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Shipping costs question (dropship)

by birclore
13 replies
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Hello Warriors,

I have set up a nice little niche site. Design is slick and sales are starting to roll in.

My products are hand made and authentic, coming directly from Italy. Originally I was thrilled that I got an agreement with the manufacturer because their products are a great price and top quality. I know I can sell lots of them.

My issue now, which I have just come to realize, is that the shipping cost for each order is almost the same price as the order itself - and the items are not particularly heavy either (hats).

Questions:

1) Do you think there is any way for me to reduce this cost? It changes the product from being very affordable with good margins to non competitive and mediocre margins.

2) What is your experience with including shipping costs in purchase price? If I can't reduce the actual shipping cost, I think I will have to include some of it in the price because no one wants to pay 100% of price for shipping.

thanks!
#costs #dropship #question #shipping
  • Profile picture of the author webass
    Hi,
    because 2) be critical, I dont know how it is where You are, but for example, have You never bought a small gadget or electronical item and paid 2$ for it and paid 2,50 $ shipping?
    I did.

    But I understand Your problem. I think Your only way is to become clear about prices of similar products to Yours and decide if You can include the shipping partly in Your price.

    Because 1) You could try to buy a smaller quantity as wholesale, send it to a fullfillment provider in bulk and let them send the orders out for You.
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  • Profile picture of the author alksense
    That obvious solution is to buy in bulk from your MFR and pay one overseas shipping fee and them ship directly from your home or office to your customers... but that's assuming you are not shipping worldwide and assuming that you can currently afford to buy in bulk.

    If you can not buy in bulk right now I would recommend accepting preorders from your customers. If orders really are rolling in then you can order maybe 10 or 20 pcs at a time from your MFR to your home (one overseas shipping fee) and then ship them locally yourself.
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  • Profile picture of the author pavv
    1) Answers above regarding buying in bulk, depends if you're prepared to pack and ship orders yourself. This can be time consuming and at small profit margin can be worthless. This would work much better on higher priced/margin items.

    2) Not sure what $ figures your working with but you might be able to incorporate SOME of the cost of shipping into the price of your product, therefor 'subsidising' the shipping. As you point out, this would make shipping not equal the same amount as the item.

    eg. Instead of $10 item and $10 shipping, make item $15 with $5 shipping.

    If you are in a competitive (price wise) industry you may need to do the former, but if it's not competitive you might be able to work shipping into pricing entirely. Then you can put free shipping all over your site, customers love free shipping and it helps with conversions.
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  • Profile picture of the author Cash Maker
    Originally Posted by birclore View Post

    Hello Warriors,

    I have set up a nice little niche site. Design is slick and sales are starting to roll in.

    My products are hand made and authentic, coming directly from Italy. Originally I was thrilled that I got an agreement with the manufacturer because their products are a great price and top quality. I know I can sell lots of them.

    My issue now, which I have just come to realize, is that the shipping cost for each order is almost the same price as the order itself - and the items are not particularly heavy either (hats).

    Questions:

    1) Do you think there is any way for me to reduce this cost? It changes the product from being very affordable with good margins to non competitive and mediocre margins.

    2) What is your experience with including shipping costs in purchase price? If I can't reduce the actual shipping cost, I think I will have to include some of it in the price because no one wants to pay 100% of price for shipping.

    thanks!

    The best option is buy larger quantities, that way shipping costs drop way down.
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    • Profile picture of the author birclore
      Originally Posted by Cash Maker View Post

      The best option is buy larger quantities, that way shipping costs drop way down.
      But when you are dropshipping that isnt really an option right? OR am I missing something?
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      • Profile picture of the author pavv
        Originally Posted by birclore View Post

        But when you are dropshipping that isnt really an option right? OR am I missing something?
        Your not missing anything. I've been there (stocking, packing and shipping orders) and its a real time waster, unless you're making a lot of money per order. Now I will only do stores that dropship.

        With dropshipping you can theoretically run hundreds of stores. If your going to stock and pack then you're basically working a job

        In terms of mindset, IMHO you're on the right track.
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  • Profile picture of the author Silas Hart
    Italy has probably one of the worst shipping infrastructure in the world right now. Many businesses don't even ship TO Italy.

    If you can hang it out for a while, you can ask if the manufacturer will extend a line of credit to you so that you may receive X amount of product based on past sales history, for example, 6 months "worth" of product.

    If they say they are unwilling, I would probably look into purchasing in bulk and trying to haggle as low as possible where the savings would probably be relocated to a shipping agency that can guarantee your items be delivered to your front door.
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    • Profile picture of the author birclore
      Originally Posted by Silas Hart View Post

      Italy has probably one of the worst shipping infrastructure in the world right now. Many businesses don't even ship TO Italy.

      If you can hang it out for a while, you can ask if the manufacturer will extend a line of credit to you so that you may receive X amount of product based on past sales history, for example, 6 months "worth" of product.

      If they say they are unwilling, I would probably look into purchasing in bulk and trying to haggle as low as possible where the savings would probably be relocated to a shipping agency that can guarantee your items be delivered to your front door.
      Ok, what if I can afford to actually purchase enough stock without needing the 'line of credit'? I don't really think that's an issue because I am pretty confident I can eventually sell the products, so it's not like I am losing equity.

      My bigger concerns are:

      1. I definitely don't want to store, pack and ship the items myself.
      2. What type of volume do I need to be doing in order to use a fulfillment agency successfully? At the moment, I'm selling a decent amount of hats but nothing crazy. Will a fulfillment center eat away at all my profits or will the savings on shipping outweigh the cost?

      thanks!!
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  • Profile picture of the author Andy777
    No one can effectively run hundreds of online shops, not even dozens!

    You don't have to pack & ship by yourself - import in bulk and hand over inventory to Amazon, Shipwire or any other fulfilment company. This will be much cheaper than shipping each item individually and very little extra work involved (once goods are in fulfilment house, it's pretty much same dropshipping with you controlling everything).
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    • Profile picture of the author webass
      Originally Posted by Andy777 View Post

      No one can effectively run hundreds of online shops, not even dozens!
      Not alone.

      But it belongs to the long term goals and the organization. We have high goals on the 5 year schedule...
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    • Profile picture of the author pavv
      Originally Posted by Andy777 View Post

      No one can effectively run hundreds of online shops, not even dozens!
      When I say 'run', I mean manage. You need to hire/outsource customer service and order processing. This combined with drop shipping means all you need to do is work on strategy/direction/marketing (and opening more stores).

      This structure allows you to scale upwards into dozens or hundreds of stores.
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      • Profile picture of the author Andy777
        Originally Posted by pavv View Post

        When I say 'run', I mean manage. You need to hire/outsource customer service and order processing. This combined with drop shipping means all you need to do is work on strategy/direction/marketing (and opening more stores).

        This structure allows you to scale upwards into dozens or hundreds of stores.
        Ok, if you have a team of 100 people then you can manage 100+ shops.

        But not with few outsourcers.

        That is - if you want to be competitive.

        I have only few shops, employees and outsource many tasks and we barely manage to get everything done in time.

        Concept of 100+ shops pretty much reminds me good old days when you could just have EMDs, few page AdSense websites and make thousands 24/7.

        Things are different now.

        You couldn't compete in with a shop you can spend just 10 minutes of your time a day while competitors have TEAMS working on just one shop.

        Not talking about dropshipping - so your prices won't be competitive from day one.
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  • Profile picture of the author pavv
    @birclore

    1. I definitely don't want to store, pack and ship the items myself.
    I think this is a good choice.


    2. What type of volume do I need to be doing in order to use a fulfillment agency successfully? At the moment, I'm selling a decent amount of hats but nothing crazy. Will a fulfillment center eat away at all my profits or will the savings on shipping outweigh the cost?
    My understanding is that you would need some good volume to make it viable to use a fulfilment centre. As mentioned above Amazon might be an affordable option for small volumes though.

    What I think you need to do is inquire at some fulfilment centres. Get some quotes on storage/shipping fees and crunch the numbers. Without this information all we can do is speculate options.
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