Drop Ship Strategies for Canadians
Dropship Canada
Canada Wholesale Drop Shipping
Last Updated: 7 April 2008

Introduction

What is "drop shipping"?

A drop ship distributor receives your wholesale order for a product that you have retailed to your customer. The distributor then ships the product directly to your customer, with your return address on the label. You don't have to stock any inventory, mess around with packaging, or hassle with shipping. Your gross profit is the difference between the retail and wholesale costs.

Entrepreneurs have generated tidy profits by means of drop shipping, on eBay, through online stores, via email or other marketing strategies. Success is contingent upon the ability to identify demand, select the right product, and market that product effectively.

There may be various legal obligations you need to meet in dealing with a wholesale drop ship distributor. For example, a distributor may require (1) a U.S. bank account and (2) a state-based business license (Tax ID) before approving a wholesale account, whether you're a U.S. or a Canadian resident.

On the other hand, you may be surprised to learn that some — chiefly U.S. — solutions do not require business credentials or credit references, and, since you're considered a "reseller" once you've set up your account, neither do you have to pay sales tax on your orders. Shipping may even be free of charge, depending on the solution you choose.

From a Canadian perspective, a number of additional hurdles must be considered. If your wholesale drop ship source is in the U.S. and your customer is in Canada, you may have to contend with duty, brokerage fees, and tax issues. Your customers will need to be advised of these additional charges, since they cannot be built into your retail price.

Set up wholesale accounts with Canadian companies that drop ship.

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 are somewhat more complicated. Indeed, some Canadian entrepreneurs have elected to market only in the U.S., avoiding the Canadian scene altogether. 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.

The latter problems are eliminated if you can locate Canadian companies willing to ship to Canadians. In that event, depending on the company's drop ship policy, you may only have to pay for shipping. GST/HST, PST and RST are additional areas of concern, and these are examined in greater depth Drop Shipping Legalities in Canada. Basically, you are not required to become a GST registrant until your profits are >= $30,000 CAD. Provincial Sales Tax may or may not apply, depending on the point of sale.

In the past, locating wholesale drop shippers in Canada required a great deal of personal research. Drop ship directories specific to Canada were non-existent or unreliable. U.S. directories and guides included few if any Canadian companies, with little additional information provided to explicate cross-border hassles.

This problem has been ameliorated to some extent by the emergence of new services specific to the Canadian scene. One of the best of these new services is provided by Wholesale Canada.

Based in Montreal, Québec, Wholesale Canada provides an online directory that includes more than 7,500 Canadian Wholesale sources, U.S. Wholesale companies, and lists of drop shippers who ship to or are located in Canada (21) and the United States (29). The the information is solid and the price is easy on the wallet — $15 USD for six (6) months' access, and $ 20 for a full year. If you're looking for Canadian wholesalers and wholesalers who drop ship, we highly recommend this service. [Read Review]

SaleHoo is a service we've come to appreciate more and more. Founded by Simon Slade, an Australian entrepreneur, SaleHoo Inc. has grown dramatically in recent months and is now approaching 50,000 members, worldwide. What impresses us most about this company is their determination to facilitate the efforts of their members. They don't offer the same services as Doba®, for instance, enabling you to deal with multiple suppliers through a single account; SaleHoo helps you run your business on your own, offering clear setup advice, research tools, and reviews of suppliers from and discussion of strategies with other members in the community. See, for example, their free Canadian resource site.

Shopster, headquartered in Calgary, Alberta, operates a Virtual Warehouse containing more than 700,000 products in the US, from where the majority of products are shipped. They offer a storefront solution that can help eliminate many of the headaches involved in running your own online store. Some Canadian suppliers have product in the system, and if you stock your store with them and market to Canadians, your customers won't have to worry about duty or brokerage fees from cross-border shipments.This solution is not for everyone: although the Shopster system does not require advanced knowledge of design, coding and marketing, unique customization of your storefront and successfully promotion of your selected products does. Read our review for further deatils.

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.

Doba® (formerly, Wholesale Marketer®) is an American company we believe offers the best overall solution for Canadians who market to the United States. This company does not require a TaxID, references or related credentials for membership. They offer a turnkey solution — you can set up an online store, stocked with products through your Doba account. Prices recently have gone up, so this solution isn't as affordabl;e as it once was. Read a full review here.

Dropship Design LLC, another U.S. solution, provides three packages, each with a one-time set up fee and no recurring monthly costs. Here's a summary of their solutions:

Unlike other dropshippers, we do not markup the wholesale prices. We charge you the REAL wholesale price so you can enjoy the highest profit margins. We can help you find the perfect products at the lowest prices available.

We believe that your efforts in selling our products should be rewarded with 100% of the profits.

It's simple...
You sell our products, we ship for you, you keep the profits!

Whether you're the owner of a retail store, a webmaster, a beginner or an expert eBay power seller, we have the perfect package to fit your needs.

OUR DROP SHIP & WHOLESALE PACKAGES:

• Package 1
  Sell our products on eBay and keep all the profits.
  This package will allow you to sell any of our products on any online auction of your choice. This package is also good for those who want to replenish their retail store or secure products at wholesale price for resale in swap meets.
  Price: $99.99
  (no monthly fee)
  Details



• Package 2
  We will build a website for you — no hosting fees.
  A dropship website package will provide you with a website that we will build for you and include ALL of our products in it for you to sell to others. Your profits will be the difference between the retail and the wholesale price. We do not keep any commission on any sales.
  Price: $149.99
  (no monthly fee)
  Details



• Package 3
  Combine package 1 and 2 together.
  Price: $199.99
  (no monthly fee)
  Details

Use distributors who ship internationally from locations outside North America.

At Selected Online Wholesale Directories, we've listed several services through which you can identify international wholesale sources, some of which may drop ship. This will require some degree of research, on your part, but many such services enable you to post your requirements and obtain responses from vendors. Alibaba.com is a good example.

Recently, an Australian company called SaleHoo has received a lot of attention. SaleHoo list many sources that will ship internationally, but, logging in from Ottawa at least, the site is very slow and something of a work in progress. Still, this service has a presence in many nations around the world, and you may find it worth your time to investigate. You can read our review here.

Summary — Identifying what works for you.

The above strategies are not mutually exclusive, of course, but it's advisable to know your focus before you begin. If you're marketing to the U.S., you have many more options available. Some of your suppliers may ship to Canada, but the vast majority may ship only within the continental United States.

Wholesale Canada lists a few Canadian drop shippers, but, when I called several wholesalers and discussed with them the possibility of a drop ship arrangement, some were quite amenable to the idea. And you can also search on your own, using, for example, the various resoources we've listed at Find Drop Ship Suppliers in Canada. Local negotiations are also a good strategy. Use YellowPages.ca to facilitate your search.

The international solutions have potential. We strongly recommend that you visit your provincial business center for additional information and resources — see the right-hand column of this page.