My Drop Shipping Business’ Fulfillment Process

If you’ve never worked with a drop shipping supplier, the process can be a little confusing.  To help de-mystify it, I’m going to give you a behind-the-scenes look at the fulfillment process for one of my own sites, TrollingMotors.net.  I’ll also be discussing the different suppliers we work with, and how their quality affects our fulfillment processes.

 

Accepting the Order

 

When a customer places an order on TrollingMotors.net, two things happen: their payment is automatically captured, and a new order email is generated.

Payment Capture:  Like all shopping carts, Magento (used by TrollingMotors.net) will check to make sure the customer’s payment method has cleared.  If they paid by credit card, the funds will be automatically deposited into my bank account within 2-3 business days.  All this approval and transferring happens automatically when an order is placed.

Email Generated:  As you’d likely guess, the order generates a new order email which is mailed to a member of my team.  In the past for other businesses, I’ve had these new order emails automatically forwarded to a preferred supplier for fulfillment to maximize efficiency.  But for TrollingMotors.net, stock levels can run low, especially in the off-season, so a person needs to route the order to a supplier with available stock.  I’m working to automate this routing process, but for now it’s one that we do manually.

Routing the Order

For TrollingMotors.net, we utilize a few different suppliers but we have one “preferred” drop shipping wholesaler.  Because of their attractive shipping rates, great selection and good service, they are our default choice.  If they have all the ordered items in stock, we’ll usually place the order with them.  This is as simple as forwarding the order confirmation email generated by the shopping cart to the supplier.   We make sure to include all model numbers and critical order information on this confirmation, which allows us to fulfill the entire order by forwarding a single, existing email.

Once the drop shipping company receives our order, they’ll enter it into their system and automatically charge our credit card on file.  If they don’t have one or more items, they’ll email us back.  At this point, we’ll need to turn to our back-up suppliers.  Back-up suppliers are critical when drop shipping because maintaining real-time inventory on your website among numerous warehouses is very difficult — so difficult that we don’t even try.  Instead, we make sure to have multiple sources for a product to increases the chances we’ll be able to fulfill an order.

Unfortunately, our second-tier drop shipper for TrollingMotors.net isn’t anywhere near as good as our primary supplier.  We can’t submit orders via email, so we have to manually enter them into their website for processing.  And their customer service is downright awful.  Instead of having one dedicated sales representative (like at our primary supplier), we have to deal with being handed off from department to department when an issue arises.  So the only time we use them is when we can’t get the item from our preferred vendor.

Occasionally, we’ll need to utilize numerous suppliers to fill a single order because neither has all ordered items in stock.  In cases like this, we’ll place partial orders with both suppliers.  We’ll be paying multiple shipping fees and might even lose money on the order, but it’s one of the costs of operating a drop shipping business.

 

Fulfillment & Notification

 

 

The turnaround time from order placement to shipment varies by suppliers.  Our preferred supplier can usually ship orders that arrive by 2 p.m. the same day and is another reason they’re our #1 choice.  But unless they see an order first thing in the morning, our back-up supplier won’t ship it until the next day.  We always utilize our wholesalers’ UPS account instead of creating and using our own.  Because of their volume, they get substantial discounts on shipping rates and it simplifies our accounting.

Assuming our preferred supplier filled the order, they’ll immediately send us a confirmation email with a tracking number.  At the end of the day, one of my team members will send these tracking numbers out to our customers via our TrollingMotors.net shopping cart control panel, which will email the customer a shipping invoice with our company’s branding.  If the order was fulfilled by our back-up supplier, we’ll need to log in to their system to access the tracking number, which is much more of a hassle.  Sending out tracking numbers is something I’m working on automating in the near future, but for now it’s still manually done at the end of each day.

With the customer notified about their shipment and the funds collected, the fulfillment process is completed.  An email will be automatically sent to the customer within a week to make sure everything arrived safely, and another one a month later to ask for a product review.

Occasionally orders fall through the cracks, which is why my team does a manual review each morning of all pending orders.  If an order has been pending (i.e., not shipped) for more than one business day, it’s flagged for review.  Sometimes even the best suppliers miss orders and occasionally we’ll make a mistake and forget to route an order.  Regardless of the reason, the daily order check is crucial to ensure our orders ship out on time.

 

Questions?

Have questions about any steps in the process?  Or do you run things differently with your drop shipping site?  Let me know in the comments below.

 

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Comments

  1. ben says:

    Hi Andrew, Related to your topic about. Will it be good using third party automated system for dropshipping where they automated the order submission,Mailing system(ups etc) and receipt straight to vendors? so you save time during the order processing. While you also can check and make sure the orders properly everyday throug the third party website.

    • Andrew says:

      Hey Ben! This is definitely a great thing to have BUT you’ll usually pay for it in terms of lower profit margins. The 3rd party who creates the platform that connects you to all the drop shippers will need to get paid somehow, and that is either through a monthly membership or a cut of the wholesale pricing.

      The other problem is if it’s incredibly easy to find and integrate with these suppliers then more people will be doing it, so you’ll face more competition. It’s often easier to make money with suppliers you personally find and that fewer other people know about.

  2. Jake says:

    While this post has made me feel a little better about the idea of dropshipping, I still may be favoring wholesale order and doing my own packing for HealthyChimp once we get the site operational. Entrusting the process to dropshippers scares me; if they screw up the order, I have to sit on the phone, first with an angry customer, then again with them, to rectify it! Any best practices?

    Maybe as our orders increase we can shift to this model. Great post, Andrew!

    • Andrew says:

      Thanks for the comment, Jake!

      Giving up your control of fulfillment is definitely one downside to drop shipping. HOWEVER, if you partner with a competent supplier usually fulfillment issues aren’t a major issue / thorn in the side of the business. The way I see it, I compare the advantage of not having to (1) purchase inventory (2) own a warehouse and (3) package the items myself to the potential downside of a few mistakes that I likely would make, too.

      In terms if best practices, it’s crucial to rectify a problem as quickly as possible when it arises, which will often result in a loss on the order and/or spending additional money. For example, if an item gets shipped to the wrong place I ship out a replacement immediately without waiting for the other item to come back to the warehouse. Or if a customer receives a defective item that’s under $25, we simply ship them a new one at no cost – and don’t request the old one back.

      So there are a few downsides, but I think the advantages outweigh them.

  3. Anthony says:

    Hey Andrew, Do you offer more than one shipping delivery method for your drop shipping sites?

    • Andrew says:

      Hey Anthony! For TrollingMotors.net, no – we only offer UPS ground because the motors are so heavy that any other methods are prohibitively expensive. For other eCommerce stores I own, I do offer expedited shipping on items as they are smaller and it’s possible to do without incurring massive shipping fees.

  4. Very well written and insightful article Andrew, thank you.

    I’m curious about who your preferred supplier actually is, as it seems you went out of your way not to name them or provide a link to their website.

    I currently use Shipwire, but since I’ve just recently launched my business, I’ve yet to gauge the quality of their service. Although I’m confident they’ll do very well.

    • Andrew says:

      Thanks Mustafa! I intentionally don’t name my suppliers as I don’t want to encourage direct competition with my store.

  5. Owen says:

    A great post explaining the drop shipping process. Yes, my process is much the same.
    Do you outsource your customer service or do you do yourself?

    • Andrew says:

      Thanks Owen! I have an in-house team that handles all our customer service. I think outsourcing customer service is a very difficult – and dangerous – thing to do as others will never care about your customers as much as you do. I think a lot of good businesses have tried to outsource their customer service with disastrous long-term results.

  6. Jason Graham says:

    Great post Andrew! You have been a great resource for me while I work on my own projects and I appreciate your openness to help others.

    Thank you!

  7. Scott says:

    Andrew,

    This is a little bit off topic, but can you tell us who you use for your payment gateway? I”m in the process of setting up a magento store and am leaning towards Authorize.NET.

    Scott

  8. Alex says:

    Andrew,

    You did a terrific job outlining what all is involved in the dropshipping order fulfillment process, along with things to look for to optimize the process!

    Quick question that might be just a bit off topic:

    When you’ve decided on your niche that you’re going to pursue and you start to develop the site (you’ve already completed your keyword research at this time), do you look to purchase exact match domain names or more of a brandable domain name for your site? Just wanted to get your thoughts on that.

    Thanks in advance for your time, as I look forward for your reply!

    Best regards,
    Alex

    • Andrew says:

      Thanks Alex!

      Exact match domain names are great, but can be expensive and don’t have quite the SEO kick that they use to. I’d recommend a combination of keywords and branding for a domain name, which will help your SEO efforts without having to drop some serious cash on an exact match domain name. For example, motorcycletirespro.com for a motorcycle tire store. Hope this helps!

  9. Joe says:

    Hi Andrew, thanks for the great article. Do you ever receive multi-item orders for products that are sourced from different dropship suppliers? How do you handle the shipping issues and shipping cost of products being shipped from different suppliers? Are shipping costs built into the product price to cover for each individual item?

    Thanks again for your great insight!
    -Joe

    • Andrew says:

      Hey Joe! This situation is fairly common, and when it arise we simply “eat” the additional shipping cost of fulfilling the order using two different suppliers. We do our best to offer products that are available from multiple suppliers for peak fulfillment rates, but sometimes we’ll still need to make two shipments to properly fill an order. While you theoretically pass on the shipping cost to the customer, this is a fairly poor experience for them and will likely result in increased technical complexities. So, I view it as a cost of doing business and try to structure my store and supplier relationships to reduce these dual-fulfillments as much as possible.

      Hope this helps!

  10. brian says:

    quick question. how would you recommend to someone that has a job still/commitments during the day to handle customer inquiries if you are just starting in eCommerce? Is the only option to to get a professional 800# service and check your voicemails regularly ?

  11. Jeff says:

    1) It seems impossible to know what shipping costs will be with drop shipping. There are just too many unknown variables. For example, one supplier has 4 warehouses, any one of which could ship my product to the customer. I’ve just decided to charge a flat fee per order of $10 for regular shipping. What do you think?
    2) How do you handle returns? Do you just have the customer return the product to you, and you do all the communicating with the drop shippers? It will make my shipping expenses go up as customers return products to me (and get reimbursed for it) and I then return products to drop shippers. However, I’m thinking it’s worth it to have customers only deal with me–clear communication, no intermediaries, no customers going around me to purchase from my suppliers next time, etc.

  12. Oliver says:

    Hello Andrew, first of all I want to highlight that your explanations are extremely helpful for people like me who recently decided to start an ecommerce. Thank you for that.

    I am currently building a new cart based on “magento community” and my idea is to integrate products from various dropshippers.

    I have the following two questions :

    – Would you recommend me to buy and install an extension module (on top of the basic “magento community”) to integrate dropshipper’s products as well as to automate the ordering, provisioning and tracking processes ?

    – If yes, do you have any dropshipping module suggestion in mind for “magento community” ?

    Any advice will be a great help.

    • Andrew says:

      Hi Oliver!

      At first, I would recommend not to purchase any drop shipping software unless you can find something great at a very reasonable price. The add-ons I’ve seen are very expensive ($1,000 or more) and I think running things manually before trying to automate is important. Plus, you should automate only once you have a need for it – not before you’re getting lots of orders. Otherwise, it’s wasted effort that should be spent marketing instead.

      Once you start seeing some traction with sales and traffic, I think a good choice is a service like eCommHub.com, which helps you manage your order flow automatically.

      Hope this helps!

      • Oliver says:

        Hi again Andrew,

        Thanks a lot for your wise advice, I will follow your recommendation and start managing dropshippers manually. I also take the opportunity to thank you for your excellent book “Profitable
        eCommerce” that provided me a huge knowledge boost and a wonderful overview of what needs to be done in terms of eCommerce SEO and Market Analysis. Too bad I didn’t find your book earlier.

        Best Regards and Happy Christmas,

        Oliver

        • Devin says:

          Hey Oliver,

          Would like to add my two cents in, as magento multi vendor dropshipping is what our store is based on.

          First, thanks andrew for the ecommhub.com recommendation – I have come across this solution before, but now will take an extra look as your recommendation is highly valuable. How do you use ecommhub? What problem did it solve for you?

          I agree that only automating once it is necessary is the smarter way to go as we have done the opposite… Purchased automated tools first and now are suffering the consequences of not enough marketing.

          Anyway, for our magento stores, we have been working with webshopapps.com to purchase shipping extensions…particularly their dropship extension (http://www.webshopapps.com/us/shipping/dropship.html) which is the dropship extension we have been using for our magento store.

          Keep up the great work Andrew – thanks so much! Both me and my family members who are currently transitioning out of stable careers and into entrepreneurial ventures have benefitted greatly from your work!

          • Andrew says:

            Thanks for sharing, Devin – and glad my writing has been helpful! We are in the process of integrating eCommHub into one of our sites for inventory syncing needs, although it’s take a bit longer than we’d hoped due to issues with one of our suppliers.

            I’ve also worked with WebShopApps and found their products – and people – top notch.

  13. Adam Butt says:

    Hi Andrew,

    I read your post it was very helpful in understanding how the drop-shipping process works.

    I am about to start up my own drop-shipping ecommerce based on Magento Comunnity.

    I have the following questions:

    1.) Once I have established my best selling items would you recommend purchasing them in bulk? This will allow me to have greater profit margins.

    If No, then please advise.

    2.) I am trying to figure out if dropshipping is my long term goal or if I’m looking at eventually stocking the items myself for greater profits. Can you advise me what you think about this? Will you continue to dropship? Is it worth it in terms of profits?

    Thanks and happy Christmas!

    Adam

    • Andrew says:

      Thanks Adam. To answer your questions:

      1) It depends on how much you’ll save by purchasing them in bulk, and if you’re willing to manage the shipments yourself. Often, I find that the cost savings aren’t worth having to handle the product and ship it my self.

      2) I’ve looked into stocking products myself and repeatedly found that – at least for my lifestyle and preferences – that the discount offered by buying in bulk isn’t worth the hassle of running a warehouse. This will obviously vary from niche to niche – and person to person – but I’ve been drop shipping for 4+ years and have long had the ability to stock my own products, but choose not to.

  14. Jason says:

    Great article, I just have a couple of questions.

    1) I am currently starting an online store and am going with the drop shipping route. Now one thing I am unsure of is how do I get a product shipped from my supplier in the US to my customer in Canada, without my customer being able to see my pricing on the custsoms documents?

    2)Also, since I am not stocking parts, how can I provide my customer with some type of shipping quote system that is acurate through my website during the checkout process? I am in Canada with my supplier being in the US, Will this be a problem for me?

    • Andrew says:

      1) I believe your supplier will simply put the retail price of the items as that’s what custom duties are usually levied on.

      2) It shouldn’t be. Assuming you have the size and weight of all items – especially weight – you should be able to use a real-time USPS or UPS calculator to calculate shipment fees.

      Hope this helps!

  15. David says:

    Hi Andrew,

    Are there any programs you particularly like for purchase orders? I’ve gotten a few orders, and I’m realizing that it’s kind of unwieldy to send lots of POs at once…though I’m not sure there’s any way around it. I don’t want to annoy my supplier representative with tons of Excel files (or any type of file), but since every order requires a different shipping address, I don’t see any way around it. Thoughts?

    -David

    • Andrew says:

      Usually we simply send POs / emails over one at a time. It’s a little more work, but it’s nice in that if an order gets bounced back by a drop shipper (because they can’t fill it), we can simply re-forward the email to supplier B. I do know there are services / programs that let you submit orders in bulk but I never integrated them into our workflow.

      Hope this helps!

  16. Hello, I have a question you may or may not be able to answer. In October I started working on my online retail store using drop shipping. I am decided to do my own research and get several different companies to drop ship with, and at this point I am working with about 13 different companies. With that each company offers different shipping rates, and through different companies, but with my shopping cart they will not let me customize this so I can charge my customers accordingly, so I had to add my shipping to charges to an option selection when they checkout, which has also just cause d more problems since I cannot discount customers for ordering more then one item. I actually ended up putting a message on my website stating to contact me if anyone is wanting to make a purchase with more then one item so I can give them the appropriate discount. I am definitely needing to change who I do my business with at this point since this is not the only problem I have using drop shipping, is there a shopping cart out there that is made more specifically for companies using drop shipping?

    • Andrew says:

      At this time, I don’t know of any drop shipping specific carts, no. I’d recommend trying to come up with a simplistic shipping pricing policy that covers the “average” price of your orders for one flat fee. You’ll overcharge on some – and undercharge on others – but it will likely be the easiest way to incorporate it into your store and you won’t have to have customers contact you during checkout.

      Best of luck!

  17. Richard says:

    Hi Andrew,

    Really like your article, and have found it very useful as im in the planning stage of my 1st drop ship site.

    I wanted firstly to ask how you would suggest running a drop.ship website when you have a job? I can’t afford to give it up until I have a good cashflow, but want to give the drop shipping enough time to really make it work.

    Also do you sync products with eBay, and how have you found this? As they and PayPal take more than 10% are the margins good enough to make it worthwhile?

    Thanks for the writeup!

    Richard

    • Andrew says:

      Hey Richard!

      If you have a job, it’s more difficult and you’ll have to make some sacrifices, but it’s still manageable. If you haven’t read it already, I’d recommend this article:

      http://www.ecommercefuel.com/create-online-store-with-job/

      I personally don’t use eBay and have always stuck to my own storefront. There are some advantages to eBay, but I think long-term you will make more money by investing in your own company and brand.

    • Ilene says:

      We run a small Virtual Assistant business to do all the leg work for those who have a full time job or just don’t want to take on the hours of detailed work involved in the drop shipping process. As we’re a nonprofit charity, payment for services is tax deductible as we take a percentage of revenue and donate to other horse rescue organizations.

      Sorry for the plug here, but what method could anyone recommend to get the word out on how we’re trying to help?

      Thanks in advance
      Ilene

      PS – Great blog btw!

  18. Kevin Bambury says:

    Hi Andrew,

    I am really enjoying the blog and ebook.

    Have you ever experimented with affiliate marketing?do you think this could be a good way to learn for beginners?

    Thanks

    Kevin

    • Andrew says:

      Thanks Kevin! Personally, I haven’t done much affiliate marketing. Apart from a few affiliate commissions I’ve generated via this blog, I don’t have any experience with it. It can be a low-cost way to start, but is definitely a very different model from eCommerce…

  19. Loran says:

    Andrew – when and how does your Accountant require you to recognize the sale and cost of sale? In other words, how doe the order get transformed into sales revenue and cost of sales expense? Thanks!

    • Andrew says:

      Loran – I use accrual accounting, so I recognize the revenues (and associated costs) of each sale when it was booked. So if the sale was made on March 31st, I’ll make sure to claim all revenue and costs for March 31st, even if they don’t hit my credit card from the supplier until April 2nd.

      Hope this helps.

  20. Christy says:

    Andrew,

    Thank you for the article on drop shipping and for writing “Profitable eCommerce”. Both have been tremendously helpful! Thank you for sharing this information!

  21. Pradeep says:

    Hi Andrew,

    This is a great article! Will the drop shipper prefer payment only by credit card? I mean, if the business grows, how should we manage without being maxed out?

    • Andrew says:

      Most will accept cards, yes. And if it does grow, you can run into issues – like having to pay off the card every 3-4 days to free up credit! But that’s a good problem to have, right :-)

  22. Paul B says:

    Hi Andrew

    Excellent Articles. I hope you can give some useful advice on my query

    Background – I am in the process of setting up my first e-commerce website. The website is 80% built, and uses a shopify template with Ordoro software as an ERP back end to manage the stock.

    The products for sale on the web site will be “light weight” outdoor camping and hiking gear e.g. tents, sleeping bags and jackets and accessories such as water bottles and compasses and tent pegs etc

    The products will come from 5 or more suppliers/drop shippers located in different locations. The 5 suppliers/dropshippers are needed because each supplier/dropshipper has particular products that are “light weight” and customers may choose multiple products to meet their particular requirements.

    Dilemma – My dilemma is that I really want to make the distribution and delivery of products as easy as possible for the customer, and with 5 suppliers/dropshippers I can see the scenario of multiple packages being sent out with multiple postage variances. If I was the customer getting 5 separate packages at different times and different post costs would rather annoy me!

    In an ideal world I would like the products from each supplier to go in one box and be delivered to the client.

    The only way I can see of doing this is either hold lots of the stock from different suppliers in an outsourced warehouse; and pay for the warehouse staff to pick and pack and send to the client in one box. The advantage is that its quick – Disadvantage is that cash is held up in stock.

    Or

    Get drop shippers to deliver to a Outsourced warehouse, its then collated into one box and then sent . Disadvantage , two postal costs, and it slows down delivery!

    Hopefully you and the forum can pass on some wisdom to stop me making mistakes !

    Best Regards

    Paul

  23. Dan says:

    Hi Andrew,
    You got me thinking about what i can find as my niche product. I had a look at your Trollingmotors.net and man I am sincerly impressed.
    The question i have for you is: I live in Alberta Canada. i cant decide if i should set up dropshipping in US or stay only Can. or both… does it matter where i am.? How did you become an expert at trolling motors? Did you grow up with them in your area.? Were you able to get help and knowledge from the motor suppliers, like Minn-Kota to help. I am wondering how much head info do i need or do you just learn as much as you can while you work it. Maybe a stupid question but I would like to imitate your professionalism when running a e-business.
    Thanks again, and for the e-book.
    Dan B.

  24. Kevin Kimani says:

    Hi Andrew,

    Awesome blog post! I am a sourcing expert and i really enjoyed how you went into specific details on explaining the drop shipping trade.

    Definitely hitting that FB like button!

    Thanks

  25. Ilene says:

    Question from newbie drop shipper

    We provide drop shipping virtual services and have recently started to sell our own products on Ebay and Amazon through Mission Pay Paypal authorized charity.

    We just made our first sale and I am not sure how to go about providing the customer with a tracking number. Won’t the tracking number show where the product was shipped from? Guess the box will have their name on it also? (Walmart)

    Any guidance much appreciated.
    Kids4Horses

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