Drop Shipping and The Paper Catalog

I get requests from people every single day to mail them a catalog. And yes, I mean every day. So, if you had to guess, what do you think I do with them? No, nothing grand, I just file them on my computer for a time when I might have a catalog ready. Whenever that may be.

People automatically assume that just because you have an online store, you surely have a catalog. The reality of the day is that a catalog is extremely expensive to produce. Graphic design, original photography and content, and printing is just the beginning. Add on postage and obtaining a decent mailing list and you’ll be amazed at what producing a paper catalog can cost. Plus with an extremely low return rate, you have to mail out tons and tons of catalogs to make it feasible.

While I’m no expert, I’ve heard it said that your store really needs revenues of $1 million before considering producing your own catalog.

However, admittedly, I am missing an opportunity. How can I be taking advantage of these requests?

1. At the very least I should be responding to these emails, thanking them for their interest, and telling them that we only have a website at the moment, but will keep their request on file. But I don’t.

2. I should be adding them to my email marketing list. They have, afterall, requested information from my company. I have, however, failed to do this.

3. I could be sending each of them a coupon or special offer. “Sorry for not being able to fill your request for a paper catalog. Please accept this $5 coupon good on any purchase along with our apologies.” I could mail or email this. But alas, I haven’t done either.

So obviously I have some work to do. But the lesson to be learned here is not to overlook the easy opportunities provide great service and maybe gain some customers in the process.

Does anyone else have different ideas of how to handle this?

Customer Service Is Never Part-Time

I often stress the need to provide the best customer service you can as a drop ship retailer.  As a drop shipper you are already behind the eight ball; you pay a little more for your products, you have extra fees, and you probably don’t have a big pile of money supporting your venture.  It’s hard to beat the big guys when it comes to these issues.  However, customer service is one place you can shine.  Most consumers recognize and search out good service, and many will pay slightly more to get it.

So this begs the question:  How do you give great customer service when you are starting out, and working part-time?  Believe it or not, there are many things you can do.

1. Site Design.  Great customer service starts with site design.  Most consumers will click around your site to find the answers to their questions before taking the time to contact you.  Take the time to give good and complete product descriptions to your items.  Make sure you have a detailed FAQ page and check it often.  If you are getting a lot of the same questions, maybe you need to add to it.  Be sure to clearly state shipping charges and return policy.  Finally, make sure all of this information is easy to find.  The more information you provide right on the site, the more likley your customer will answer their question all by themselves.

2.  Email.  The first level of customer service we all started with is a customer service email address.  Create a generic address for all customer service inquiries (service@mystore.com).  Be sure to clearly state when a customer can expect an answer and STICK TO IT.  This is also a great place to use an auto-response (Thank you for your email.  Our customer service team will review and respond within two business days).  People get fed up with customer service really quickly when claims and deadlines are not met.  If you say you will respond within one business day, then you better make every possible effort to do so.

3.  Phone.  Be it a toll free number or not, a phone number is a big and scary step for the drop ship retailer.  New retailers worry about being stuck on the phone all the time, or even worse, not being there when the phone rings.  They worry about being tied to the office when they don’t have the time to be, they are only working part-time, afterall.  These worries are not necessary, however.  Just make it clear on your site that the line is not manned, but they are free to leave a voicemail.  Then revert to the standard response time.  One word of caution, get a separate and dedicated line for the business, and make sure everyone in your house knows which line it is.  There is nothing worse than a customer calling and having your young kid answer!

4.  Call Center.  Eventually your call and sales volume will grow to a point that you really want to have someone answering the phone.  My advise is to find and hire a third-party call center.  Yes you can have professional customer service reps answering your customer’s questions and placing orders without hiring a single person.  I use Call Center Services from Solid Cactus. More about call centers coming soon.

5.  Tracking.  One of the easiest and most important  things you can do is provide tracking information.  The most popular call that customer service reps get is the classic “where’s my stuff” call.  Have your system send out emails that tell the customer their order has shipped and provide the tracking number.  Not only is this great service, but it lets the customer stop bothering you and start checking the UPS website to see where their box is.

Like any other part of the drop ship retail business, the key to customer service is information.  Give them information before they ask it, and let them know how to get help if they need it.  These simple steps will add to your business’ credibility.

Dad’s Advice

So I’m back after quit awhile.  Something happened to me that most new entrepreneurs will experience sooner or later.  It’s not fun to re-live, but let me give you the highlights.

As we’ve talked about many times before, drop shipping is so great because you can start part-time and see how things go before taking the big plunge into totally working for yourself.  Of course, I’ve always meant that you give your employer the time and attention required, then do your drop ship business in your free time (nights, weekends, etc.).  Which, of course, is what I’ve always done.

So, my employer “found out” about my part time endeavors.  I do say “found out” because honestly, I didn’t tell them.  I felt it was wrong to use my job to promote my part-time stores.  So literally not one co-worker or customer of mine even new I had my drop ship stores or blogs.  I felt, even to this day, that this was the epitome of integrity.  Had I been talking about my stores to anyone and everyone, THAT would have been a conflict of interest, something that I worked so hard to avoid.

So I got pulled into big meetings with important people and proceeded to spill my guts.  I told them the time I spend, what work is required, whether or not I was using company resources.  I was honest with everything.  Their main concern was that my endeavors looked like large operations that took up a great deal of my time.  (incidentally: what a complement.  Little old me, working evenings and weekends had accomplished what every small entrepreneur hopes to; looking big, even though I am not).

So legal got involved (this is a fortune 500 after all) and it was determined that I had not violated any company policies or conduct codes.  I was, however, asked to stop writing Drop Ship Digest while under their employ as it posed a “certain concern”.  I complied, even took the blog down for quite awhile until I left that company.  I stayed with the company awhile longer, but then left after finding something better.  It’s been eight months since I left that company by my own will, and I’m finally ready to start writing on this blog again.

For those of you that have read me in the past, you know that I have much more integrity than to disclose what company that was, or any real details, so please don’t ask.  I’m just happy to be moving forward.

So how does dad’s advice fit into all of this?  When I was at my lowest point of depression and stress, my father said something to me that I will never forget.  And it’s a good lesson for all of us.  He told me that everyone who has ever tried to do something different has been knocked down at some point or another by people who are afraid or don’t understand.

The moral of this story is, of course, that starting a new business, be it drop ship or something else, is certainly not the norm for most people.  And all of us will come across those people who tell us not to; or tell us we’re crazy; or tell us we’re stupid to try.  They’ll tell us we’ll never make it, and we’re wasting our time.  Or we might come across the folks who threaten, judge, and prey on your venerabilities.

It has always been my driving motivation that I didn’t want to be an old man who always wanted to start his own business; but never tried.

If a new business is one of your goals, I feel drop shipping is a nice thing to try.  But whatever it is, you’ll never know unless you try.  I’m still here, my businesses are open, and I feel stronger for it.

Here’s to a successful future, and remember: don’t let the bastards get you down.

Economic Issues

I’m curious as to how the economy is affecting small dropship retailers. My two stores are fairly young, so they are growing, although not tremendously. I’m sure in a stronger economy, I’d be doing better, but I’ll take what I can get right now.

So does a weak economy help or hurt us small retailers? I guess there are two sides. On one hand, Americans in general have less money to spend on stuff. So depending on what you sell, your customers have less income to buy your goods. So certainly we’re not in great shape in that regard. The price of everything is going up, so manufacturers will have to start raising prices. This causes your costs of goods to rise, and in turn, you may have to raise prices. No body likes this, and your customer will be unhappy. Two strikes. Finally, shipping costs are on the rise which may cause shopping carts to be abandoned once they see how much shipping will cost. Three strikes, ouch.

On the other hand, all retailers are facing these same factors. At least we don’t have large facilities to man, or pay rent on. We don’t have big inventory issues or have to worry about cutting jobs as the brick and mortars do. Secondly, fuel is the main reason that shipping costs are going up. So customers do have to choose between spending money on shipping, or putting gas in the van to drive to the mall. For me personally, I’d still rather order from my computer than run around town. Finally, the economic stimulus checks are coming, so maybe things will jump up soon.

I want to hear from you. What are your thoughts? How is the economy helping or hurting your business?

Why do suppliers need a SSN or EIN?

Time for some more Business 101. When you set up a new account with a supplier they should ask for your SSN (if you are a sole proprietor) or your business’ Employers Identification Number (EIN). An EIN is basically your business’ social security number. If they don’t ask for one of these, beware, it could be a red flag that something isn’t right.

Here’s what’s going on. In this country (USA) sales tax must be collected on every consumer sale. Yes, I said consumer sale. The end user, or the person buying the item for their personal use, must pay sales tax. However all the sales in between do not need to be taxed (i.e. selling the item from the manufacturer to distributor, distributor to retailer). Follow me so far?

The IRS requires all of us to track these sales so they can make sure the correct tax is being collected and paid. So, when your supplier sells you an item, they report to the IRS that the item was sold to another business for the purpose of resale. This tells the IRS that a sale was made, but it wasn’t to a consumer. The burden to collect and pay the tax on the item now comes to you, the retailer. Suppliers (or manufactures, or distributors) use your SSN or EIN to prove that they sold the item to a legitimate business and the IRS needs to look to you for the tax. Got it?

Five Ways To Start The Year Right With Your Drop Ship Business

It’s the beginning of the year and the perfect time to take a little time to reflect and recharge your drop ship business. While that’s easier said than done, most likely January sales are a little slow (what with the holidays just ending), so what better time to do some housework. Here are five things to do to recharge your drop ship business.

1. Close Out Accounting and Review

Everyone hates accounting, except, I guess accountants. But chances are you fell behind a little during the holiday rush. Now is the time to get everything in order. Enter all back sales receipts, get those credit card and checking accounts reconciled, and make sure your vendors get your invoices out to you. You really want to get your  numbers closed out as soon as possible. Remember, your corporate tax return is due on March 15th, not April.

Once that’s done, you need to go over your numbers to see what went well and what didn’t last year. See where too much money was spent and where more should go. If you ended the year in the red (lost money), why? Did you spend too much on advertising campaigns that didn’t work? Maybe that new laptop wasn’t a smart purchase. Who knows, but you need to examine so you can make adjustments now to get back on track. If you ended the year in the black (made money), why? What things went well and how could things be tweaked to do even better this year?

2. Review Individual Supplier Sales

Run sales reports and break it up by drop ship supplier to see what you are selling. Ask your supplier if they can run a similar sales report on your account and compare. Do their numbers match yours? Make a list of pros and cons for each supplier. You want to note things like stock levels, are they always back ordering stuff, are they easy/hard to buy from, do they invoice quickly and accurately, do they communicate well or do you never know when new/discontinued products are added? Use this list and compare to sales numbers. Here is a little matrix I use to make some supplier decisions based on this review:

-If a supplier has lots of cons and low sales, maybe it’s time to get rid of them.
-If supplier has lots of cons and high sales, it’s time to have a discussion with them. “I really love your product line and sell it well, but I’ve got some concerns, can we discuss them?”
-If a supplier has lots of pros and lots of sales, see if how you can strengthen your relationship with them.
-If a supplier has lots of pros and low sales, it’s time to communicate with them and see what can be done to sell more.

3. Identify Underperforming And Potential Product Categories

Product categories are just as important as suppliers. What product categories are doing well and which are dogs? Maybe something you carried as an afterthought has really sold well, could you expand that line with more similar and higher priced items? Conversely, you will probably see some lines that just don’t work for you. Is it worth keeping the category if you didn’t sell a single one all year long?

4. Check Vendors For New Prices, Discontinues, Or Missed New Items

The holidays are hectic and I know that I missed some updates from my suppliers. Now is the time to get updated product lists and make sure you’ve deleted old/unavailable product and updated any price changes. Even more importantly, did a supplier add a great new item that you forgot about during the rush? Well then add it and promote it, quick!

5. Clean Up!

Finally, after a crazy November and December, I bet your office is a royal mess (mine is). Time to clean. Buy a fresh box of folders and eliminate that “to be filed” pile of papers. Get rid of the clutter, the excess cords that don’t connect anything, the trash and boxes, everything that is just in the way. Put stuff back in cabinets and drawers where they belong. Maybe you should, dare I say, dust and vacuum. Believe it or not, cleaning up can go a long way to boosting your morale and making you feel like you’re ready to tackle another long year.