Part 7: Drop Ship FeesSome Drop Shippers
charge a small "Drop Ship Fee" per order.
It's important to understand
exactly what a "Drop Ship Fee"
is, and how it works.
Remember, Drop Shipping has been around for DECADES; it's not something new just since ECommerce came along. There are standard practices
in Drop Shipping that have been tested and proven over a period of MANY years, and the Drop Ship Fee is one of them.
What is a Drop Ship Fee?
It's simple. A Drop Ship Fee is the "Handling" part of "Shipping & Handling".
When a customer buys a product from your Online Store or Auction, you're going to charge them your Retail Price, plus "Shipping & Handling".
You know you've seen it before! "Shipping & Handling" is attached to just about everything you've ever ordered from a catalog, a TV ad, or the Internet. Just what is that ever-mysterious "Handling" charge?
Wholesalers usually sell products in bulk quantities. A case here, 30 cases there, a whole truckload somewhere else. They do not have to individually pack and ship each item...they just throw some pallets on a truck, and off they go. That's what they do most often.
When a wholesale distributor Drop Ships one single item
for you, they are doing a lot of extra work for you
. They call that work "Handling"
They are storing the product for you
, in THEIR warehouse. You don't have to clean out your garage, or rent that extra space somewhere.
They are packing the product for you.
You don't have to buy shipping boxes, envelopes, labels, etc. You don't have to spend the time packing the product. Your time is a very real expense to your business.
They are using THEIR UPS or FedEx Account
to ship the product directly to your customer.
They will handle all returns and damaged goods
replacements for you.
This extra work costs them money
, and they have to cover their expenses somehow.
That's a lot of work that YOU don't have to do.
That translates into money you SAVE. You not only have to consider your expenses for everything listed above, you have to learn that your time costs your business money, too. When you can get someone to warehouse, package and ship your products for you, you not only save all those expenses, you save time. Use that time to promote your business, instead of standing in your garage packing boxes!
So, the Drop Ship Fee is the "Handling" part of "Shipping and Handling".
It's all the work done by the Drop Ship Distributor to prepare your single-item order to go out the door.
Some Drop Ship Distributors
charge a Drop Ship Fee when they fill an order. As I said, it's been a normal part of the Drop Shipping business method for decades.
You pass that fee along to your Customer as a part of your "Shipping & Handling". However
, you may choose to simply include it in the price of each item you sell, to make your Customer's shipping cost appear lower.
Here's an example:
, Twee T. Bird, orders one set of Cat Handcuffs from your Online Store.
Your Store's Retail price for the Cat Handcuffs: 29.95
Your Store calculates Shipping to Mr. Bird's door at: 5.62
Your Distributor charges a Drop Ship Fee of: 2.00
If you're charging the Drop Ship Fee as "Handling", Mr. Bird's Total will be 29.95 plus 7.62 Shipping & Handling
(5.62 Shipping plus 2.00 "Handling" [Drop Ship Fee]).
If you're charging the Drop Ship Fee as part of your PRICE, then your Store's PRICE for the Cat Handcuffs will be 31.95, and Mr. Bird will only pay 5.62 in Shipping & Handling.
Internet customers are perfectly comfortable with paying Shipping & Handling charges. Some of the biggest Online Stores on the planet use Drop Shipping exclusively, and charge the Drop Ship Fees that THEY pay, right back to the customer, as a "Handling" charge. We do it all day long ourselves, in our online Retail business. :o)
Different Types of Drop Ship Fees
Drop Ship Fees are almost always charged on a "Per Address"
That means that if your distributor's Drop Ship Fee is 2.00, and your customer orders ONE item from your store, the drop ship fee that you charge them as "Handling" will be 2.00. It ALSO means that if your customer orders SEVERAL items, and they all come from the same distributor, the Drop Ship Fee for the ENTIRE order is STILL just 2.00, since it's all shipped from the distributor at the same time to the same address.
SOME Drop Shippers charge Drop Ship Fees on a "per box"
basis. It's rare, but does happen sometimes. Now, that does NOT mean that there is a separate Drop Ship Fee for each ITEM; it's for each BOX. Most of the time, with multiple-item orders, the distributor can put several items into the SAME shipping box, and you STILL only pay the Drop Ship Fee ONCE.
Letís go on to Part 8: The Real Business World