How do I check a dropshipping store’s reliance on a single supplier?
Ask for every supplier the store has used and the share of orders each one shipped. If a single supplier handles nearly all orders, the store is exposed to that supplier’s stock, pricing and shipping. Then check whether a second supplier has actually shipped orders, not just been named in a spreadsheet.
Start with the order records. Ask the seller to export recent orders and tag each one with the supplier that shipped it. A store that lists several suppliers but routes most orders through one is still a single-supplier store. Look at the best-selling products too, because a hit item that only one supplier carries is a quieter version of the same risk.
Next, look at the relationship itself. Is it an account with an agreed price list, or an informal arrangement the supplier can change on short notice? Ask to see messages about price changes, stock-outs and late shipments. Find out whose name the account is in, and whether the supplier knows the store is for sale. A supplier that will not deal with a new owner can stop the store shipping overnight.
Finally, test the backup. Ask to see a recent order fulfilled by an alternate supplier, with its cost and delivery time set beside the main one. If no backup has ever shipped an order, plan for the time and money it will take to find and trial one. Your accountant can help you see how a supplier cost increase would move through to profit.
Key takeaways
- Tag each recent order by the supplier that shipped it.
- Ask whose name the supplier account is in and whether the supplier knows about the sale.
- A backup supplier counts only if it has shipped real orders.
Related reading
13 pages on the same subject, grouped by topic.
Buying
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Selling
Due diligence
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentHow to diversify your supply chain
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