Basic Help Understanding Dropshipping Please!

[James[D]]

Hi,

Im looking into the prospect of dropshipping, but am a bit unsure about where the profit and commission come in. I dont really want to have ask the supplier too many questions as it may look unprofessional.

On the suppliers website it outlines the process; "put our products on your website -> buyer pays you full retail price -> then you pay the us the wholesale price". Which makes sense. However later it goes on to say "Drop shipping works on a commission of 20% revenue based on selling at our RRP".

So when exactly does this commission come in to play? Is it 20% of the wholesale or RRP? When would they typically pay us?

Many Thanks.

 

[14A]

Hi,

You advertise a product at its RRP (Recommended Retail Price), a customer buys the items, pays you, then you order the item from the dropshipper and pay them the trader price - The difference between the trade and RRP price is your money.

Typically the dropshipper then sends the item direct to your customer (Bypassing you) in unmarked packaging so the customer doesnt know the dropshippers involvement.

Hope that helps.

 

[14A]

Example:

Customer pays you £1 for their item, of that £1 you must buy the item for 50p - Giving you 50p profit.

Only thing I'd say though is, how often do you pay RRP for something? I tend to shop around and get a deal. Just check you can charge what you want rather than RRP.

 

[James[D]]

Example: Customer pays you £1 for their item, of that £1 you must buy the item for 50p - Giving you 50p profit.

Thanks for the quick reply. I understand the example above, but am I bit confused when they say about "20% commission" and where it fits in?

Is this an amount they pay in addition to the difference between retail and wholesale price. Or are they saying this is typically the difference between wholesale and retail price which you can expect to make? :|

 

[arcon5]

Op, I think where it says 20% commission it means thats the difference usually between the wholesale price and the RRP price. E.g. if the RRP is £1 you will pay them 80p - so you commission is 20p i.e 20%

 

[14A]

Op, I think where it says 20% commission it means thats the difference usually between the wholesale price and the RRP price. E.g. if the RRP is £1 you will pay them 80p - so you commission is 20p i.e 20%

Yes, I would agree with this.

 

[Curtis]

I tried dropshipping for about a year and it can be pretty good if you have a good supplier. I had excellent contacts in clothing and electronics accessories - feel free to message me if this is what you're looking at getting involved with.

The margins that they're putting up have to be checked out. They only need to find one obscure seller and say you can can make XX% when a quick search on eBay you might find the product cheaper than you can buy it from the dropshipper.

Also, don't start selling without testing them out. I always bought from them and had them ship to my address. I had to pay for postage to the buyer as well as from the dropshipper but it's one transaction.

Another thing to be aware of if you are selling somewhere like eBay is their legal implementations. I was selling iPod Nano 'Style' MP3 players and I paid £20 and sold for £40 but after two weeks they started banning listings on these - though there seem to be ways round it looking at others who did this - mine were getting banned and there's weren't.

Good luck, but make sure you're supplier is reliable

 

[James[D]]

Ok thanks for clarifying that