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Dropship Business Pushed To The Foreground

Apr 1, 2011

The Internet may have allowed a thousand ecommerce flowers to bloom, but wholesale dropshippers are the fertile soil from which many of those merchants have sprouted. By shipping products directly from the wholesaler to the end user customer, online retailers have an easy way to start retail businesses without having to buy and warehouse huge amounts of inventory. This has lowered the barrier to entry, and so the dropship industry has grown and grown. Moreover, with the latest technological advances, not to mention the changing buying patterns of online shoppers, the outlook for future growth is even more rosy.

Kole Imports, a large and well established general merchandise wholesaler, is moving beyond the state-of-the-art in dropshipping with a new offering that promises to change the way the industry does business. The dollar store behemoth has just moved into the dropship business in a big way, with the launch of a suite of software services on a new website. According to vice president of business development Jason Kole, the new product is revolutionary. "We've been working on this for eight months, and we've spent hundreds of thousands of dollars developing this program," he says. "This software platform is going to change the industry." What sets Kole Imports apart? First, a high level of accurate, timely product information on a vast array of skus. "Right now we have over 6,500 products, but we add new products and closeouts on a regular basis, and those products become part of our data feed, imported into our Excel and CSV files that are updated every night," says Kole. "Anyone can go to dropship.koleimports.com and download that feed. It includes our product name, long description, real quantity in our warehouse, UPC, weight, brand name, color, country of origin, length, width and height."

Accuracy is also key, especially when so many products are involved. "We have a 250,000-square-foot warehouse in Carson, CA, and our products have always been for wholesale sales. With dropship, it takes much more precision, and our data is cleaner than it has ever been in the history of the company. We're actually 99.7 percent accurate in filling dropship orders, which is an industry-leading standard," says Kole. In a break from the usual practice, Kole does not offer sales on a per-piece basis. The minimum order is an inner package, which could be as small as 12 pieces. "We're not shipping one piece at a time. There are no more fees, dropship surcharges, or shipping surcharges. The price on the data feed is the full, all inclusive price.

The shipping is added on top," says Kole. How does he think he can succeed at dropshipping without single item sales and charging absolutely no fees, whether one time, by the month, or by the package? "We think that as people get more savvy in Internet sales, they are beginning to search for products in small wholesale quantities online, where five years ago they would not do that," he explains. "For example, a Cub Scout leader that needs to buy 48 rain ponchos will now go on Google and search for a wholesale package. They don't want to go to a dollar store and pay $48 for 48 pieces. Now they can go on any of our dropship partners' websites and buy 48 pieces for maybe $35, which we have sold to them for $28."

Another revolutionary technology from Kole is coming online soon. Programmers will be able to hook into the Kole's system and place products on ecommerce sites that mesh with Kole systems in real time. "We're also about two months away from launching our API program," says Kole. "People will be able to customize their websites to be able to get our quantities on hand in real time, and then send us orders within seconds. We'll be able to receive an order, process it, and get it out within an hour." Buying in multiple quantities with zero fees, low wholesale pricing, huge numbers of items, and the ability to seamlessly integrate with a customers' own ecommerce site are the remarkable features that may change the way dropshippers do business. That means Kole Imports is an innovator to watch.

Sunrise Wholesale is a dropshipper's dropshipper. About 90 percent of the company's business comes from dropship customers, who are about evenly divided between eBay sellers and retailers with their own ecommerce websites. According to CEO and owner Coby Pfaff, although the company targeted many types of customers when it opened up over ten years ago, it soon became clear that there was a niche to be served in the dropship business. "Originally we started out marketing to everyone, from brick and mortar retail stores to fund-raisers," says Pfaff, "but what we found was that people were desperate for a dropshipper that would just dropship single units. We got online and found that there weren't many dropshippers offering that. We decided to specialize in it." Now the company motto, featured prominently on its website, is "We dropship, you profit!"

Offering a wide range of general merchandise, from decor to electronics, Sunrise requires no fee for access to its site. "We give a basic membership for free, which includes the dropshipping. There are no dropship charges, they just pay for the product and the shipping," says Pfaff. Sunrise Wholesale does provide a premium opportunity that offers access to steep discounts. "We also offer an optional gold membership that gets retailers an extra 25 percent off the standard wholesale price," he explains. "For someone selling on eBay who really needs a rock bottom price, the gold membership is the way to go. For someone who is just starting out and doesn't want to pay monthly fees, the basic membership is also a great option."

With so many eBay clients, Sunrise has come up with a special way to serve those clients' needs. Once a customer logs into the member area, "They can get access to our auction wizard. So if you want to sell on eBay, you just pick an item from the online catalog, make a few clicks, and it will post right onto your eBay account for you." That ease of use evolved from a deep appreciation of what customers need, a vision that has guided the decade-long development of the company's website. "We've nailed the ecommerce community's dropshipping needs after doing it for so long," says Pfaff. "We probably have the most useful features for retailers that are dropshipping, especially auction sellers. The auction wizard is an especially good value," he adds.

The company's shipping policy is also designed to be simple for retailers. "We just do flat rate shipping to make it easy," says Pfaff. "People don't have to know the zip code or the weight of the box or the items. Orders under $32 cost $7.95, no matter how many items or how far you're shipping it. If it is over $32, we just charge a flat 25 percent of their wholesale total. There's no minimum purchase." The company also provides all the info a seller could need through an XML feed, Excel files, an image website, and a downloads page.

Leveraging the power of several different gift basket companies through the facilities of a veteran dropshipper, "Best Gift Basket Dropshipper is a joint venture of four gift basket companies who are using the systems at National Gift to be more successful in their gift basket sales." That's according to Anthony Richardson, the owner of National Gift, who has been in the dropship business since 1994. "We forged a partnership that came together," he says. "They needed a professional organization to guide them on how to market their products. The goal was to offer another dropshipping option for retailers in the industry." He adds that a primary purpose of the site is to offer reasonable terms to wholesale clients. "For the most part, dropshippers in the gift basket business do not give good wholesale pricing in terms of profit margins," he says.

Richardson also wants to give retailers a chance to move away from the pay-per-month price model. "The other goal was to offer an alternative to monthly fee dropshipping agreements," he says. "We wanted to give customers more open-ended opportunities, with no real commitments in terms of dropshipping services." Best Gift Basket Dropshipper does that through several one-time fees that offer access to two price tiers, and are good for life. One option, tailored for newcomers, is a $49 flat fee that lets customers make purchases at 25 percent off the retail price. A better option, with a $200 fee, gives a base wholesale price of 35 percent off retail, and that price is even lower depending on volume. "An enhanced profit margin is based on their sales volume," says Richardson.

The system, launched in May 2010, is set up to help customers market the gift baskets easily. "For online retailers, we provide all the product descriptions and images," says Richardson. "Once they sign up as an authorized reseller, we give them access in the member area of our site." They can use that information on eBay or Amazon, or wherever they are selling. "They just log into the Best Gift Basket website under 'My account,' add the products to the shopping cart, tell us where to ship it, and every package goes out with a custom packing slip. They can upload their company logo and info on the packing slip, so the product appears to have left their facility instead of ours. We're very much invisible to the consumer," he explains. Two other features make the site even more friendly to customers. "Right now, we've got a 20 percent off coupon that can be used twice. For us, that's a lead generator," says Richardson. Once retailers have joined, they will find a useful array of information online. "In the members area, there are all your previous purchases, your customer database, your customers' email addresses, and all your purchase and shipping history is saved."

A veteran of the dropship industry, Safety Technology has been shipping safety, security and personal protection products directly to its customers' customers for well over a decade. That experience has given the company an edge that it is glad to share with retailers. "A lot of buyers are never quite sure what they should start with," says president and owner Michael Gravette. "So we created some startup packages with our more popular products and some additional discounts, just to make it easier for them. We would get inquiries from buyers who want to sell on the Internet, but don't know how. So we started creating turnkey websites for them, teaching them how to market on the Internet, and that's probably the biggest thing we did to increase sales of our products." Now about 75 percent of the company's sales come from dropshipments.

However, even established merchants need marketing help, and Safety Technology's longevity and expertise pays off for them, too. "There are different ways of getting traffic now than there were when I first started in 1996," recalls Gravette. "Competition is greater now. If you want to sell on the Internet and it's something worth selling, then you're going to find many people selling it. Retailers have to be able to deal with the competition and understand how consumers find them." That requires a deeper understanding of the ins and outs of search engine optimization. "Merchants type in a generic phrase like 'stun guns,' and they'll say, 'There's no way I'll be able to get a high search engine result.' What they don't understand is that there are thousands of keyword phrases that people actually type into search engines, and that's how a merchant can be found," explains Gravette. "It's easy to get out there and dominate for a longer tail keyword phrase that is much more likely a shopper is actually typing in." Gravette agrees that price comparison sites are useful. "They should also do Google Places," he says.

In addition to website construction and marketing help, Safety Technology stands out by charging almost no fees at all. "A lot of dropshippers charge a membership fee. Our distributors who sell on the Internet want to include all of our products on our website, but they can't inventory everything. We have to dropship for them, and I don't want to penalize them by adding additional charges," says Gravette. "We charge published UPS and USPS rates, and we add $1 per order, and that dollar is basically to take care of packing materials and boxes," he adds. The company also offers a wholesale online ordering system, downloadable images, and product information spreadsheets. There is also a unique physical media option. As Gravette describes it, "We have an image and text flash drive with all the product descriptions and images, including the high resolution images. They can order that for $20. A lot of people doing fliers want the high-res images. It makes it easy for someone who is building their own website to have the images all in one place."

Plum Island Silver, a sterling silver supplier, has offered dropship services for more than ten years. "We've been dropshipping for a long time, and it's become a significant part of our business, absolutely," says manager Guy Andrews. "Probably 20 percent of our business is in dropshipping for people who sell on eBay or have their own websites, even people who do home parties." The company specializes in serving customers who need a smaller, less formal mode of operation. "We do cater to people who are starting home based businesses. We don't have an official application form, but in order to get started, we do require a resale license," Andrews explains. "We offer affiliate dropship accounts so that retailers can offer their customers a website address for shopping that has their own domain name and store name. It functions as a dropship account and it is hands-off, so they are doing their own marketing. We set it all up for the retailer, and all they have to do is give us the URL they are going to use. The fee for this is $200 per year."

Plum Island's other dropship fees are very modest. "There's no minimum order or sign-up fees. We just have a small dropship fee of $2 per package for an unlimited number of items," says Andrews. "People who do want to use our image and database have to have an image license, which costs $10 every six months." Plum Island Silver understands that in the current economic climate it has to offer the lowest prices possible. "We definitely offer discounts up to 50 percent off," says Andrews. "We have to be able to give our retailers that flexibility in pricing, because it is pretty competitive out there." The company uses a unique mechanism to offer dropshippers the same discount that it offers traditional retailers who benefit from placing large orders. Even though a dropshipper may be buying just a single piece in any given transaction, the customer can still qualify for volume discounts. "Normally wholesale customers qualify for a discount with a large purchase. Obviously dropshippers aren't doing that," explains Andrews. "We try to be pretty flexible in getting high discounts for dropshippers, even starting out. All they have to do is put an equivalent deposit on the account to get a 50 percent discount. They can use that credit for future dropship orders, so they are always going to get the highest discount levels."

For more information:
Kole Imports
24600 Main St.
Carson, CA
Toll Free: 800.874.7766 ext. 167
Fax: 310-834-0005
Website: dropship.koleimports.com/

Sunrise Wholesale
PO Box 691300
Los Angeles, CA 90069
Toll Free: 877-250-5045
Fax: 800-858-4986
Website: wholesaleprofits.com

Best Gift Basket Dropshipper
9975 Wadsworth Pkwy, Unit K-2
Westminster, CO 80021
Toll Free: 877-399-0284
Website: bestgiftbasketdropshipper.com

Safety Technology
1867 Caravan Trail #105
Jacksonville, FL 32216
Tel.: 904-720-2188
Toll Free: 800-477-1739
Fax: 904-720-0651
Website: safetytechnology.com

Plum Island Silver
PO Box 60
West Newbury, MA 01985
Tel.: 978-499-8203
Toll Free: 800-543-7177
Fax: 978-499-8208
Website: plumislandsilver.com

Topic: Product Trends

Related Articles: dropshipping  dropshippers 

Article ID: 1440

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