Entering a drop-shipping agreement

[bottlemaster]

I have been approached by an online retailer that wishes to sell my product. They have suggested a drop-ship arrangement, whereby they take orders through their website, and simply forward them on to me to fulfill. That way they don't have to keep any stock.

I've never entered into an agreement like this, and I'm guessing the Devil is in the detail. I've tried to ask as many questions as I can think of to cover all angles. Some of the detail is as follows:

• They will cover all shipping charges - I will simply provide them with my receipts
• I will be covered under their product liability insurance (I don't have this myself)
• They will handle all customer queries and complaints, as they are the point of sale
• They want me to send the product out in plain, unbranded packaging with no marketing information to direct people to my website
• I will invoice them at the end of each month for all sales during that period
• They will have full editorial control over how the product is advertised on their website

I asked whether we needed to put together a formal agreement, but apparently the emails we have exchanged will suffice. (?)

Is there anything else I should be considering or asking about before going ahead with this?

Any advice would be very much appreciated.

 

[quikshop]

"I will invoice them at the end of each month for all sales during that period"

You MUST get payment up front and in full, otherwise you are exposing your business to potential losses and fraud. Perhaps after this reseller has proven themselves trustworthy over a period of months you might want to consider a credit account, but until then insist on full payment up front.

What some dropshippers do is give resellers a login to their own website. When a reseller needs something dropshipping, they login, purchase the item in question and provide the shipping address during that process.

The dropshipper is obviously paying less than the retail price, but through this type of mechanism you have full payment up front.

Another note on that, do not accept PayPal for dropship orders. PayPal payments are too easily disputed with disputes weighed heavily in favour of the customer, or in this case the reseller.

We run a dropshipping business but go a couple of steps further than most dropshippers in terms of protecting ourselves. Our resellers use fully automated 'white labelled' shops, so we get reseller payments and orders through directly, resellers are simply marketing their shops and earning commission with no customer issues to deal with.

 

[TheGuru2010]

I would advise getting your own insurance to cover the product side of things, im pretty sure that there insurer will try and collect the damages from you if a claim was ever brought about.

 

[Page]

Think about how quickly they want it out - does this fit in with you - daily when selling one a week might be a royal pain

Time the entire process for a single order and getting it to the post office or out on a courier - also the invoicing etc
You might be surprised how long all this takes - does it still make sense

20 a day might - but 1 a day might not

 

[philbee]

Big oaks from little acorns. One sale or not, it's still a sale, and how do you know if this will not blossom in to more regular sales. Negative attitudes do not belong in business.