Drop Shipping – The Easy Way to Get Started
By Matthew Coers
One of the biggest challenges of selling products online is finding a cheap way to purchase the items you plan to sell. If you already have a retail store, and are looking to establish an online outlet, then this is really not a problem for you. Home-based businesses, however, have much more difficulty purchasing goods for resale. That’s because distributors and manufacturers will not sell directly to a home-based business.
Even if you are able to purchase goods from a distributor, minimum order sizes are generally large enough that a significant investment is required to get your initial inventories. In short, a home-based business intending to sell products online can easily spend thousands of dollars purchasing items that may be very difficult to sell online for a variety of reasons.
That said, there is a certain class of distributors that will allow a home-based business to sell products on their websites, and then drop ship them from the distributor’s location. There is no need to purchase pallets of goods, and no need to worry over warehousing and fulfilling orders. You sign up for an account with the distributor, list their products on your website, and when you get an order, they ship it to the customer. No inventories, no muss, no fuss.
You can market the products on your website, via online auction sites like eBay, or through prefabricated online stores like Yahoo! Shopping. Basically, anywhere you can find to promote the products is generally ok, however all the providers I’ve seen have very strict rules against spam e-mail.
Purchasing products from drop shippers is generally quite a bit less expensive than purchasing the same items retail. That said, you will not be able to buy items for the same “wholesale prices” that traditional retail outlets are able to purchase them for. That’s because you are not purchasing in the same quantities as more established firms, and most of the drop shippers charge a “Drop Ship Fee” which is tagged on to the cost of every order and can easily increase the cost of items you are selling by a significant percentage.
As an example of how this works, let’s assume you are selling music CDs on your website. Let’s further assume that the average retail price of a CD is $15.99. Because you have an account with a drop-shipping company that specializes in CDs, you are able to purchase CDs for an average price of $9.99. When someone orders a CD from you, you charge your customer $15.99. You then pass the order to your drop shipper who charges you $9.99 plus a Drop Ship Fee of $2.00 for a total of $11.99. Your net profit of $3.00 may not seem like a lot, but since you don’t have any overhead beyond whatever it costs for your web server space, you really do make out pretty well.
The example above using music CDs is a simple way of explaining the concept of drop shipping, however practically speaking you will probably find that CDs are not the best product to sell online. That’s because you will be in competition against companies like Columbia House that can afford to sell 10 CDs for a penny. They make their money back in the end, but only because they are able to purchase the CDs at an extreme discount. Whereas you are buying the CDs for $9.99, they might be paying only $2 per copy.
The same limitation applies to other “commodity” items like electronics, video games, and software. There are lots of competitors out there that can purchase the same items for less money, so you should try to think of niche products or value-added services that differentiate your website from the others.
There are quite a few dubious organizations out there that claim to have lists of Wholesalers that will sell to the home-based market. Unfortunately most of them are not legitimate. Worldwidebrands.com has an eBook that covers most of what you need to know about drop shipping called, "Starting Your Internet Business RIGHT" and it can be downloaded for free Here.
In conclusion, drop shipping should probably be considered as a start-up activity. Your goal is to test different marketing programs against each other, get your website ranked on the search engines, and build your business volume up. Once you get your site established and have a healthy volume of traffic flowing through your site, you should be able to gauge the profitability of establishing an account with a full-blown distribution company. After all, the drop-shipping alternative is an inexpensive way to get started in your business, but it is not the most profitable way to purchase goods once you have a full-volume business developed.
About the Author
Mr. Coers specializes in helping entrepreneurs build effective web businesses. His website, contains useful articles on website design and website planning.
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What Everyone Should Know About How To Buy Wholesale
By: Melanie Burns
Finding a supplier for the product you want to sell, at a price that you can profit from, can be a big task. The best suppliers for your online sales or auctions do not advertise their services and often cannot be found online.
Those that you can find online tend to be middle-men. It is often difficult to get a good enough price to make any real profit online.
Let me tell you about my simple 2 step system to find an untapped source for wholesale suppliers. This is so simple that it's often overlooked as a source for product. This system involves thinking outside the box and not letting policy stop you. (continued below)
The First Step to find a supplier is to find someone that already sells or has access to what you want to sell. This could be a website, an eBay seller, a manufacturer, a wholesale outlet, or a regular store in your city. This is the easy step. You know what you are looking for and you can search on the internet, not for a wholesale source, but for anyone already selling what you want to sell.
Another valuable source for a local supplier is your local phone book. The yellow pages are the best way to find local sources. This should be the first place you look. Doing business locally with someone that you can meet face to face is a big plus for your business.
Another potential source for your product is to find a distributor who would be willing to private label a product for you. You could get a very high quality product for a much lower price than if it had the name brand label.
The Second and Key Step is to convince the source you found to become your supplier.
Manufacturers and wholesale sources often have minimum orders that might be beyond your reach if you are just starting out. Online retailers, eBay merchants, and retail stores may be your best bet. Try to find a small store who is looking to expand.
But remember, you are dealing with a human being and they can be convinced to do business with you. Just be sure to sweeten the deal for them. One way is to offer the person you are dealing with at your new found source, a percentage of your profits from the products he supplies you.
Be sure to project it out for him. If he can see the benefit of working with you even though it causes extra work for him, you can be successful in making a deal.
You could offer him 20% of the profit from sales of his products. For example you could show him that you project to make at least $100 profit from each product, and you expect to sell 40 of them per month. The $4000 a month means an extra $800 per month in his pocket. You still make a nice $3200 profit for the month in this example.
On top of that, he will be ordering more products from his supplier and may be eligible for a higher price break from them. This way, his reward for the effort to work with you, is making money on both sides.
There are many benefits you can offer your potential supplier, but no matter how you look at it, the main thing it comes down to is MONEY. What's in it for your potential supplier to do business with you? If can you show him that, you have a better chance of making a deal with him and starting your online sales.
NOTE: When looking for suppliers around your city, don't go trying to impress the big stores with your $800 or even $3,000 extra income per month proposal. Try going to the little stores that are looking to expand their business, they are the ones that are usually more open to new opportunities.
The big stores are making hundreds of thousands of dollars per month in profits, so an extra couple of thousand would probably not impress them the least bit.
So now you see that by thinking outside the box, you open the door to many possibilities and increase your ability to make money online with your products.
About the Author:
Copyright © Melanie Burns
This article is free for reproduction but must be reproducted in its entirety including live links and this copyright statement. Subscribe to the iBusiness How2 Newsletter to receive hot tips, how to's, internet business tools, and relevant product reviews by sending an email to: newsletter@internet-business-how-to.com
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