Hey guys, I've never posted here before but I've created an e-commerce website for new and upcoming products as a mini project with a friend of mine. We weren't serious about making this a legitimate e-commerce business and were initially going to make it a cool product database that people could visit in order to find out about the newest an coolest stuff being made at the moment. Since the site has been up, we have had 6 people try to order products off of the site and it's made us rethink turning the site into a direct store for said products. The big issue is that we don't have any money to invest in warehouse space and the overwhelming majority of the manufacturers whose products we would be selling do not offer a drop shipping program. On top of that, we are located in Canada but would prefer to target the US for obvious reasons. Can we actually get this website off the ground by charging a 10% (or whatever percentage would make sense) markup on every product and then ordering the product from the manufacturer directly with the customer's shipping address? We understand that this would require a lot of legwork on our part but we are definitely up for it. Please keep in mind that this would not be a long term strategy and we would only employ it until we had the funds to either rent warehouse space or most likely employ the services of an order fulfillment company with warehouses in the States and other countries. Does anybody have any tips, resources, ideas, or (especially) harsh criticisms to send my way? All feedback is appreciated By the way, below is a list of things I brainstormed last night while trying figure this whole idea out. I know this will make the thread fairly long so only read it if you are curious or interested and feel free to comment on any of these if you have something to say. 1) If we use Paypal, it will hold the funds for up to 21 days so the first bunch of sales would need to be charged to a personal credit card belonging to me or my partner. 2) The shipping policy could be different for each product because it would be subject to the shipping policy of the individual manufacturers from whom we would be ordering the products on a product by product basis. 3) I'm not too sure about the legality of any of this and how taxes would apply in this case. 4) It would be obvious to the customers that the product they received was shipped by the manufacturer and they would most likely receive a checkout summary detailing taxes, shipping charges, and the actual price of the product. Therefore, a price markup might not be a good idea (or would it) and instead, we might want to institute a transparent "processing fee" on top of the actual price instead. The issue there is, if people see this fee, would they even bother purchasing on the site? 5) How would this type of e-commerce model handle warranties and returns? Could we just direct them to the manufacturers? 6) If we were discovered to be doing this by the individual product manufacturers, would they care? We wouldn't be undercutting them and they would be making sales thanks to our ability to bring them customers so I doubt they would have any problems with it. 7)The way I see this is that we would be creating a short term affiliate program where one didn't exist (at least for the majority of the manufacturers we would be dealing with). That is to say that we would be sending them sales through the marketing strategies behind our site but instead of getting a percentage commission from them, we would take our commission directly from impulsive customers who really don't care what price they are paying. We have had a few people try to buy products (even though the site has no functioning checkout system) on our site with higher prices than the manufacturers were offering so there are obviously people who just see something they like and are willing to spend the money without any real research. Thanks in advance to those who will reply to this thread and don't be shy to absolutely destroy this idea....the sooner we can figure out whether this is worth pursuing, the sooner we will be able to move ahead, even if it's with something else . This is a long shot and me and my friend know this so that's why we only want to do it until we can move onto something more feasible.
Don't have to be specific, but can I ask what general type of products you're looking at selling? Reason is that for almost every type of product I've ever seen, there are typically a few wholesalers that stock products from a number of major companies in the industry. Normally using one of these is the easiest way to get your foot in the door. Many of them dropship or will blind ship for you and some will even put your personal marketing material in the packages for a small fee. I've never seen an actual manufacturer that will ship to a customer, but the points that you raised would be of huge concern to me. Manufacturers are normally good at handling stuff like warranties, but their business model isn't normally setup to facilitate returns at all. But, much of the time they won't deal directly with an end user on warranty claims, they deal with the company that sold the product. Also, their pricing to you is very often dependent on quantity, so if there are wholesalers for your products, it's very possible that your prices with them will be lower than going directly to the manufacturer. Another big concern that I would have just because you're looking at doing cross border transactions is how you address the payment side of this. Depending on what sort of credit card / paypal acceptance you do, it starts getting complicated and expensive when doing cross border transactions and currency conversions. This would be applicable if your manufacturers/wholesalers are in the US as well as if your customers are in the US. Multiple currency conversion is a good way to suck a lot of profit out of a business. Having said this, if you truly have found a niche and there isn't any major penetration in it at this point, it could be very successful. It could also be something that doesn't have the good sales potential which is why nobody is doing it. Whatever it is you also need to figure out how to market it which isn't going to be free even if you do go the affiliate route. Working directly with manufacturers can be a huge headache but if you are able to figure out how to handle the logistics of ordering from multiple companies and automate it as much as humanly possible, again it could definitely work. Would definitely agree in changing distribution models down the road. As far as customer caring if the manufacturer is shipping directly to them, unlikely. Ask to blind ship the product or get a branded invoice. Again, I haven't found many manufacturers that will ship directly to an end user, so you would have to develop a relationship with them to figure out how each one works. I really don't have enough experience to feel comfortable giving good advice on the legalities and regulations of cross border commerce, but there's obviously a lot of companies that do it and most likely it is just going to take research to figure out how to do it properly. The payment side is something that I know causes a lot of headache so make sure to figure that out as well.
Hey Jestep, I appreciate the lengthy response. I really should have been more specific. The website focuses on new products available for sale such as those created on Kickstarter or maybe even Yanko Design. So you see it spans multiple product categories and industries rather than just one. I can tell you for sure that a very large percentage of the manufacturers will be relatively small businesses and will have their own web stores to sell directly to end users. I'd also like to mention that as of now, we have roughly 500 products listed (again we were trying to make this more of a database initially).
No need to worry! Join doba.com or other drop shipping service program. There you can find hundred's or even thousands of manufacturer's who can drop ship products for you to every corner of the world where you want to drop ship for your customer. But keep one thing in mind that the profit margin will be very low.
It definitely sounds like you're going to want to either a) create yourself a drop-shipping scenario, or b) spin a type of affiliate program, just like you mentioned. When you're ready/able to get your own space, you'll be super golden. Best of luck!!
Thanks for the responses guys. We actually recently made contact with a single manufacturer who is willing to set up a dropshipping relationship with us so we are going to move in that direction. I have another question but I didn't want to create another thread. Since both me and my partner are located in Canada but will most likely be making a lot of sales in the US and other places around the world, we are going to have to deal with currency exchange and international taxes. However, we are completely lost when it comes to these matters we don't really know where to start. Could anybody point me in the direction of some resources that might be able to clear things up for us? Also, besides an SSL, are there any other licences or anything similar that we would need in order to proceed as a dropshipping e-commerce website? I am currently looking into this but figured you guys would know the best resources to go and find these answers.
A little Google-Fu, and I think this might be exactly what you're looking for: http://www.bdo.ca/en/Library/Servic...tions-of-selling-goods-over-the-internet.aspx I also found these: http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/ http://www.tradecommissioner.gc.ca/eng/exporting-to-united-states.jsp Hope they help! (That third link seems a bit more official than the second one, haha)
You're a Google-Fu master. Thanks I will definitely spend the next little while looking over those links. It's so confusing going from no experience to trying to start your own business. I can understand why so few people are willing to do it and it also explains why so many fail. You literally have to walk around in the dark for a while before things start making sense.
Haha, thanks! Enjoy the reading material. And you're dead on -- but think about how bright that light will seem when you start making some money after having been wandering in the darkness for a bit! Relativity does amazing things. Good luck!