Drop shipping is a great way to do business online, as long as you’re aware of a few things: you’ll pay a bit more for the products, you’ll need to find reliable drop shipping partners with whom to work and perhaps most importantly, you’ll have to qualify to do business with them.
There are some key parameters to meet if you’re going to be taken seriously when you come calling. To that end, here’s what you’ll need to get a drop shipper to work with you.
1. An Awareness of the Tax Issues
You must be a registered tax-paying business entity for a drop shipper to take you on as a retailer. This means you’ll need an Employer Identification Number (EIN) on file with the IRS to enable it to ensure you pay taxes on goods sold. You’ll also need a resale certificate for your state to buy at wholesale prices. Keep in mind, anything you buy with your resale certificate must be purchased for sale. Using the certificate to acquire goods for personal consumption is verboten. And yes, the certificate also helps the state keep track of taxes you’ll owe.
2.The Ability to Pay up Front—at First
When you start out with a drop shipper, in most instances you’ll be required to pay up front. When you establish a good track record, they’ll generally relax this requirement and offer terms such as Net 15 or Net 30. This means you’ll get 15 to 30 days to pay for the item after it’s shipped. One payment strategy fledgling retailers employ is a credit card with rewards points. This earns them something on the back end from the credit card company, which can be particularly lucrative if you sell furniture online or other big-ticket items.
3. A Convincing Marketing Plan
You’d think companies looking for retailers to move their merchandise would eagerly take on new retailers, but they don’t. You must demonstrate you’re serious to get a deal with a good one. They’ll typically want to know how their products will be featured on your site, how you will bring value to them and the people who buy the merchandise, as well as how you’ll market your site to generate traffic and convert it into sales. Further, many drop shippers will want to see a lot of traffic already in place.
4.An Existing Storefront
This means you’ll build your site out before you call the suppliers with whom you’re most interested in doing business. Doing so will let them see how their products will be represented. To really pique their interest, set up pages featuring their products with favorable reviews posted of them. The idea is to demonstrate you’ll be a capable retail partner.
5. A Firm Launch Date
To convince suppliers of the earnestness of your endeavor, have a firm launch date you can quote—and stick to. It says you’ve done your homework, you know what you need to have in place to support the business and you have a timeline to which you’re adhering. This edifies your credibility. Also know it will be up to you to keep the process moving along. This means you’ll make the initial contact; you’ll set follow-up meetings and when all is said and done, you’ll capably take on the responsibility of generating sales.
As you can see, there is considerable groundwork to be laid before you can convince good suppliers you’re worthy of their attention. Knowing in advance what you’ll need to get a drop shipper to work with you and having it in place before contacting them is a solid first step toward your success.