If you’ve been interested in starting your own internet businessbut you’ve been trying to avoid the hassles of things likedeveloping and producing products, tracking your inventory, settingup warehouse space, and maintaining a confusing shipping/receivinginfrastructure, then drop shipping may be your answer. It allowsyou to sell quality, brand-name products on your website for ahefty profit, while someone else looks after product developmentand order fulfillment.
Although the process can be a boon to internet entrepreneurs,you should know the advantages and disadvantages to this businessmodel before getting started.
In addition to not having to worry about shipping productsyourself, there are a few other advantages to this business model.First, it saves you the cost of building your own inventory. Ifyou’re like most people starting a small business, you don’t have aton of extra money lying around, so the last thing you want to dois tie up your cash in inventory that you may or may not be able tosell.
Second, no inventory also means no leftovers. If the product yousell suddenly becomes outdated, obsolete or just plain untrendy,you aren’t the one with a room or warehouse full of stock nobodywill buy. Many online retailers find themselves having to offerdeep discounts–and taking huge losses–on old products just to getthem out of their homes or warehouses to make room for moreinventory.
Third, you’ll be able to add new products to your site almostinstantly. Since you don’t have to worry about stocking inventory,if you find your customers clamoring for a particular product, it’snot unrealistic to expect you could add the item to your site injust a few days.
Have you noticed there are literally hundreds, if not thousands,of sites selling huge mish-mash selections of inexpensive giftitems . . . things like plastic gnomes and porcelain figurines?That’s because there are a few very large drop shipping companiesthat import these items and then recruit websites to sell them ontheir behalf. Unfortunately, this is not the way for you to go ifyou’re getting started with drop shipping. There are already a lotof giant gift sites out there–and way too much competition for youto reasonably expect to be successful at it.
Instead, spend some time researching different kinds of productsthat you might want to sell. The products you choose should be indemand but not widely available online. It’s most likely preferableto target a niche market rather than try to find a product thateveryone wants to buy.
Whenever possible, you’ll want to set up drop shippingarrangements directly with the manufacturers of the products youwant to sell. The fewer middlemen you have to go through, thebigger your profits will be.
If, after contacting the manufacturer, they agree to drop shipfor you, great! You can be fairly confident they’ll offer you acompetitive price. If they don’t agree to drop ship for you, you’llhave to look for another alternative. This usually means trackingdown a distributor. A distributor is simply a company thatmaintains a large inventory of another company’s products anddistributes those products to smaller companies. The best way tolocate a distributor is to simply ask the manufacturer of theproduct to recommend one. Another great way to find a distributorfor the type of product you wish to sell is by looking throughrelated trade magazines. You’ll frequently find manufacturers anddistributors advertised in the backs of these publications.
Most companies you contact will be more than happy to speak withyou–after all, you’re going to be selling their products for them.When you call, simply ask to speak with someone about becoming avendor for their products. Once the switchboard puts you through tothe right person, they’ll be able to answer any questions you have,including:
1. What’s the wholesale price they can offer you on theirproducts? You’ll need to make sure the wholesale price theyoffer is low enough that you’ll be able to generate a good profitbased on what you’ll be able to sell their products for.
2. Do they charge a handling fee for drop shipping? If so,how much? Most companies that drop ship will simply add thecost of UPS or FedEx shipping onto your wholesale price, but somewill also charge you a handling fee (generally between $1 and $5).This is to offset their cost of picking, packing, and processingthe order for you.
3. How do they ship their products? Almost every companythat drop ships products will use a major nationwide deliveryservice like UPS or FedEx. Ask them to include tracking numberswith the order confirmations they send. This will save you manypotential problems when customers ask, “Where is my order?”
4. How do they bill you? Most drop shippers will billyour credit card the wholesale price of the product plus shippingand handling as soon as they receive an order from you. Withothers, you may be able to set up a monthly billing cycle where yousubmit payment for all orders at the end of each month.
5. How do they deal with product returns? Be sure to findout what their policy is regarding returns. Most reputablecompanies will offer some kind of guarantee or warranty on theirproducts and will deal with returns for you. This way, if acustomer contacts you with a return, you can simply tell them themanufacturer will be happy to speak with them directly. If yourmanufacturer doesn’t accept returns, look out! You’ll be the onestuck replacing defective merchandise for your customers.
