At first, I thought I hit a goldmine. I found a business that sold wholesale, and had just started dropshipping their products. Now, keep in mind I had never dropshipped anything until this point, and do not just dropship through just any ole website today either.
Dropshipping basics: You sell the product, you place the order with someone else, they ship it to the buyer with your return address.
There was a small monthly fee, and I setup my account and started listing the products on eBay.
Initial response was great. My inventory doubled, and I started having an extra few hundred sales a month with a 30% profit. What I didn't realize is that if I found this business so easily, anyone could. They didn't require much information to setup a dropshipping account, no more than a any website would, which meant any Tom, Dick, or Harry could compete with me. The ride was short lived, since at least 10 other sellers found them in just a couple months. Now I had to compete with 10 others, and my sales of a few hundred were divided by 10. Then came the addition of this site to the "Wholesale and Dropship Lists" on eBay. I started selling just 10-20 or so a month.
The company did nothing wrong by dropshipping for so many competing sellers. They did it to make a profit, and I would have done the same thing in their shoes. This was simply a middleman's middleman seller. When I found their supplier, I was shocked that their dropship prices were actually 50% higher than I paid, then I found their supplier's supplier, and was floored. What I was paying $8 for originally cost about $2. Sure, I expected to pay a little bit for them carrying the inventory, but I would have never started if I had just looked a little deeper from the beginning. I could have been buying from the original supplier and saved thousands (and made thousands) but I just saw the "perfect setup" and ran with it.
Here are some tips for finding a great supplier:
1. When you find one you like, search Google Shopping/Base for that product. If you see more than 5 sellers with over a 10% markup over their prices, look for another supplier.
2. If you find it in a catalog of dropshippers like Wholesale Central, see tip 1, and monitor it weekly.
3. If you find one that passes the first two, do a search for a product name plus the words "wholesale" and "minimum order." You may have to search through a couple dozen pages, but you should be able to find out if they buy from the manufacturer or from another middleman pretty easily.
4. Last, never tell anyone who you buy from! Someone is probably already looking into your business to find out where you get your stuff, so don't help them out! You need as little competition as possible from the beginning to build your customer base. Once you are established, you can handle others getting into the market, but no startup can survive immediate competition.
No supplier is perfect. I know several online sellers who use Amazon to dropship 100% of what they sell (They sell it, order it at Amazon to deliver to their customer) and apparently they do quite well since one in particular works around the clock on 10 different sites, with a 6-figure income. How he does it when every box has Amazon stamped all over the shipment is beyond me. I also know several others who are the only dropshipper for their supplier and sell more from the supplier than the supplier sells themselves. And I know many, many who use the same supplier as hundreds of others use, and fight down to pennies of profit on each sale.
I will be writing more on dropshipping soon!