So, you've chosen a niche that you think will be a winner and now you've gotten to the stage where you need to come up with the products.
The easiest thing in the world to get is a supplier if you can buy in bulk. That's what all manufacturers and distributors are set up for, after all. If you've got a ton of money, a very high tolerance for risk and a don't mind being tied to your online business because you will have to pack and ship every order as it comes in or lose some profits by paying a fulfillment center to do that for you, you're all set. Just pick up the phone, call the brand you want, tell them you have a bunch of money to spend with them and you'll have no problems!
We prefer to make things easier on not only our wallets but our own peace of mind. That's why almost all of the online stores that we set up dropship products.
What Is Dropshipping?
Dropshipping is simply setting up an arrangement with a supplier where they pack and ship products directly to your customers while still giving you wholesale or near-wholesale pricing.
This is the ideal scenario for an eCommerce business. You don't have to fork out a bunch of money for inventory and hope that it all sells and you don't have to waste a bunch of time packing and shipping things.
It's not only a no-risk scenario because you don't have to worry about things not selling, but it allows you to create a much more diverse catalog of products because you don't have to pay for them in advance. An order comes in with payment from a customer at your retail price, you send the order to your supplier, buying it at a wholesale price, and you keep the difference as your profit!
Sounds great, right?
Well, if only it were that easy and every brand dropshipped or allowed anyone and everyone to do it. Although it is much easier to find dropship suppliers today than it was a decade ago, it's still, without a doubt, the hardest part of building an online store.
Everything else in the process of eCommerce is something that you have close to absolute control over. Setting up an agreement with a supplier is something that totally depends on another person saying "yes". Fortunately, there are things that you can do to make your chances of landing a dropship supplier much better ...
Have All Your Pieces In Place
Before you even think about contacting a potential dropship supplier, there are definitely a few vital pieces you need to have in place in order to be taken seriously.
All depending on your level of experience and "salesmanship", all of the following may or may not be necessary:
- Register a domain name (pretty much required)
- Set up a DBA and/or business entity (generally recommended)
- Register your business, get an EIN and obtain a seller's permit/sales tax ID (required)
- Create a "dummy" site (optional, but it can be a big help)
- Set up and display a toll free number on your "dummy" site (optional)
- Create a very basic corporate site for your main business entity (optional)
I'll briefly cover each of the above ...
1. Register a Domain Name
You're going to be calling potential suppliers, telling them about your website (or the website you are about to launch), so it only makes sense that you would already have a domain name. The forms that you usually have to fill out in order to obtain a supplier agreement almost always ask what your website name is.
We always recommend getting a .com name because the average person remembers a website as being ".com" even if it isn't a ".com" and you certainly don't want your customers going to your competition's site because they remembered .com and not .net (or some other TLD).
You can check this article out for pointers about choosing a good name.
2. Set up a DBA/Business Entity
You'll have very little success getting supplier agreements if you contact them as "Joe Blow - just some dude setting up a website". They'll be much more inclined to set up an agreement with "John Smith - Director of Sales & Marketing for Iconix Online Development Group".
In most states, it is a legal requirement to set up a DBA (Doing Business As) if you are going to be representing your business as anything but your own legal name. It only costs $20-$30 to set up in most states and besides, when you get to the next item on the list, you're going to want all of the legal documents in your business name, not your personal name.
Most states allow you to register online, so just do a search with your state name and "register DBA" and you'll either find their online registration page or other information about setting up a DBA if you cannot file for one online.
We highly recommend that you choose a very generic business name at this stage. That's because you'll probably own several online stores over time and you need your business name to make sense when contacting a wide variety of suppliers. It would raise a few eyebrows if you say your company name is "Everything Babies" but you are contacting a supplier for your new samurai swords website. On the other hand, saying that you are in charge of setting up suppliers for a website owned by "Allied Commerce Solutions" would make sense for pretty much any website name.
Later, after you have a supplier or two in place for a specific website, you'll need to set up a DBA for that individual website, but you can use the EIN and sales tax certificate of the main generic company for every website.
3. Register Your Business & Set Up Other Permits
Every supplier form will ask you for your EIN (Employer Identification Number), which is something the federal government requires every business with employees to have so that they can report employee income tax withholding information and other federal taxes. Even if you are the only "employee", it is an extremely good idea to just go ahead and get an EIN (they are free). Yes, you can fill in the EIN blank on a supplier form with just your social security number but you'll look like a much bigger operation if you have an EIN and will be taken more seriously. Fill out this online form to quickly get that out of the way.
Along the same lines, unless you are dealing with a Chinese supplier, you absolutely MUST HAVE a sales tax certificate. You'll never get an account with an American supplier without one!
Most states (but not all) require you to formally register your business (it's a revenue source for them) , so you'll need to do that next. You can also obtain your seller's permit (also called a tax ID, reseller's certificate and several other things, depending on the state) at the same time. This page contains information about registering a business with your state including links to individual states' pages.
We recommend actually calling your state's county clerk's office, though. If you explain that you are an online-only business - especially if you are working from home - and that there will be no customers entering your premises, you may not have to formally register your business (you will always need to get a seller's permit/sales tax ID, though, unless you live in one of only 5 states that have no sales tax). Also, all depending on the products you sell, there may be additional licenses or permits that your state requires.
4. Create a Dummy Site
This optional step can sometimes be the difference between whether you get a supplier or not - especially in some of the more non-traditional types of product niches or with particularly well-known brands.
Put yourself in the shoes of an hourly or low salary employee who likely gets dozens of calls per week from people looking to set up dropshipping businesses. Most of them will tell you that only 10% of the accounts they set up are ever heard from again, so they start to get a bit jaded, believing that you are just another person wasting their time.
Who is that person more likely to set up with an account - someone who already has a website or someone who just has a domain name and no website? I think the answer is obvious. Better, if you have no problem being a little bit deceptive, nobody is hurt if you imply that you are already are doing business with their competitor(s), selling their products.
Most shopping carts have the ability to turn products on or off so that site visitors can see them or not. We recommend setting up a handful of products from each place you plan to contact and hiding that supplier's products when you call them, making it look like you already are selling their competitors' products. If they set you up with an account, great, you already have some of their products hidden on your site and you can turn them on again after the call. If they say "no", you can turn their products back "on" and move onto your next potential supplier, doing the same thing.
We list this step as optional because some people already have an online store (or two or three) and you can often just show the supplier your other site(s), demonstrating that you know what you are doing. Still, it's not as good as looking like you are already making sales.
Granted, setting up a dummy site takes time but you can just copy and paste product images and descriptions you find on other sites at this stage; they'll never know that your dummy site exists. Later, when you get actual supplier accounts set up, you can change your text and images.
We recommend setting up your dummy site on Shopify for three reasons ... One, they have a 14 day free trial, so you might very well get a supplier before you ever have to start paying. Two, they are the only shopping cart platform that we know of that allows you to move your website onto the actual domain name you own while you are still on a trial account. Three, Shopify is a much easier platform for newbies to build websites on than other shopping cart solutions.
5. Show a Toll Free Phone Number on your Dummy Site
This is definitely an optional step and probably isn't necessary. That said, every little thing you can do to make a good impression helps and nothing says "established, reputable business" like a toll free number does!
If you already have a toll free number that you use for another website or business, you might as well slap it in a prominent place on your dummy site, though. It might be the very thing that helps tip the scales in your favor.
We use Phone.com for our toll free numbers. They are a lot less expensive than you might think!
6. Create a Corporate Site for your Main Business Identity
This is another step that is definitely optional but setting up a main "corporate" site helps with two things. First, it continues to create the impression that you are a bigger operation than you really are and second, it makes it possible to have an email address that is tied to that corporate domain name.
Again, this is all about perception. It looks far better to have an email address like email@example.com or firstname.lastname@example.org than it does to simply have a gmail address.
No need to go crazy here. You should be able to set up a corporate site in an hour or two:
Steps to Create a Simple Corporate Website
- Register a domain name (we recommend using NameCheap)
- Set up web hosting (we recommend using BigScoots)
- Install WordPress (BigScoots shows you how to do that here)
- Get a professional logo (we get ours from CrowdSpring)
- Choose your theme (learn more about themes here)
- Add your basic company details (mission statement on the home page, an About Us page and a Contact page should suffice)