After much deliberation I have decided to go with the drop shipping option and I will be selling high end traditional shaving gear and accessories. The hardest thing I find difficult is to work out how much I will be charging to my customers who place an order on my site. For example a supplier gives me a wholesale discount of 15% of each item and by the way charges me VAT.
1.) Let's say that product a costs, altogether £25.00 + VAT £5.00 = £30.00
2.) 15% x £30.00 = £4.50
3.) £30.00 - £4.50 = £25.50
My question is what is the best way to work out the price of the product I should be selling at. As a rule of thumb I would price my product at £32.00. Am I doing this correctly? In addition I have also discovered that with drop shipping I cannot compete on price alone as my competitors offer good prices which I just cannot compete with.
Note: the supplier in question is unsure of how many sales I will make so as a new start-up he has give me 15% wholesale discount and this liable to change if my store is a success he will increase the discounts maybe even to 30%.
As a new shopify store owner am I liable to charge customers who purchase from my eCommerce store a 20% VAT charge as I know that you can only charge this if a business makes over £50,000 per year. So do I have to charge customers VAT? Also since I am drop shipping should I charge for potage and packaging and how do I go about working this out as well.
You need to identify what will be your advantages. Often times you cannot compete unless you do make thinner margins for a short period of time. The sweet spot is when you find products that have MAP pricing and you still have some wiggle room to make some profit on each order. As you can price your product where everyone else is or near close and compete with some hustle.
I also would suggest looking into other drop shippers. We have sourced various drop shippers and been able to get higher margins just by making better relationships.