Profit on Dropshipped goods

Discussion in 'Ecommerce Forum' started by Bushman, Aug 9, 2019.

  1. Bushman

    Bushman UKBF Regular Free Member

    119 27
    We are manufacturers and are considering offering retailers a dropshipping service for our goods, and was wondering what sort of profit resellers expect to make when selling drop shipped goods. The goods would be low value usually under £20 at retail.

    TIA
     
    Posted: Aug 9, 2019 By: Bushman Member since: Nov 17, 2015
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    18,277 2,101
    You would usually sell them to dropshipper at higher price than wholesale and charge a shipping fee that covers time, packaging and postage costs. For instance £3.99 for a parcel, when in reality its costing you £2 odd for the postage side alone.

    A quid or two profit is OK, some want more and set their selling price appropriately.
    For dropshipping its about volume of stock for sale to get a small percentage sold.

    More importantly, have you worked out how to let dropshippers know the stock level?
     
    Posted: Aug 9, 2019 By: Mr D Member since: Feb 12, 2017
    #2
  3. Bushman

    Bushman UKBF Regular Free Member

    119 27
    Thanks for the response, we would show stock levels on our website.
     
    Posted: Aug 9, 2019 By: Bushman Member since: Nov 17, 2015
    #3
  4. thetiger2015

    thetiger2015 UKBF Regular Free Member

    195 50
    You'll need to be more detailed than that. Most dropshipper websites now integrate automatically using a CSV/API that allows them to have real time access to your stock levels. Just having them on your website isn't much use, unless they check your website every day and visit every product page every day to check you still have items in stock.

    Dropshipper margins are much smaller than wholesale but they leave the logistics to you, hence the ability to have a narrower margin. Where a B&M style retailer might be able to achieve a 60% gross margin, a dropshipper may only see a 30% gross margin or even less if they're competing against every Tom, Bob and Lynda on eBay etc.
     
    Posted: Aug 9, 2019 By: thetiger2015 Member since: Aug 29, 2015
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

    18,277 2,101
    Dropshipper may have 100k products listed on a site (bigger ones are millions of products) and want to know when you are out of stock.
    Whether they can scrape that info from your website or access some file somewhere they aren't unless very small going to be able to check your website daily.

    Have heard of big dropshippers with automatics set up so a computer runs in a room and generates an income without human interaction needed.
     
    Posted: Aug 9, 2019 By: Mr D Member since: Feb 12, 2017
    #5
  6. fisicx

    fisicx It's Major Clanger! Staff Member

    31,457 9,234
    As already suggested, the whole thing needs to be automated. You update the sellers website with stock levels, tracking and delivery info.
     
    Posted: Aug 9, 2019 By: fisicx Member since: Sep 12, 2006
    #6
  7. crackerjackcommerce

    crackerjackcommerce UKBF Contributor Free Member

    81 6
    Hi, for us we would like auto updated stock level feed somewhere we could download it from or ftp.

    We like to earn at least a 20% margin once all cost of sale fee's have been taken into consideration. If it was a higher volume with less customer service required i.e. sell more and little after sales support then we would be prepared to work on a lower margin.

    Good point, this would be our main concern.
     
    Posted: Aug 12, 2019 By: crackerjackcommerce Member since: Aug 1, 2019
    #7
  8. light after the dark

    light after the dark UKBF Newcomer Free Member

    4 0
    Hey Bushman,

    you'll definitely need to automate the stocks in line with the supplier but many platforms that are used by dropshippers have apps that connect your website to the suppliers and update as per the suppliers stock. aliexpress, oberlo, shopify can all be linked to talk to one another regarding orders and stock levels, even pricing can be auto updated. I'm sure there are alternative programs that do the same too.
     
    Posted: Sep 26, 2019 By: light after the dark Member since: Sep 26, 2019
    #8
  9. sqwibble

    sqwibble UKBF Newcomer Free Member

    1 0
    RE: Stock Levels.

    Some good points made already. So ignoring the customer service nightmare trying to explain to customers why the products they purchased are no longer in stock, but still available to buy online.

    Unfortunately, customers expect to be refunded the entire amount they pay including any processing fees which PayPal or Credit Cards charge along with the time the company have to put into customer service and managing the situation.

    If enough customers request a refund as a result, rather than wait for their items to come back into stock. This is going to get quite costly in the long term... assuming customers haven't taken their business elsewhere already as a result of the poor reviews!

    Something else to consider, your dropshippers/resellers will either need to have traffic looking to buy those items or similar or need to create demand for them on their own websites from scratch.

    Whether that be from "free" traffic sources such as improving their own search rankings and improving referral traffic from other sources such as social media. Or paid traffic which will eat into their profit margins and potentially make selling your items unfeasible for them if you get too greedy!

    So it really depends on the CPC of your items, if they're no more than £20 each retail, I can't imagine anybody is willing to pay more than a couple of pounds a click at most. But if it's a highly competitive market, there may be bigger retailers bidding on the same keywords knowing they can upsell to customers, products with much higher profit margins to offset the losses they incur from customers who are only interested in the £20 product only.
     
    Posted: Sep 29, 2019 By: sqwibble Member since: Sep 29, 2019
    #9