Setting up an Internet Business? Consider Drop Shipping
By June Campbell
You've tried affiliate programs, but you'd like higher profits and more control over your business. You don't have your own products and you don't want to manage an inventory. Drop shipping might be your answer.
Mail order businesses have used drop-shipping arrangements successfully for decades. While this method of order fulfillment is not yet well known on the Internet, the potential is excellent.
It works like this.
You set up a drop shipping account with a manufacturer or wholesaler. Next, you generate orders for their products, establishing the retail price yourself. When an order is placed, you forward the sale information to the supplier. The supplier fulfills the order, sending it to the customer with your business name on the label.You remit the wholesale price of the item to the supplier.
The benefits are obvious. You keep no inventory and, since you set your own selling price, you are likely to make higher profits than you would make as an affiliate. You might, in fact, set up your own affiliate program and enlist affiliates to market your merchandise.
Drop shipping arrangements also give you the ability to establish small, low-cost web sites that are targeted to niche markets. These little sites also make it easy for you to test and promote various products. If a product doesn't sell well online, it's an easy matter to remove the web site -- or leave it up, since costs are low.
Consider the following:
You Need a Legal Business Entity
To operate a drop shipping business, you must be a legitimately registered business. In the US, you will need a State Tax ID number. Residents of other countries must determine the requirements in their locale.
Sales Taxes
US residents are responsible for collecting taxes from their own state and from the state of the drop shipper (if applicable). In some states, gross sales must be reported to the state and county for business licenses. Residents of other countries will need to check local requirements for taxation and reporting.
Your Internet Store
You will need a web site, shopping cart software, and a means of processing financial transactions. In most cases, this means having a Merchant Account. Typically, when a customer makes a purchase, you handle the transaction via credit card, then forward the order to the supplier for fulfillment. You, in turn, pay the supplier for the item via credit card transaction. You might arrange payment by individual item or by a net 30 invoice.
Research your Drop Shipping Company
Do your homework and research the company before you sign contracts. Here are some questions to ask:
* Is the company a manufacturer or wholesaler? Some businesses offering drop shipping arrangements are resellers. They have set up accounts with drop shipping companies. You, in turn, will be reselling for them. You will make better profits if you set up your own drop shipping account directly with a supplier rather than with a reseller.
* Does the drop shipper charge you an account setup fee or a monthly fee based on monthly traffic counts or some other criteria? Most (not all) companies charging a set up fee are resellers. If there is a set up fee, is it in exchange for a value-added service such as access to an admin web site or specially printed labels for your company's orders?
* What does the company charge for shipping and handling? If the cost is too high, your customers will abandon their shopping carts if they think the expense is out of line.
Your Product Mix
A web site selling a narrowly defined range of products will be easier to administer, and easier to promote than a site containing an array of products. For example, a site selling lady's sportswear will be more attractive to search engines than a site selling men's, women's and children's clothing of all descriptions.
And finally, choose items that are neither too inexpensive nor too heavy. Experienced drop shippers say that products of over $20 and under 70 pounds work best. If you want to sell lower priced items, group them together in a package and sell the package. The shipping costs will appear to be more reasonable. Alternatively, promote products that carry similar shipping costs, or that will not add to the shipping cost.
And lastly, much success in your new business!
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About the Author
June Campbell is a self-employed writer. Her work has been published internationally in a multitude of print and electronic publications. Prior to making a career change in the mid-nineties, June spent close to twenty years working as an addictions counselor and clinic director in Canada.
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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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