Drop Shipping

[guildofblades]

Hi Everyone,

On the topic of marketing and sales channels, has anyone else here considered setting up drop shipping terms for retailers?

I've been hanging around a number of business forums (I'm always scanning for useful business forums) and had recently become aware of just how many small retailers there really are out there. No, I don't mean game retailers, those are rather a dying breed right now. I'm talking about the large number of e-bay stores, small part time web retailers, independent local shops who sell a variety of trinkets (toys, books, educational stores, used merchandise retailers, etc, etc). And among this segment of stores is a growing number who are specifically looking for drop ship suppliers.

My initial instinct when I heard about the concept of drop shipping was that I wasn't getting any promotional exposure for my products there and that I didn't want to ship tons of mail orders at a discount. But more recently as I have been learning about these industries more, we decided to take the plunge and just recently began offering Drop Shipping and have been getting some interesting results so far. Listings in a number of drop ship directories and been steering a LOT of interest to our site. Only time will tell how large of a business that can be turned into, but its off to a decent start and I get the feeling that we've barely seen the tip of the iceberg.

Anyway, for our drop shipping terms, we decided to offer drop ship retailers a 20% discount with no minimum order. And we are passing on our usual shipping charges, which are based on volume of the individual order. We set up an online ordering page for authorized drop ship orders, so in theory, other than answering the occasional e-mails about the process or products, the sales process should be mostly automated. The real question will be how effectively we can market new product releases to existing drop ship stores and what additional product promotional opportunities we'll be able to dig up through this new sales channel.

As of today we have been provided an opportunity to discuss the products we offer via drop ship on a fairly prominent radio show for small businesses. I'll post the shows name and show in a few days once I know when the segment will be running.

What are everyone else's thoughts on drop shipping by game manufacturers?

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com

[Troy_Costisick]

Heya,

Could you explain a little bit more about what drop shipping is?  I have to confess, I haven't heard of it before now.

Peace,

-Troy

[Justin D. Jacobson]

When I saw the thread title, I thought you were planning on sending Dro (of BWHQ) somewhere.

But, yes, count this as a tell me more, I'm intrigued, request.

[guildofblades]

Ok the basics of Drop Shipping works like this:

I am a manufacturer or distributor of a product. I want to sell it. I want other people to help me sell it, ala, retailers.

In the new virtual world, and perhaps this new era of brick and mortar retailer stocking nothing and trying to "special order" everything, retailers want to sell things, but retailers do not want to invest money to stock things.

So as a Drop Ship provider, I offer to sell them the product at some sort of discount (or net fee) and tell them when they place an order with me, instead of shipping the order to them I will ship it directly to THEIR customer. A slap their store name and return address on the return address label (but I do slap MY product catalog in the box along with the product and sure do record the customer's mailing address....I am thinking I might provide Drop Ship retailers with a product shipping notification where I will send an e-mail to their customer directly with notice of shipping (so I can get those e-mail addresses...lol)).

Most Drop Ship retailers sell products at NET wholesale costs with no listed MSRPs and let retailers price as they will. We tend to believe in MSRPs, so we sell our Drop Ship goods to the retailer at a 20% discount.

So, step 1:

Virtual retailer sees our products and that we do drop ship. They find a way to list our products for sale in their store or on their site. They contact us and ask to be authorized as a Drop Ship retail account. We review the legitimacy of their business (because we don't want to be discounting our products 20% to general consumers) and authorize them (or not).

Step 2: Retailer sells the product, collecting their chosen selling price plus however much they chose to charge for shipping and handling.

Step 3: Retailer logs into our Drop Ship ordering page and inputs the order. On that page all products added to their shopping cart are charged only 80% of MSRP. Their order is also charged our standard shipping rates. The Drop Ship retailer makes sure to provide us the customer name and shipping address is the transaction notes.

Step 4: We ship the product directly to the consumer.

Its very much like an affiliate program excepting the retailer takes payment directly from the consumer and we take payment directly from the retailer. So they are getting a mark up just like a retailer who purchases and stocks things (albeit a smaller markup unless they are charging WAY over MSRP) rather than an affiliate fee.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com

[timfire]

Is that 20% off cover, or 20% off the retailer standard rate?

[guildofblades]

20% discount off of our MSRP. Our suggested cover prices.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com

[Clyde L. Rhoer]

Hi Ryan,

As a consumer I like the sound of drop shipping. One of the main reasons I won't special order from a Brick and Mortar, or anywhere else, is I have to come in to the store, and order the product. Then I wait, hoping they call me, and hoping they don't sell it to someone else who walks in the store. Then if all that happens I have to go back and pick it up. Drop Shipping sounds like it would meet an unmet need. Retailers can sell more products than they can hold on their premises, and customers could more efficiently get special orders.

Possible problems? Customers can already order online, and cut out the middleman. I'm not sure how strong your game brand is, so I don't know your ability to strike up your own deals. It seems to me like the idea is much stronger the more products are involved. I'll be interested to hear how it works out for you.

[guildofblades]

Hi Clyde,

Well, we are perhaps more suited to offer this kind of promotion than a lot of other publishers because we 1) Don't sell through distributors so we don't need to worry about any negative impact on our business by offering yet another way to supply product that does not include them and 2) We have a fairly large catalog of 60-80 items to sell and a good half of them are historical board games that are not too complex and with reasonable prices, so our games might be a lot more palatable to general online retailers.

In truth, once we announce this program I really do not believe many game retailers will take advantage of this method of selling. Because even though very few of them are willing to stock much beyond whatever the hot collectible game of the month is, they also have it ingrained in their mind that they are entitled to get a 45-50% discount no matter what. And with us doing all the inventorying and shipping on these, no way we can offer them that. Those kinds of discounts are reserved for the retailer who buy our products and stock and promote them in their stores.

You are right, consumers can come order the stuff from us right now. That how we make the bulk of our sales currently to, and we had once upon a time used up to 17 distributors and were stocked in 800+ retailers. But hobby retailers, in general (not all) are fickle and stock only whats perceived to be hot today and care not what sell steadily year after year. (for example, I once heard the "average" quantity on sales for the average item in the average hobby store was between 2-3 copies sold per year. I've had stores selling many of our products in quantities of 6-10 in a year decide to stop selling the products because "they didn't sell well enough". Obviously they sold well compared to average, but yeah, 6-10 copies doesn't seem like much if all you are looking for is the next item that will sell like the Pokemon Trading Card Game had during its peak). Anyway, I see the Drop Ship program as a means for small hobby retailers lacking the ability to stock our whole line to maybe stock a few of the best sellers and be willing to sell the rest by Drop Ship. I also see it as a means to introduce our products through other online sellers not specific to the hobby game market and thus expand our ability to introduce our games to potential new gamers.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com

[johnwedd]

haveing the option to drop ship is nice for your net euntraprenuer, way to start an online biz. it requires alot more work on the shippers point. which can quickly turn into a logistical nightmare. you gotta have a close working relationship with the retailer. to make sure that things like amount and what have you. limiting how many retailers you have. thats the key.

[guildofblades]

Hi John,

We simply give our Drop Ship retailers an internet ordering catalog page where they can input orders. So to us, it ends up getting processed just like any order mail order, excepting we slap a different return address on the package. In this manner we can handle drop ship orders every bit as quickly as regular mail orders and hence are not limited in our ability to handle volume.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com
http://www.thermopylae-online.com

[Mcrow]

So, lets see if I get this right.

A retailer gets and order for a game @ their store and pays them the retail price.

The retailer logs into your site and orders the game @ a 20% discount off  of the cover price and pays the shipping.

You mail the game to the buyer.

If I were a retailer, i'm not sure I'd go for that. On an $20 game I would make $4, minus shipping which would be a minimum of $2 for media mail. I see no reason why a retailer would bother. I must be missing something.

[guildofblades]

You have it right except...

Every retailer I know of on the program so far passes shipping onto the customer....

Its the exact same shipping fee they would get charged if they came to our website and ordered directly from us, so they're not "losing" anything by ordering through the retailer.

Actually, there is no proviso for telling a retailer at what price or at what shipping fee they can apply to their sale. So on their end I can not dictate, not can I really track what they are charging for our games or for shipping. Its possible some retailers chose to pad their margins a bit by marking up either retail price or shipping above MSRP and our shipping charges. It is up to each retailer to decide how they want to manage their sales.

You are right, in traditionally hobby game retail a 20% discount is very low. In this case, however, they have almost no risk and no investment. They don't place their drop ship order until they actually have money in hand from the consumer putting an order in with them.

For retailers who feel 20% is too low, we support a web based wholesale ordering option at a 42% discount and our limited retailer Point or Purchase Preferred retail program gets retailers a 60% discount. So we support vastly different programs so as to be able to sell to just about any retailer, hobby game in focus or otherwise. Most of our "non" hobby game retailers either simply utilize the web ordering wholesale option or drop ship option.

In spring of 2007 we're going to begin a sales rep program where we will give a sales rep a cut of a sale to a new retailer (for us), though we're not certain exactly what cut. Leaning on 15% on first time sales and thereafter that rep will be assigned to that retail account and expected to keep the retail reasonably up to date on new releases, promotions, etc, etc. Sales after the first will likely earn the rep 10%. If the rep wants to earn greater commissions, we'll begin to offer programs to support in store demos and events where the rep can show off the games to try and build interest and more commissions. We figured all reps will be part time and most will be pre-existing fans of our games. And we're going to try and steer them not just towards game stores, but all sorts of other retail sectors where our games might be able to gain some shelf space. However, I expect we'll still channel all retail sales through one of our three programs and that Drop Shippers will not be assigned reps and drop ship sales can not earn commissions.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com
http://www.thermopylae-online.com

[Mcrow]

that makes more sense.