Dropshipping From a Distributor

Discussion in 'Growing and Managing a Business' started by reddogzl, Aug 16, 2011.

  1. reddogzl

    reddogzl
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    Hello everyone,

    My first post got a lot of feedback so I figured I would ask another question. You guys are great!

    I'm working on starting a new online business and I have a question about distribution and dropshipping. I spoke with a company about six months ago about building a site for them to sell their products online. The owner was concerned about managing the online store so he decided against the site. I see a lot of potential for their products online so I proposed an idea to the owner. I want to build my own online store and sell the products they stock. I would essentially be dropshipping the products they stock and he would be an easy way to be my distributor. Here's where I'm concerned:

    Company A buys the product from the manufacturer at wholesale (I assume). I want to use company A as a middleman to stock and ship the items I sell on my site. Would there be a problem with the manufacturer here? Would the manufacturer frown upon the fact that company A is buying them and then reselling them to me?

    Right now company A operates like this: Manufacturer -> Company A -> End User

    With my company it would work like this: Manufacturer -> Company A -> My Company -> End User

    Company A would be working as both a retailer and a distributor, I suppose.

    Thanks
     
  2. daytrader

    daytrader
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    Welcome to the business advice forum. :D
    hope you can contact the manufacturer itself.
     
  3. Gary Barzel

    Gary Barzel
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    I don't see as to why the manufacturer would care, as they are making their profit from Company A. The question is why would you want Company A to work as a middleman for you, when you can get the product for much cheaper directly from the Manufacturer? (ownedbox, I believe was trying to raise this point as well)
     
  4. sigma

    sigma
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    That's not a problem, this is used for many company, they are selling the product to their sub-com before selling to the end user. Their major porpose is just want to reduce the tax :)
    The manufacturer never care about this, as long as you pay them good price and your payment is on time
     
  5. Mountain Man

    Mountain Man
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    Depending on the quantity, many manufactures will not sell dirrectly to you. That is why they have distributers. The distributer (in this case company A) usually doesn't care who they sell to as long as they make a profit. I don't see the manufacture having a problem either since they will be making the same amount of money, you are infact selling them on behalf of the distributer. There may be a few cases where the manufacturer wants to know what is happening to thier product (for public image, such as guns, liquor and tobaco etc.).
    As long as everyone can make money I don't see an issue. If there is, perhaps you can work it so you are a commissioned salesman, so company A pays your company for advertising his products (based on sales). You may not even need to buy the products, simply pass on the sales to company A. I would stronly recommend that whatever you do, get something in writing.
    Best of luck.
     
  6. reddogzl

    reddogzl
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    Thanks for the quick responses.

    The items that I want to sell are quite large, all requiring freight and a very large warehouse to store. I'm in no position to obtain a warehouse, so this is a good way to get started. With this type of product, I don't think the manufacturer would be interested in drop shipping.

    It is a pretty rare opportunity, I think. I doubt anyone is dropshipping these items, so hopefully I'll be able to find a way to beat the competition.
     
  7. sigma

    sigma
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    Not sure what is the product you going to sell but you did mentioned that it is large, I assume it is quite expensive per units. As I know some manufacturer directly sell the distributor/end user not only batch order but also per unit if the product is high price product. Anyway, try talk to the manufacturer, that shouldn't a problem to get the deal, many manufacturer are looking for agent as well
     

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