Setting Up My Drop-ship Relationship - Part 2
My friend agreed to the
situation where it would cost him nothing for me to design and build another website to sell his products. I’ll get a percentage of the products I sell on
the website I build and I won’t have to deal directly with customers at all.
He ships to them and deals with any returns, damage issues, shipping issues,
etc. He communicates directly with the customer and the customers won’t call
me, they’ll call him, the drop-shipper, directly. That’s because the phone
number on the shipping documents will be his. I made that very clear to him. He
likes it because it’s new revenue for him without his having to spend any time
or money to find it.
He already had a wholesale
price list because he already sells products wholesale to other retail businesses.
I’ll just basically be buying from him at his wholesale prices and selling them
on my Web site for retail.
One of the issues that come
up in any deal like this is how to deal with shipping. Who pays for what
percentage of the shipping costs? In my experience, the best thing to do is
keep it simple. Instead of dealing with complicated numbers like X% of sales
and Y% of shipping, we just agreed that I will get a percent of the gross,
including shipping. So if someone makes a purchase on my website of $50 and the
shipping cost is $10, that’s a $60 gross sale. I get to keep 30% of that amount
and send him a check for the rest. That makes the accounting very simple.
If there are returns, he has
to deal with them himself. Once the sale is made, it’s his responsibility to
fulfill it. I don’t have the time to deal directly with the customers of the new
website, so in this deal that’s his job.
I realize that in setting it
up this way, I may be handing all repeat sales over to him because customers
may contact him directly. But in this situation, it’s a drawback I’m forced to
accept because most of my time has to be occupied with running StoresOnline.
The next thing we needed to
do was agree on terms. We both agreed on simple net 30 terms. That means that
every 30 days, he’s going to get a check from me for all the products he’s
shipped to my customers over the prior 30 days. You may find that terms vary
per supplier. I’ve seen situations where suppliers require payment every week.
It just depends on their situation.
So those are basics of the
agreement we set up. Next, I’ve got to choose a domain name that will help draw
traffic to my new site, get my account set up, and start building the Web site.
