Worldwide Brands lists fully vetted suppliers in Canada (meaning: no cross-border hassles for Canadian customers) and other countries, in addition to 8,000+ listed in the United States,
New suppliers are continuously added. As of 8 May 2008, here are the numbers:
Drop shipping is a well-established marketing strategy in the United States. Many companies provide this service, and state
laws generally facilitate such trade. In Canada, however, things can be somewhat more complicated.
The wholesale drop shipping model is quite straightforward.
Your customer purchases product from you at retail cost;
You order the product from your wholesale supplier, to whom you provide the customer's shipping information.
The supplier drop ships the product directly to your customer.
You don't have to stock any inventory, mess around with packaging, or hassle with shipping. Your gross profit, quite simply, is
the difference between the retail and wholesale costs. (For a more detailed essay on how drop shipping works, see here.)
Some resellers prefer to work only with Canadian suppliers and target only the Canadian market, but, until recently, few options
were available to them (see Find Drop Ship Suppliers in Canada > Directories for options).
Canadian businesses are not generally geared toward wholesale drop ship arrangements with independent resellers; many market
directly to retail stores. An increasing number of businesses now have wholesale drop ship programs in place, however, and more
are becoming available all the time. Sometimes the best approach is to contact a local manufacturer or distributor and negotiate
a wholesale drop ship arrangement directly.
It's best to set up your business as a legal entity. There are many reasons for this, including the fact that you'll want to keep your personal and business finances separate,
but the most important reason to get legal is that reputable wholesale suppliers prefer to work with a "real business". To set up an account with a legitimate wholesaler, you should have
a Business Number (Canada) or Sales Tax ID (U.S.) — see the homepage and Wholesale Sourcing, for videos and links
pursuant to the this. It is also useful to incorporate. If you're in Canada, talk with the people at
CorporationCentre.ca. In the States, check out the services provided by
MyCorporation.com.
Learn the Ropes...
Once you've got the legal issues in hand, depending on your objectives, there are many additional issues to consider. You have
to find product, for example, and product sourcing can be problematic, given the number of middlemen and bogus operations out
there. We strongly encourage you to check out Worldwide Brands for free videos, articles,
eBooks and tutorials. CEO Chris Malta has developed a comprehensive resource that sets the industry standard, and
the wholesale product information is rock-solid, fully verified and reliable. You'll also benefit from an understanding of how
wholesalers and drop shippers work, how to handle taxes, brokerage fees, backorders and product returns, and so on.
Beyond that, and any other legal requirements you must meet (if, for example, you decide to import goods into Canada,
it's fairly straightforward to get going. Salehoo.ca provides a good general guide, entitled
Tax basics for Canadian eBay Sellers and Business Owners. We provide
detailed references below, and relevant links at upper right.
Finding Suppliers
As already indicated, we believe Worldwide Brands is the best product sourcing solution, but there are several approaches you might take to locate
wholesale suppliers. We discuss some of these below, and explore several more at Drop Shipping > Reviews & Articles,
and Find a Drop Shipper in Canada).
Finding the Right Products To Sell
Selling what people are buying is the only way to make money.
And selling those products in the right places is equally important.
One of the best ways to find the answers to both questions is the Market Research Wizard.
Market to U.S. residents via U.S. drop ship suppliers and service providers
It may prove much easier to arrange a wholesale drop ship solution in which you sell products only to residents of the continental
U.S., thus entirely avoiding cross-border hassles, GST/HST and RST. Indeed, many Canadian entrepreneurs have elected to market only
in the U.S. They still have to pay Canadian taxes on their profits from these U.S.-based transactions, but they avoid cross-border
hassles and shipping issues. Armand Melanson, for example, a successful online entrepreneur in Nova Scotia, advises that "[t]he
consumer/industrial base in the US has made it the mecca for selling online using the dropship method. Most people selling
successfully online (even those from outside the USA) are selling to US buyers using US suppliers."
Drop shipping is the shipping of merchandise from a supplier directly to a retailer's customer. This means that
the retailer can ship to their customers directly from the suppliers' warehouses. This process minimizes risk
because the retailer does not need to buy the product until it has sold. Suppliers take care of the warehousing,
packaging, and shipping of products, saving you a great deal of money.
The product selling process:
Find products to sell from the Doba Product Catalog.
List those products on a web site or auction (use the descriptions and images on the Doba site).
After the product sells, collect the money from the buyer.
Place the product order through Doba after receiving payment from the buyer.
The product is shipped directly to the customer.
Doba® has been an eBay Certified Service Provider since 2004 and is regarded by many as the most trusted drop ship solution in the industry.
Their innovative business model enables the user to source product from 203 wholesale distributors, manufacturers and craftsmen (they add about 5/week),
all through a single account. They create relationships with U.S. suppliers and manufacturers who agree to drop ship products for Doba® members. The
monthly membership fee affords access to all of these wholesalers, some of the biggest in the nation, enabling small and home-based businesses to secure
product. You even have access to them during your Free Trial.
Their Order Life Cycle fulfillment engine manages an order from the time a member places the order until the customer receives the product; you can track the order and update your customers as to order status,
so the hassles of returns, refunds, and reconciliations are minimized. Doba® doesn't require a business license or credit references to setup your membership, and, with the exception of their new Advanced package, neither do they
require a Tax ID. Most suppliers, wholesalers, and manufacturers in the aggregated group charge a small drop ship fee for pulling, packaging and shipping a single product from the
shelf - a product they usually sell in bulk - and you do have to pay that fee when you order. Doba® makes all such fees transparent
to the member, however, when he or she selects an item for purchase. Upfront and itemized, you see precisely what your costs will be.
Doba® does not take a cut of your profits - they finance their operating expenses entirely through subscription costs. More than 30,000 members. NOTE: We recommend this service for Canadians who market to the United States. Most suppliers do not ship to Canada.
DropShipAccess
Located in Monroe, Michigan, this BBB-accredited business provides access to multiple suppliers without taking a cut of your profits - the service is paid for through the monthly fee. Depending on the product, wholesale prices are generally 30-70% below MSRP. Shipping cost is listed with each product, and the website states that most items can be shipped internationally — to Canada, the UK, and Australia (you still need to factor in duty and other hassles, such as product returns, but one rarely sees an offer to ship internationally in this context). There are three plans: Basic ($39.95/month), Advanced ($59.95/month), and Enterprise ($79.95/month) — and there's a 7-day free trial. DropShipAccess is a member of the eBay Developer's Program, and their Advanced package includes an eBay listing service that enables instant product loading to your eBay store. Other turnkey storefront solutions are also available.
DropshipDesign.com
Dropship Design LLC, another U.S. solution, provides five packages, each with a one-time set up fee, no recurring
monthly costs, but an annual renewal fee of $67 USD (due and payable 12 months following the date of purchase). They offer a Basic Dropship Plan ($49.99 USD), an eBay Ad Wizard ($99.99 USD), a Website Plan ($149.99 USD), Product Export Files ($149.99 USD), and a Combo Plan (all of the previous, for $199.99 USD). Support via email.
Shopster
Now an eBay Certified Solutions Provider, Shopster offers a Product Sourcing plan (including a List Manager for eBay) and Shopster e-Commerce, a configurable
storefront solution. Prices are on par with Doba®, and most of the suppliers are U.S.-based, though Shopster is headquartered in Calgary, Alberta. We
are a member of Shopster, and we maintain a storefront. About 25% of free trials move to full membership.
What if your US supplier won't ship to Canada?
Problem:
Many US Retailers do not ship internationally
Solution:
MyUS.com gives you a real US street address.
MyUS.com allows you to receive items from any US company or person.
MyUS.com ships packages from your US address to over 200 countries worldwide.
US versions of websites give you much wider selection of goods.
You benefit from discounts and sales offered to US consumers.
Better Business Bureau — Accredited Business MyUS.com was named the 2009 Exporter of the Year (Business Services category) by the U.S. Department of Commerce.
Incorporated in 1997 and active since 1997, Access USA, Inc. (MyUS.com) provides international package forwarding
through their warehouses in Bradenton, Florida; they serve more than 30,000 customers annually, and receive approximately 2,000 packages daily on behalf of their customers. Since stores
and suppliers in the US typically do not ship overseas, this service enables people living in any of more than 225 countries to enjoy the same services as US citizens. Each customer
chooses whether they are interested in package forwarding, postal mail forwarding or both. Three plans — Standard, Premium, and Premium + Mail ¨ each with a small setup fee. Premium
plan is best for drop shipping — setup fee + monthly or discounted annual fee.
Duty under NAFTA
Let's say you're in Toronto, you have an online business that sells products for personal use, and you rely on a U.S. supplier
who drop ships items made in the U.S. to your customer, say, in northern Alberta. With respect to duty:
Your goods qualify for the U.S. duty-free rate under NAFTA if the following
applies:
the goods are for your personal use; and
they are marked as made in the United States or Canada or not marked or
labeled to indicate they were made anywhere other than in the United States or
Canada.
If you would like more information on goods eligible under NAFTA, refer to Memorandum D11-4-13,
Rules of Origin for Casual Goods Regulations, which is available on the CBSA's Web site at www.cbsa.gc.ca under
"Publications," or you can call BIS at one of the telephone numbers listed in
the section called "Additional information." How goods qualify under NAFTA Accessed: 7 April 2008
Importing - Duties and Taxes
Now, the goods are not for your personal use, in this instance, but for your customer's personal use. They are considered "casual"
as opposed to "commercial" purchases, because your customer isn't buying one or two power tools, for example, not a pallet of 50.
In technical terms, your customer is the "importer", not you - you've simply facilitated the acquisition of product - and the customer
isn't responsible for any import-related paperwork. Duty does not apply under NATFA, but sales tax does. The relevant facts can be
found in Importing Non-Commercial Goods by Mail:
Notes on Taxes
You do not need to register for a GST/HST number unless your annual sales
are >= $30,000 CAD (see GST/HST, below), but, should your total sales equal
or exceed that amount at any point in the year, you must call the office and
register immediately. You must charge GST on all sales
thereafter.
Sales made via the Internet
If you sell taxable goods or services via the Internet you must charge RST on the total value of the goods that are delivered
(physically or electronically) to Ontario, or the services that are rendered in Ontario, regardless of where the sale takes place.
With the exception of computer programs, if the goods you sell are delivered electronically, such as a magazine or a catalogue,
and you do not provide a hard copy you are not required to charge RST.
Total value includes the selling price in Canadian dollars plus shipping/delivery/mailing charges, customs, duties and federal
excise taxes. Federal Goods and Services Tax (GST) and brokerage charges are not included in determining the total value. On
your website you must inform your customers that RST is applicable to your sales of taxable goods and services delivered in
Ontario. If your goods or services are delivered to customers outside of Ontario, you are not required to charge RST. You are
required to retain proof that the goods or services were delivered to a customer located outside of Ontario. [...][Read More]
Duties
We calculate any duties owing based on the value of the goods in Canadian funds. The duty rates vary according to
the type of goods you are importing and the country they came from or were made in. Depending on the goods or their
value, some other taxes may apply, such as excise duty or excise tax on luxury items like jewellery.
Under the North American Free Trade Agreement (NAFTA), duties on various goods imported from the United States and Mexico
have been eliminated. The NAFTA rates apply when the goods you are importing are made in the United States or Mexico.
Goods and services tax (GST)
You have to pay GST on most goods you import into Canada. This is to make sure the imported goods are taxed in the same way
as those sold or provided in Canada. We calculate GST on the mail item’s dutypaid value. This is the total value converted
to Canadian funds, plus any duties that apply.
Harmonized sales tax (HST)
The Government of Canada has entered into agreements with certain provinces to collect HST at a rate of 14%. If you live
in a participating province, you will have to pay HST instead of GST. We calculate HST the same way as GST. The tax you pay
is based on the mail item’s duty-paid value.
You do not have to pay the provincial part of the HST (i.e. 8%) on books at the time you import them. However, you will have
to pay the remaining tax (i.e. 6%) if the publisher has not already collected it from you.
Provincial sales tax (PST) and tobacco tax
We collect PST on behalf of the provinces of Ontario and Saskatchewan, and both PST and provincial tobacco taxes on behalf
of the provinces of British Columbia, Manitoba and Quebec. We collect tobacco taxes on behalf of Alberta.
In British Columbia, Ontario and Saskatchewan, PST is collected on the province’s taxable base on most noncommercial goods.
Examples of goods that are PST-exempt in Ontario and Saskatchewan include books, children’s clothing and children’s footwear.
In Ontario, examples of PST-exempt goods include books, children’s clothing and footwear valued under $30.
On behalf of Manitoba, we collect PST on all imported non-commercial goods except footwear, clothing and books. In Quebec,
only books are PST-exempt.
PST and tobacco tax rates vary from province to province. To obtain a listing of the rates currently in place, please refer
to Appendix A of Memorandum D2-3-6,
Non-commercial Provincial Tax Collection Programs. Accessed: 7 April 2008
If, on the other hand, you are bringing product into Canada for commercial purposes, such that you intend to stock and ship that
product to your Canadian customers, then you are the importer. In that case, read SME Centre: A Step-by-Step Guide to Importing.
Become (or deal with) an Importer of Record
An alternative is to become an importer of record, bring the product into Canada, then ship it yourself (see under References, below). In that case, however,
you're handling stock and shipping packages. Or you might consider the services provided by
Dropshipped Canada. Online supplier
of power tools and more, Scott White, importer of record, has product in US warehouses. Orders to Canada are shipped UPS Standard
(<= 200 lbs). Brokerage fees and applicable taxes are flat fee ($15.00 for <= $1200 of product; $35.00 for > $1200 of product), included in
your cost, and all prices are USD. No Minimums.
MEMORANDUM D8-2-2 This memorandum outlines the conditions under which a remission may be granted on certain goods imported through customs mail centres.
The wholesale drop ship directory or service solution that works best for you will depend on the market you wish to target. Again, many Canadian
entrepreneurs prefer to market to the United States, because this strategy enables them to avoid cross-border hassles
and brokerage fees.
Some resellers prefer to work only with Canadian suppliers and target only the Canadian market, but Canadian businesses are not
generally geared toward wholesale drop ship arrangements with independent resellers — many market directly to retail stores,
with which they have drop ship arrangements. An increasing number of businesses now have wholesale drop ship programs in place,
available to legitimate resellers, and more are becoming available all the time. We listed several resources you can use to locate
these suppliers. Some service solutions don't require business references or credentials, but it remains your responsibility, as a
reseller, to meet the local, provincial and federal requirements for your business. The service provider simply requires that you
keep your account in good order.
If you do not use a service provider such as Doba® or Shopster, we strongly recommend that you get legal, get your Business Number (Canada) or TaxID (US).
When you approach a drop ship wholesale supplier independently, be aware that many do not want to work with a small-time online reseller whose orders
may be erratic and low-volume. Be professional and straightforward in setting up your account, but reveal your situation only
if asked directly. Sometimes the best approach is to contact a local manufacturer or distributor and negotiate a wholesale drop ship
arrangement directly. Some merchants, even those unfamiliar with drop shipping, will be willing to work with you once they understand
thhat working with you will prove mutually beneficial.
Dealing with High-Cost Shipping on Low-Priced Products
Clark Winegar, Doba's Director of Retention
You've probably noticed several items on Doba that cost more to ship than they cost to buy. Batteries are a perfect
example. With an MSRP of $1.48, shipping cost of $7.49, and a drop ship fee of $2.00. Who in his right mind would try
to sell a set of four AA batteries from a Doba supplier?
In this article, we explore the high cost of shipping low-priced items and reveal various ways you can include these
items in your business model to improve sales and even make a profit selling them.
Why are the shipping costs so high?
Why is the shipping cost so astronomically high? The answer lies in how the product is shipped. At Doba, we require
all our suppliers to provide us with tracking numbers for all shipments that can be tracked online. For drop shipping
we feel this is essential. Since our members never see or touch the majority of the products they sell, we have to be
able to provide them with the added visibility of online tracking. This means that all of our suppliers ship UPS, FedEx,
or DHL (mostly UPS and FedEx). These are premium shipping services that not only allow you to track packages online,
but also insure the packages and have certain minimum shipping fees regardless of size and weight.
You could ship the products for a lower cost yourself, but if you were to use the same premium shipping services, you would
end up paying about the same (in many cases even more) than what our suppliers charge for shipping.
Getting creative
Do high shipping costs prohibit you from selling these low-priced products? Certainly not. You just have to sell them
a little differently. The following list describes your options:
Sell in bundles or sets. As long as you sell from the same supplier, bundling products together or selling a higher
quantity of the same product can be a great way to spread the shipping costs out over multiple items. One of our
suppliers, for example, offers card stock for $0.26 per sheet with a shipping cost of $5.43. If you add 150 sheets
of paper to your cart, you can sell the bundle for $39, and the shipping cost only increases from $5.43 to $7.49
(costing you less than five cents per sheet). Perhaps you could combine several different colors of cardstock into
a set or sell the paper with an album. Apply the same principle to other products. If you were selling a tiny digital
camera battery, you could combine it with new memory card and camera lens cleaners or other camera maintenance items.
Be creative.
Absorb the cost into your profit margin. You see specials on the web for free shipping, $0.99 shipping, or other
low shipping offers all the time. How do they do it? Online retailers know that there's no such thing as "free shipping."
Carriers always take their cut. Companies that run specials like this have to absorb the shipping cost by making lower
profit margins. At first, lower profit margins may look less attractive, but sometimes a lower profit margin can make
the difference between getting a sale and losing a potential customer. Lower profits are better than no profits.
Carry an inventory. One of the great advantages of drop shipping is that you don't have to manage inventory, but sometimes
carrying an inventory makes sense. If you find a product that seems to sell great but the shipping fees are cost prohibitive,
consider ordering a large quantity and having them shipped to you. You can then ship them out on your own using a lower
priced shipping alternative like the post office. This is extra work for you, but it could also mean more profit.
Offer freebies or bonuses. Offer small, inexpensive items as promotional perks. A small bonus can make a huge difference
to a customer. Auto dealers give away stuff like new DVD or MP3 players, ski tickets and golf passes. Compared to the total
price of a $20,000 or $30,000 car, these bonuses are miniscule, but customers love them.
Offer less expensive items only as an upsell. The idea here is to not offer inexpensive items as part of your regular product
catalog. Instead, have the item appear as an upsell only after an item has been added to the shopping cart. You can do this
with a universally upsellable product, such as glow sticks or flashlights if you specialize in camping equipment, or program
your cart to offer items according to the type of product that is added to the shopping cart (for example, offer tent pegs if a
tent is added or propane if a lantern is added).
You can use one of these methods, or combine several of them in order to be successful. Just remember, there is no such thing
as "free shipping." Someone always has to pay and most of the time it's the retailer, so get creative and learn to make money anyway.
About the Author:
Clark Winegar, Director of Retention at Doba (http://www.doba.com), holds the distinction of being Doba's very first full-time
employee. Clark holds a bachelor's degree in marketing from Brigham Young University and has played a key role in Doba's success,
including identifying, recruiting, and integrating new wholesale suppliers; editing the first edition of Drop Shipping For
Dummies, and penning several articles on how to succeed as an online retailer. Clark's intimate understanding of the
wholesaler-retailer relationship and his first-hand experience as an accomplished entrepreneur make him uniquely qualified to
help guide Doba members to becoming as successful as they are ambitious.
