How to find the best dropshipping suppliers in 2021?

Dropshipping suppliers are those businesses or individuals that are willing to send your customers the products they purchased and paid to you. For each product sold and shipped they will bill you.

One thing to keep in mind – these suppliers need to have a cost that makes your business operate at a profit. Dropshipping is hard as many people are doing it today so you need to understand how it works so you can find your edge.

How does dropshipping work?

So how do you find the best dropshipping suppliers? Well say you’ve started your ecommerce business and you will be selling plain t-shirts. You know you can buy those t-shirts for $20 at the closest store. If you do buy t-shirts in that store, you will be buying them at end consumer value. You are the end consumer. Because you cannot price them at a higher level you are basically stuck with them – hence the “end” in end consumer.

What you need to do is go find yourself some dropshipping suppliers that are willing to sell you those t-shirts for less than $20. Why would they do that, you say?

Some companies just work this way. They manufacture the products or sell them in bulk and let other companies sell directly to the end consumer. They then send the products to the customer (like what Dropshipping Supplier A does below)

Using dropshipping suppliers to fulfil orders

( This example combines dropshipping suppliers with your own operations )

How do I negotiate with dropshipping suppliers?

When dealing with dropshipping suppliers in 2021 you usually work together towards a commitment before you start doing business together. This commitment can come in many forms but usually it’s one of the following:

  1. commit to a target and pricing: maybe you are not willing to buy 50 plain t-shirts from your dropshipping suppliers, because you don’t know what your potential customers are willing to buy. You are, however, confident they are willing to buy something. So you commit to a monthly, quarterly or yearly sales agreement. The dropship supplier will then give you a startup discount for purchased products or some good terms, like white-labeling the shipping packages . This discount can increase as you sell more and more merchandise. You can list the products on your online store, stock as little inventory as possible and ship and restock when orders arrive.
  2. buy products in bulk: say you are willing to buy 50 of those plain t-shirts. You can negotiate your purchase price down to $15. Willing to buy another 50? Maybe the price can go even lower, to $10 and so on. The thing you have to remember here is that although bulk buying can be a potentially great deal in terms of price discounts, you also have to sell those products. If you get stuck with $500 worth of t-shirts that you are not able to sell, you have just wasted your money. It doesn’t matter how much you saved purchasing said products. What matters is making a profit and making your customers happy.

Once you’ve made a deal with one or more suppliers you will be selling your products right on your store. When the orders start pouring in (or maybe just trickle in the beginning) you have to make sure customers receive the products they’ve paid for. This part is called “fulfillment” as in fulfilling your promise to send the product to the customer in exchange for the payment you have received.

What is fulfilment in dropshipping ecommerce?

Fulfillment means any task done inside or outside the company that assures the right products are shipped to the customer. Usually this means:

  1. order management: checking order information (customer info, address, number of products etc) and forwarding order details to the right fulfilment center to be completed. If you are a startup this may mean you will be checking the customer details, maybe confirming the order and then planning on where to get the products from.
  2. pick and pack: this is the usual term for picking products from the warehouse shelf and packing them to make sure they are ready for shipment. With dropshipping suppliers, they are the ones doing this.
  3. shipping the products: once products are picked, packed and ready to go, they have to actually leave your supplier (if you’re doing dropshipping) or your warehouse. This happens through company specialized in shipping (such as FedEx or UPS) to do so.

How to work with dropshipping suppliers to send ecommerce orders?

Fulfillment can be done either within your company, by the dropshipping supplier or as a mix between the two. Let’s have a look at these scenarios:

  1. fulfilment is externalised as suppliers “dropship” orders:  this means you can just showcase products on your store and orders are shipped by your dropshipping supplier. Rather than stock on products, you can just forward orders to your product supplier and that company will take care of the shipment. The individual product is then shipped to the end consumer and you are invoiced for said product. You profit from the difference between the retail price (the price you posted on your website) and the price you’re paying to the supplier.
  2. fulfil orders within the company: this is the way most medium to large companies fulfil their orders. They build inventory for most of the products they’re selling (especially popular items), stock them in warehouses and when orders arrive, employees in the warehouses fulfill these orders. This process implies a rather large inventory and it can be an ineffective way to handle orders for startups. That’s why most ecommerce startups require another form of collaboration with suppliers:

Usually, most online retailers (such as yourself) choose a combination between the two and maybe some other processes.

Using dropshipping suppliers to fulfil orders

( This example combines dropshipping suppliers with your own operations )

For example, let’s say you partnered with two suppliers (see figure above). Supplier A will provide you with plain t-shirts. Supplier B brings in sneakers. After you start your store you receive two orders. Customer X is asking for 2 plain t-shirts. Customer Y is asking for a plain t-shirt and a pair of sneakers.

This is what happens when you are NOT using a dropshipping supplier:

How to work with suppliers

You will have to treat these orders differently. Order number one, the one where customer X paid for 2 plain t-shirts is forwarded to Supplier A and he will dropship these items and then invoice you for the products.

Order number two is a bit more complicated. You will have to ask supplier A to send you one plain t-shirt (if you don’t already have it on your inventory) and Supplier B will send you a pair of sneakers. You will be invoiced on those products and once you have them in your warehouse you can pack and ship them to the customer.

You can also choose to work with external fulfillment services, such as ShipBob or Fulfillment by Amazon. These services relieve you of the burden of picking, packing and shipping your orders. For a cost.

By building and interlinking separate operations such as those mentioned above, you are actually building what is called a supply chain. The supply chain means any interlinked process that enables you to move products from the manufacturers or wholesalers to the consumer.

The supply chain is not a static structure. It can and it will change as your online store evolves. As you partner with new suppliers, your ability to distribute products to consumers will increase and so will your revenue. But speaking of adding suppliers to the supply chain …

How do I find Dropshipping Suppliers for my Store?

Yeah, how DO you find dropshipping suppliers for the online store? Now that you’ve got a sense of why you need suppliers, how to negotiate and deal with them, let’s have a look at how to actually find them. When you’re looking for merchandise suppliers you’ll see that you have two big options when choosing, each with its pros and cons. These two options are domestic suppliers and overseas suppliers.

Assuming you are in the US, using domestic suppliers will be a very viable option but you should also consider the second. Overseas suppliers can be a great addition to your ecommerce business. They can be used when in need of additional product options or lower prices. Let’s have a look at the pros and cons of using these two types of suppliers.

Why should I choose US-based ecommerce and dropshipping suppliers?

Pros:

  • (usually) higher manufacturing standards
  • improved shipping time
  • intellectual property protection (might be really important if you design your own products)
  • no cultural or communication barriers
  • no import taxes
  • safer business relationship
  • easier to check references for reputable manufacturers or wholesalers
  • lower minimum level ordered quantities

Cons:

  • higher prices
  • less products to choose from (not few, just less)

US based ecommerce and dropshipping retailers you can work with in 2021:

Here are some of the US based ecommerce and dropshipping suppliers you can work with:

Suppliers marketplaces operating in the US

( Directories providing links to domestic US suppliers )

Overseas ecommerce and dropshipping retailers you can work with in 2021:

The most important thing you need to remember when dealing with overseas dropshipping suppliers in 2021 is that you have to be diligent in working with them. If you are inexperienced, you should ask for professional advice on how to get the best deals and protect yourself from fraud. Also – if you do find yourself in need of doing business with overseas ecommerce and dropshipping suppliers, choose to contact those that provide a local sales office or agent or order using established marketplaces that provide escrow payment options.

Pros:

  • (usually) lower prices
  • ability to deliver unique items to your customers through dropshipping
  • a wide array of ecommerce and dropshipping suppliers you can choose from
  • established online marketplaces provide an one-stop shop for retailers
  • innovative products

Cons:

  • you will have to deal with customs, local taxes and special conditions when importing
  • problems with supply chains being disrupted by the coronavirus outbreak which lead to longer shipping times
  • cultural and communication problems
  • harder to check for supplier references

Overseas ecommerce and dropshipping retailers you can work with in 2021:

Here are some of the US based ecommerce and dropshipping suppliers you can work with:

Ecommerce supplier marketplaces that operate overseas.

( The most reliable services that connect you to B2B dropshipping suppliers overseas in 2021)

Although the services mentioned above are a great way to find the right suppliers, you can also do your own digging and search for independent manufacturers or wholesalers.

How do I find independent dropshipping suppliers in 2021 ?

There is no standard way of doing this but some tips may help you get closer to your ideal suppliers:

  1. Contact the manufacturer directly: saw some product you’d like to have? Probably your customers would also. Have a look at the label and contact the manufacturer. They must at least have a name and using that, you can use Google to find out more about them.
  2. Speaking of Google: try going deeper in your search results. B2B traders and manufacturers are not really great at marketing (that is the retailer’s job) so their websites scream “so 90’s” and they are not really optimised for search engines. That’s why you should click further than you’re usually used to in order to find a hidden gem.
  3. Trade fairs: yeah, people still do that, while a lot of them are online this year, given the pandemic. You can find a starting list here.

So hopefully you now know a thing or two about finding dropshipping suppliers and in 2021 you’re going to get the best deal possible. Great! What’s next? Oh, yeah, prices:

How do I set the Price for ecommerce Products when working with dropshipping suppliers in 2021?

When it comes to pricing, you have two rather simple concepts to always keep in mind:

  1. Cost of goods sold (COGS): this is the cost you have paid for the goods plus any costs associated to getting the goods in your inventory and ready for sale. This includes, but is not limited to: shipping, handling or customs taxes.
  2. Operating expenses: this is the total cost associated with running your business. This includes rent, utilities, wages, marketing costs and others.

Basically, the prices of sold products have to cover the sum of these expenses. The bottom line is always the same: Profit = Revenue – Costs.

Your company will report a gross revenue by selling products. Profits come when you are selling enough merchandise, at the right price, to cover your costs.

Of course, it’s a bit more complicated than this but you get the picture. You have to price your sold products where you can be profitable. However, prices need to stay competitive to the market. This means that there’s a balance you have to keep. Prices should be big enough to keep you in business but small enough to be competitive with other online retailers.

What are the best pricing strategies when working with dropshipping suppliers?

1. Markup on cost means you add a certain percentage to he cost associated with the product. It is usually a standard percentage somewhere between 15% and 40%, enough to keep you profitable and your prices competitive.

The formula works like this:

Item cost + (Item cost x Markup Percentage) = Price

Say for example we are selling plain t-shirts, with a cost of $20. We’ve set the markup at 30%. The the price would be:

$20 (Item cost) + ($20 x 30%) = $26

2. Manufacturer suggested retail price (MSRP) is another way small businesses can set their prices in such a way that they are profitable but not too expensive. MSRP is the price the manufacturer recommends to resellers so they don’t start price wars that can benefit no one. This type of price setting leaves out a lot of options for the online store owner and should not be a general rule in the long run.

Above are just two of the simpler ways prices can be set to attract the consumers. We will get into a lot more details in the “Marketing your store” part of this guide so stay tuned.

For now, this concludes part two of the “How to Start an Online Store” Complete Guide. Part three will focus on building your fulfillment operation (picking, packing, shipping and returns) and how to build a brand identity and the actual store front. See you soon!

Author: Mihai Mike Dragan

Mihai Mike Dragan is an ecommerce expert and the cofounder and COO of Oveit, a global company focusing on live experiences technology, both virtual and in-person. Mike has an experience of over 15 years in building digital products, with a focus on ecommerce. He has worked with some of the largest consumer brands in the world, advising on their digital go to market strategy.   Mike Dragan is also the author of the "Understanding Omnichannel Retail - beyond clicks vs. bricks" ebook, a guide for companies that understand consumer behaviour across media. He holds two degrees, one in International Economics and one in Computer Science.

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