Finding and Working With Suppliers
Before searching for suppliers, it's critical to know how to differentiate between legitimate wholesale suppliers and retail stores posing as wholesale suppliers. A true wholesaler buys directly from the manufacturer and will usually be able to offer you significantly better pricing.
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How to Spot Fake Dropshipping Wholesalers
Depending on where you're searching, you'll likely come across a large number of “fake” wholesalers. Unfortunately legitimate wholesalers are traditionally poor at marketing and tend to be harder to find. This results in the non-genuine wholesalers – usually just middle men – appearing more frequently in your searches, so you'll want to be cautious.
The following tactics will help you discern whether a wholesale supplier is legitimate:
They Want Ongoing Fees – Real wholesalers don't charge their customers a monthly fee for the privilege of doing business and ordering from them. If a supplier asks for a monthly membership or service fee, it's likely not legitimate.
It's important to differentiate here between suppliers and supplier directories. Supplier directories (which we'll discuss shortly) are directories of wholesale suppliers organized by product types or market and screened to ensure the suppliers are legitimate. Most directories will charge a fee – either one time or ongoing – so you shouldn't take this as a sign the directory itself is illegitimate.
They Sell to the Public – To get genuine wholesale pricing you'll need to apply for a wholesale account, prove you're a legitimate business and be approved before placing your first order. Any wholesale supplier that offers products to the general public at “wholesale prices” is just a retailer offering items at inflated prices.
But here are some legitimate dropshipping fees you’ll likely encounter:
Per-Order Fees – Many dropshippers will charge a per-order drop shipping fee that can range from $2 to $5 or more, depending on the size and complexity of the items being shipped. This is standard in the industry, as the costs of packing and shipping individual orders are much higher than shipping a bulk order.
Minimum Order Sizes – Some wholesalers will have a minimum initial order size, which is the lowest amount you have to purchase for your first order. They do this in order to filter out window-shopping merchants that will waste their time with questions and small orders but won't translate into meaningful business.
If you're dropshipping, this could cause some complications. For example, what do you do if a supplier has a $500 minimum order, but your average order size is around $100? You don't want to pre-order $500 of product just for the privilege of opening a dropshipping account.
In this situation, it's best to offer to pre-pay the supplier $500 to build a credit with them to apply against your drop shipping orders. This allows you to meet the supplier's minimum purchase requirement (as you're committing to buy at least $500 in product) without having to place a single large order without any corresponding customer orders.
Finding Wholesale Suppliers
Now that you can spot a fraud from the real deal, it's time to start searching for suppliers! You can use a number of different strategies, some more effective than others. The methods below are listed in order of effectiveness and preference, with our favorite methods listed first:
Contact the Manufacturer
This is our favorite way to easily locate legitimate wholesale suppliers. If you know the product(s) you want to sell, call the manufacturer and ask for a list of its wholesale distributors. You can then contact these wholesalers to see if they dropship and inquire about setting up an account.
Since most wholesalers carry products from a variety of manufacturers, this strategy will allow you to quickly source a selection of products within the niche you're exploring. After making a couple of calls to the leading manufacturers in a niche, you'll quickly be able to identify the leading wholesalers in that market.
Search Using Google
Using Google to find high-quality suppliers may seem obvious, but there are a few rules to keep in mind:
- You Have to Search Extensively – Wholesalers are terrible at marketing and promotion, and they're definitely not going to top the search results for “wholesale suppliers for product X.” This means you'll likely have to dig through LOTS of search results – possibly hundreds – to find the wholesaler's website listed way down at #65.
- Don't Judge by the Website – Wholesalers are also notorious for having poorly designed '90s-style websites. So while a quality site may indicate a good supplier in some cases, many legitimate wholesalers have cringe-worthy homepages. Don't let the poor design scare you off.
- Use Lots of Modifiers – Wholesalers aren't doing extensive SEO to ensure you find their websites, so you might need to try various search queries. Don't stop at just “[product] wholesaler.” Try using modifiers such as “distributor,” “reseller,” “bulk,” “warehouse” and “supplier.”
Order From the Competition
If you're having a hard time locating a supplier, you can always use the old order-from-the-competition trick. Here's how it works: Find a competitor you think is dropshipping and place a small order with that company. When you receive the package, Google the return address to find out who the original shipper was. In some cases, it will be a supplier you can contact.
This is a tactic we've heard discussed by others but haven't used ourselves. And if you haven't been able to find a supplier using the other techniques discussed above, there might be a good reason (i.e., the market is too small, there's not enough demand to justify a supplier, etc.). So keep this technique in mind, but don't rely too heavily on it.
Attend a Trade Show
A trade show allows you to connect with all the major manufacturers and wholesalers in a niche. It's a great way to make contacts and research your products and suppliers all in one spot. This only works if you've already selected your niche and/or product, and it isn't feasible for everyone. But if you have the time and money to attend, it's a great way to get to know the manufactures and suppliers in a market.
One of the most common questions aspiring ecommerce entrepreneurs ask is: Should I pay for a supplier directory?
A supplier directory is a database of suppliers that's organized by market, niche or product. Many directories employ some sort of screening process to ensure the suppliers listed are genuine wholesalers. Most are run by for-profit companies who charge a fee for access to their directory.
While membership directories can be helpful, especially for brainstorming ideas, they are by no means necessary. If you already know the product or niche you want to sell, you should be able to find the major suppliers in your market with a bit of digging and the techniques discussed above. Plus, once you start your business you likely won't need to revisit the directory unless you need to find suppliers for other products.
That said, supplier directories are a convenient way to quickly search for and/or browse a large number of suppliers in one place and are great for brainstorming ideas for products to sell or niches to enter. If you're short on time and are willing to spend the money, they can be a helpful tool.
There are a number of different supplier directories, and a comprehensive review of all of them is beyond the scope of this guide. Instead, we've highlighted some of the most well-known supplier directories online. Please note we are not endorsing any of these directories, we’re simply providing you with some options.
- Established 1999
- Thousands of wholesalers
- Over 10 million products
- Price: $299 for a lifetime membership
Worldwide Brands is one of the oldest and best-known supplier directories. It advertises that it only includes suppliers that meet a set of guidelines to ensure legitimate, quality wholesalers.
We've used the directory in the past to find legitimate wholesalers and to brainstorm niche ideas – and found it useful. Though the directory is missing some suppliers we've worked with, it does include a large collection of legitimate wholesalers. If you want lifetime access to a quality directory and are comfortable with a larger one-time payment, Worldwide Brands is a safe bet.
- Established 2005
- Over 8,000 suppliers
- Price: $67 per year
The SaleHoo supplier directory lists more than 8,000 bulk-purchase and dropshipping suppliers, and seems to cater heavily to merchants on eBay, and Amazon.
Although we've never used SaleHoo to source products, its $67 annual price is one of the most compelling values among supplier directories and includes a 60-day money-back guarantee. If you're comfortable paying an annual membership – or only need to use a directory temporarily - SaleHoo might be worth a look.
- Established 2002
- 165 suppliers
- Over 1.5 million products
- Price: $60 per month
Instead of simply listing suppliers, Doba's service integrates with dropshippers (hence why they only have 165 suppliers) allowing you to place orders with multiple warehouses using its centralized interface. Membership also includes a Push-to-Marketplace tool that automates the process of listing items on eBay.
Doba's centralized system offers more convenience then the other directories which is why we imagine the $60 / month fee is significantly higher than other prices. If you place a high value on convenience and can find the products you want among their suppliers, Doba's interface may be worth the cost.
However, if you can identify quality suppliers on your own and don't mind working with them directly, you'll be able to save around $700 / year. If there are only a few key suppliers in your niche – reducing the number of parties you have to coordinate with – this may be the way to go.
- Established 1996
- 1,400 suppliers
- 740,000 products
- Price: free
Unlike many other directories, there's no charge to search Wholesale Central for suppliers because it charges suppliers a fee to be listed and also displays ads on their site. They also claim to review and screen all suppliers to ensure they are legitimate and trustworthy.
It's difficult to argue with free, and there's no harm in browsing the listings at Wholesale Central, but you'll need to be a bit more discriminating. A number of the suppliers we found appeared to be retailers selling to the public at “wholesale” prices – not something a supplier would do when offering real wholesale pricing. So while we're sure there are genuine wholesale opportunities listed, you may want to be a little more thorough with your due diligence.
Before You Contact Suppliers
Alright, so you've found a number of solid suppliers and are ready to move forward – great! But before you start contacting companies, you'll want to have all your ducks in a row.
You Need to Be Legal – As we mentioned earlier, most legitimate wholesalers will require proof that you're a legal business before allowing you to apply for an account. Most wholesalers only reveal their pricing to approved customers, so you'll need to be legally incorporated before you'll get to see the kind of pricing you'll receive.
Bottom line? Make sure you're legally incorporated before contacting suppliers! If you're only looking to ask a few basic questions (“Do you drop ship?” “Do you carry brand X?”), you won't need to provide any documentation. But don't expect to launch without having your business properly set up. We'll talk more about setting up your business in Chapter 5.
Understand How You Appear – Wholesalers are constantly bombarded by people with “great business plans” who pepper them with questions, take up a lot time and then never order anything. So if you're launching a new business, be aware that many suppliers aren't going to go out of their way to help you get started.
Most will be happy to set you up with a dropshipping account if they offer it. But don't ask for discount pricing or spend hours tying up their sales representatives on the phone before you've made a single sale. It will quickly earn you a bad reputation and hurt your relationship with the supplier.
If you do need to make special requests (say, trying to convince a supplier to dropship when it normally doesn't), you need to build credibility. Be definitive about your business plans (“We ARE launching this site on January 20) instead of using flaky rhetoric (“I'm thinking about maybe launching a business sometime soon”). And be sure to communicate any professional successes you've had in the past – especially with sales and marketing – that will help you with your new venture.
You need to convince suppliers that the inconvenience of accommodating your special request(s) will pay off down the road when you become successful and start bringing them a ton of business.
Don't Be Afraid of the Phone – One of the biggest fears people have when it comes to suppliers is simply picking up the phone and making the call. For many, this is a paralyzing prospect. You might be able to send emails for some issues, but more often than not you'll need to pick up the phone to get the information you need.
The good news is that it's not as scary as you might think. Suppliers are accustomed to having people call them, including newbie entrepreneurs. You're likely to get someone who's friendly and more than happy to answer your questions. Here’s a tip that will help you, simply write out your questions ahead of time. It's amazing how much easier it is to make the call when you've got a list of pre-written questions to ask.
How to Find Good Suppliers
Like most things in life, suppliers are not all created equally. In the world of dropshipping – where the supplier is such a critical part of your fulfillment process – it's even more important to make sure you're working with top-notch players.
Great suppliers tend to have many of the following 6 attributes:
Expert Staff and Industry Focus
- – Top-notch suppliers have knowledgeable sales representatives who really know the industry and their product lines. Being able to call a representative with questions is invaluable, especially if you're launching a store in a niche you're not overly familiar with.
Dedicated Support Representatives
– Quality dropshippers should assign you an individual sales representative responsible for taking care of you and any issues you have. We've dealt with wholesalers that don't assign specific representatives and we hate it. Problems take a lot longer to resolve, and we usually have to nag people to take care of an issue. Having a single supplier contact who's responsible for solving your issues is really important.
Invested in Technology
– While there are plenty of good suppliers with outdated websites, a supplier that understands the benefits of – and invests heavily in – technology is usually a pleasure to work with. Features such as real-time inventory, a comprehensive online catalog, customizable data feeds and an online searchable order history are pure luxury for online merchants and can help you streamline your operations.
Can Take Orders via Email
– This may sound like a minor issue, but having to call every order in – or manually place it on the website – makes processing orders significantly more time-intensive.
– If you're in a large country like the United States, it's beneficial to use a centrally located dropshipper, as packages can reach more than 90% of the country within 2 to 3 business days. When a supplier is located on one of the coasts, it can take more than a week for orders to be shipped across the country. Centrally located suppliers allow you to consistently promise faster delivery times, potentially saving you money on shipping fees.
Organized and Efficient
– Some suppliers have competent staff and great systems that result in efficient and mostly error-free fulfillment. Others will botch every fourth order and make you want to tear your hair out. The trouble is, it's difficult to know how competent a supplier is without actually using it.
Although it won't give you a complete picture, placing a few small test orders can give you a great sense of how a supplier operates. You can see:
- How they handle the order process
- How quickly the items ship out
- How rapidly they follow up with tracking information and an invoice
- The quality of the pack job when the item arrives
Your Options on Paying Suppliers
The vast majority of suppliers will accept payment in one of two ways:
When you're starting out, most suppliers will require you to pay by credit card. Once you've established a thriving business, paying with credit cards is often still the best option. They're not only convenient (no need to write checks regularly), but you can rack up a LOT of rewards points/frequent flier miles. Because you're buying a product for a customer who has already paid for it on your website, you can rack up a high volume of purchases through your credit card without having to incur any actual out-of-pocket expenses.
The other common way to pay suppliers is with “net terms” on invoice. This simply means that you have a certain number of days to pay the supplier for the goods you've purchased. So if you're on “net 30” terms, you have 30 days from the date of purchase to pay your supplier – by check or bank draw – for the goods you bought.
Usually, a supplier will make you provide credit references before offering net payment terms because it's effectively lending you money. This is a common practice, so don't be alarmed if you have to provide some documentation when paying on net terms.