepting your orders–accept that, and be ready for it.
The best way to avoid backorders is to only sell products that you can actually supply to the customer. It sounds simple, but digesting stock quantity information from your suppliers can be a chore if you don’t have the right information systems in place. All high-volume suppliers will provide you with an electronic file that provides a snapshot of their inventory positions. Some will provide information daily, others hourly, and only rarely in real-time. It may be worth the effort to have a consultant create a small application to import the supplier’s stock quantity information into your own inventory management application.
Make sure that your return policy is compatible with the supplier’s return policy. You may find that some suppliers will not accept returns for products they sell through drop-shipping. You need to fully understand the supplier’s reseller agreement before you start sending them orders.
Unless you were able to negotiate a custom reseller agreement you need to check for pricing changes every day. The supplier will probably communicate these changes to you along with stock quantity information for all of the products the supplier sells–not just the products that you sell. If there are positive or negative price adjustments you need to know as soon as possible, as you may need to adjust your own retail price for the product.
Drop-shipping isn’t rocket science, but it takes effort to get right. The most important thing is to establish strong supplier relationships. Get started today by using ProductBlazer to find new wholesale suppliers!
How to Start The Next Amazon.com for Less than $1000
What’s stopping you from starting the next big thing in e-commerce? Nothing. We propose that with as little as $1000 and some elbow grease you can build a successful and profitable retail business online.
The RetailBlazer formula for retail success is simple.
Success = Community + Expertise + Relationships + Branding
- Community
- Expertise
- Relationships
- Branding
Build a community–your customers should feel like they have a personal relationship with you and your other customers.
Focus on a single product category and become and expert.
Develop long-lasting relationships with wholesale suppliers of products in your chosen category.
Nurture a brand that fosters loyalty, trust, and expectation from your customers.
Disclaimer: This is not a get rich quick scheme. This is a strategy for getting your hands dirty, adding value, and then getting rich slowly while satisfying your customers.
Read the rest of this entry »
10 Reasons it is Better to Sell Apparel to Dogs Than Humans
Americans will spend $40.8 billion on their pets in 2007 according to the American Pet Products Manufacturers Association. Taken as a whole the pet industry is old and established. Some would say staid. But within the pet industry the luxury segment is smoking hot. Upper-middle income Americans love to spoil their companions and high-end items are must-haves for their furry, feathered and finned best friends. Faux mink coats, feathered French day beds, designer bird cages, botanical fragrances and even rhinestone tiaras are just some of the luxuries that are being lavished on our furry American friends.
These days it is better to be selling to the four-legged customers.
- No dominant brands.
- What looks best wins the sale.
- No dominant retailer.
- Cross-licensing opportunities abound.
- More opportunity for innovation.
- Faster growth rates.
- There is no last season.
- Pet Fashion Week
- Doggy fashion has its own rag.
- Better margins.
Not an authorized Chanel dealer? No problem. The pet fashion industry is wide open with hundreds of companies providing innovative designs.
Without dominant brands the retailer is able to choose their line of fashion based on what looks best, instead of which brand is the hottest. Creativity and an eye for the new and exciting is all you need to build a winning line of pet fashion.
Is Petco a player in doggy fashion? Please. Amazon? Not a chance. This market is wide open and just waiting for a winning retail brand to take the day.
Hanes may have already locked down domestic rights to Spiderman 3 underwear, but that is probably for humans only.
Human fashion is stuck in a rut. Milan? New York? The same labels every year. Where is the innovation? Pet fashion is booming and no one has an exclusive on the next big name in canine couture.
Sales of pet services are growing at 20% per quarter at Petco. Pets are part of people’s families now and when momma needs a new frock you know that her best friend won’t be left out.
Dogs don’t do seasons so there is less need for arbitrary markdowns.
August 18th, 2007 will mark the beginning of the second Pet Fashion Week in New York.
Pampered Puppy is the new Vogue.
All of the above helps to keep margins on doggy fashions healthier than their human equivalents.
Empty-nesters with fat 401ks, young couples delaying having children and pampering their pets — any way you look at it the apparel industry is going to the dogs. Smart independent retailers won’t get left behind.
How to Survive Your First Year in Business
Owning a retail business can be exciting and rewarding, but of course, plenty of hard work. Keeping close tabs on financial information is vitally important in making it through the first year and beyond. Two topics important to the financial health of your business are analyzing your return on investment (ROI) in advertising and regularly watching your profits and losses.
Most business owners understand the importance of creating brand recognition through a comprehensive advertising campaign. But choose your advertising outlets carefully or you can quickly and easily spend a significant part of your budget just on advertising and perhaps in ways that are not productive or profitable.
Know Your Customer
When creating an advertising campaign, you must first determine which outlets reach a large portion of your target market. But how do you know? Start by asking your customers. Ask what papers they read regularly. Are there television programs they watch most often? What radio stations they listen to, etc. Find out from the media representatives what their demographics are including age groups, income levels, etc. When you select your modes of advertising, don’t be afraid to ask for an “out” in your contract. You might be surprised to find out how many reps are willing to put this simple clause into your agreement. It saves time, money and haggling should you find yourself in a position where you are not getting a healthy ROI.
Track Advertising ROI Religiously
Whenever possible, find some way to track your advertising. Coupons are the simplest way. Similarly, including promotional codes in your advertising or copy such as, “Mention this ad and get 10% off of your purchase of $100 or more” can be an effective way to track the return on your advertising dollars. Asking customers where they heard about you is an adequate, though least scientific of all methods, as many people cannot precisely recall where they saw your ad.
Once you gather this information, find some way to keep a record of the results. If you use a Point of Sale system, you can devise codes to put in the “promo” field. You can then regularly run a report that lists all of the codes you entered. Or for a “low-tech” method, you can keep a simple tally on a sheet of paper. List each ad and then keep track of each customer, which ad they saw and how much they spent. You are then able to analyze whether the money you spent on, for example, television ads is bringing people into your store and whether their purchases are making enough to warrant continuing that form of advertising. It may appear as though you are getting more customers in with that commercial, but until you see how much they are spending, it may not be clear as to whether that money is being well spent.
Never Stop Watching the Bottom Line
Check your profits and losses daily, weekly, monthly and yearly! If you find that your daily losses are outweighing your profits, you may be able to make immediate changes to help that bottom line. You can begin by cutting out items that might not be imperative, like having your windows professionally washed every month. Many new businesses find themselves in the red for the first year or two, but consistently having business losses dwarfing your profits might be a clue to re-evaluate whether your customers are really interested in what you have to offer or if you might need to shift your product offering.
We are in business to service our customers, but we are also in business to make money. Keep close tabs on the financials of your business and it can help you keep your business healthy!
