Drop shipping is basically a supply chain management technique through which the supplier allows you to sell their inventory of products in your online store without you ever physically handling the stock. For listing products from various drop shippers, you can use TripleClicks and other auction websites. When you get a sale, you just have to forward that order to a drop shipper. First the consumer pays you for the product/s, then you pay the wholesale rate for the same product to the drop shipper. Once the payment is settled, the items will be delivered to the customer along with your details printed on the package.
The biggest plus of using a drop shipper is that you will not have to deal with overstock which can badly affect your resale. Additionally, a drop shipping retailer will not need a warehouse or storage facility, neither will he be responsible to handle packaging and shipment of products. This leaves him to focus his efforts on marketing and customer service.
On paper, all this sounds like a piece of cake. In reality, however, the online world is a beast and can make things complicated beyond imagination. When you are working as an online merchant, you are not just looking for buyers for your products but also competing against many sellers who may have far greater experience than you.
To get started right away, select wholesale items from a drop shipper that can be listed in auction sites or if you have a website or online store, that’s even better! Once any item is sold, you will receive the payment. Subsequently, you will forward the order to the drop shipper along with all consumer specifications, i.e. name and postal shipping address. Upon receiving the order, the drop shipper will ship the product directly to your buyer for you. The difference between the wholesale price and the retail price will be your profit for the sale of each commodity.
The Benefits of a Drop Shipping Business?
Listed below are some good reasons why an ecommerce retailer must consider drop shipping.
Your Product Line
When you own a physical store there is a limited space available to hold the inventory. Plus, there are additional costs associated with maintaining an inventory and you can only offer a limited number of products. With drop shipping, however, you get to offer as many products as you want which was not feasible otherwise. Only online merchants with drop ship arrangements get the opportunity to showcase unlimited products.
Quick Access to an Assorted Market
There is no denying of the fact that the online market is huge and when a merchant gets access to it, he will be receiving a good profit. The moment you post a product on your ecommerce platform, it will be available for selling. People working in the drop shipping business have less waiting time because it takes just a couple of weeks to deliver the product to its buyer, directly from the manufacturer. Hence quicker access to the diverse online market.
Testing New Product Lines
Drop shipping retailers never have to get hold of the inventory which negates the risk associated with selling new products. You can test a whole new range of products without adding inventory. Let’s consider the example of a retailer who sells equine gear for the category known as western style of riding. But every now and then, the retailer gets visitors who request for English style equine related apparel. Following the request, the drop shipper will just have to contact a supplier offering English style apparel to explore how the new product line would sell. Introducing and selling new product lines will not involve any risk or investment from the retailer.
Lower Capital Investment
Online retailers working with a drop shipping business plan don’t have to maintain an inventory. Therefore the burden of risk and investment is shared completely by the manufacturer and the drop shipper does not have worry about upfront investment. So the retailer will have reduced investment. Against conventional beliefs, most ecommerce beginners don’t require much investment at all to start selling products.
Where to Locate Drop Shippers
When you have jumped into the drop shipping business arena, you will need a list of drop shippers and manufacturers besides customers. Since you are serving as the middleman or the retailer, you will have to research for reliable drop shippers who can fulfill your successful sales. Most usually, if the drop shipper is from the same country or zone as your intended consumers, shipping products will be easier. Below, I have listed numerous resources for locating companies will drop-ship their products for you.
Drop Shipping Resources to Consider
The following are some of the best resources online for drop-shippers. Some are completely FREE to join, some require a small fee and some require monthly fee’s, it just depends on what you choose to do. My recommendation is to research them all and choose the one that best fits your own personal situation and what you would like to sell.
There is nothing wrong with joining more than one. In fact, this is exactly what I recommend IF you can’t locate all the products you would like to have drop shipped through just one. In reality, the more you join, the more products you’ll have access to sell.
- WorldWide Brands
- Drop Ship Design
- Inventory Source
- Product Sourcing
- Drop Ship Direct
- Wholesale Dropshippers Directory
- Green Supply
- HieNote Directory
- Dropship Commerce
- National Dropshippers
- Operation Dropship
Choosing Items to Sell
Not every item in any store makes good selling material. You have to conduct market research to understand the buying trends. After that the products you list should have sufficient demand and the supply should be managed accordingly. Check advanced search in eBay and enter product name and sort it by “price highest first” and then check on “completed listings only”. Save a copy of the search results and keep a note of the best selling products available.
Maintaining Your Account
For correspondence with the drop ship supplier, your account should be displayed as a retailer. Use email; send a letter to the supplier in order to find out how you can be the retailer of their products. Before conducting business with any of the suppliers, ask them clearly if they can drop-ship the products to your customers.
Asking for Shipment
You need to stay in touch with your distributors or suppliers and give them your customer’s shipping address. Before you sell any products, don’t forget to check if it’s still in inventory in case the supplier ran out of stock. In this case, if the product was not available in stock, the shipment for the item you sold could be delayed, which leads to dissatisfaction and negative feedback from the client. Coping with the inevitable out-of-stock situation might be difficult but it’s better to have no sale than to disappoint willing customers.
Pitfalls to Be Avoided
While doing business, you need to exercise caution in order to avoid any significant damage. Just like any other business, a drop shipping retail store will carry certain risks. You just can’t avoid every other risk which might be an opportunity in disguise. However, there are certain pitfalls encountered by drop shipping retailers. Just stay prepared and watch out for any such pitfalls.
Choosing a product that has the highest competition as given by advanced search on eBay can kill your business even before starting it. Products with maximum competition appear to be quite promising since they have great demand but from a retailers’ point of view, they give less or no sales at all. Some of the beginners in the drop shipping industry opt to start their business by listing products that belong to competitive niche like electronics or computer hardware. Any such product line that has great competition due to increased market demand, must be avoided.
Being Fooled by Fake Suppliers
Avoid being fooled by fake suppliers who either deliver poor quality products or are the reason of miscommunication. If you haven’t been fooled by such suppliers in the beginning of your drop shipping business then I would be surprised because most people fall into the trap of fake supplier’s right at the entry level of their business.
What to Look for in a Reliable Drop Shipper
As you are aware, drop shipping involves purchasing the goods from the drop shipper and then getting them delivered directly to the customers, after making the sales. This process is literally the opposite of wholesale retailing where you are bound to order large quantities of goods, store them safely in an inventory and then hope to resell them for a good profit. In drop shipping, you play it safe since you won’t have to purchase a product until it’s been sold to the consumer. However, before you begin a full-fledged online retail business there are some important things to be considered for an online merchant. The most pressing issue here is to get access to a legitimate drop ship supplier but the resources provided above should be more than adequate.
We hope this article has answered most of your questions about drop shipping and we would love to read your comments below. As you can see, finding a drop shipper and establishing an online business requires ample planning. However, the initial investment is fairly low and the return on investment is quite fast, all the best reasons to operate a drop shipping business.
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