# Margins and Costs using Fulfillment or Dropship



## voyager (Nov 15, 2010)

We have a music related website and are interested in setting up a store to help monetize the site. The past week or two I have been talking with some music shirt wholesalers (primarily pre-printed band shirts) regarding order fufillment and setting up an online store.

There seem to be two models which are close to what we're looking for:

- The first being where the wholesaler will set up the online store for you (as a sub-store off their main domain eg. www.wholesaler.com/stores/yourstore). Then they handle most of the inventory selection, the product pricing, the payment processing and customer handling. Leaving us to simply link to the store and do other marketing. This model pays us a straight % for any sales and we have no control over markups.

- The second being where we set up our own store on our website domain (eg. shop.example.com). Then we have to set up our own storefront, populate the store with the wholesalers products, do our own payment processing, then submit each individual order (automatically) to the fulfillment wholesaler for shipping. Here we get to set the markups and are in more control of our margins and customer base.

Please let me know if I have anything wrong so far.


So, having said all that I have a few questions:

1. For model #1 above. What is a reasonable or industry standard commission rate on sales we should expect to receive?

2. For model #2. How much work is required (after the initial setup), on an ongoing basis for handling the inventory management and processing?

3. What are the hidden costs in both models?

4. What sort of standard contract terms should we expect to see with the wholesaler? eg. Start-up costs? length of contract? Other quirky business stuff to watch out for?


Any other advise or guidance for someone relatively new to this industry is very much appreciated - Thanks in advance!


----------



## LuluJ1984 (Oct 17, 2012)

I'd be curious to know the approximate start up fee price of model #2 also.


----------

