Picture this. You sell a product that you don’t ever have to
store. You set your retail price and every time you sell, your
wholesaler ships the product for you to your customer’s door in
your name and you keep the profit. How is that possible?
It’s called drop shipping. Simply put, a drop shipper is a
distributor that will ship products in single units directly to
your customer in your name. The purpose of this article is not
to convince you to start a drop shipping business but to give
you pointers on how to start right and avoid common pitfalls.
The Beauty of Drop Shipping
One of the greatest challenges for people interested in starting
a home business is where to find products to sell. If you don’t
have thousands of dollars to invest in products and storage and
want to avoid the hyper-competitive business of information
products, or the dreaded multi-level business, drop shipping
might be the answer.
The most obvious advantages of drop shipping include: you never
have to deal with the headaches of warehousing, packaging and
shipping, and you don’t tie down your limited financial
resources in inventory.
Other advantages are: no leftovers, you can change or add
products easily and instantly, and no limitations as to what you
can sell. Plus, you get to use your customers’ money to run your
business and “carry” brand-name products and look big. Is this
cool or what?
The Dark Side of Drop Shipping
Beware. While drop shipping business may be simple, finding a
true, reliable drop shipper is not. Scam companies lurk, ready
to relieve you of your hard-earned money, or profit from your
hard work.
For starters, some “drop shippers” are just middle-men who
contact the real drop shipper when you place an order. They use
you as their salesperson, so you use your money and time to find
customers, and cut into your profit.
Others are fly-by-night operations. They will take your money
and disappear. In short, scam.
Once I responded to an impressive full-page ad in a business
magazine. The advertiser claimed to be drop shippers, and even
promising help through support and business advice. To cut a
long story short, the “drop shipper” rarely delivered my orders
as promised and in many instances I had to re-order elsewhere
and absorb the losses to avoid disappointing my customers.
Later I found out that the company was not the real drop
shipper, when I discovered their source.
A few years ago, an eBay™ Powerseller (someone who sells a lot
on eBay™) was in the news. Having sold a number of high-ticket
items at an online auction, he then paid a drop shipper to
deliver them. Imagine his agony when the company suddenly closed
down without delivering his orders, or refunding his money!
I once paid a $100 “dealer fee” to another “drop shipper”. I
received a pretty catalogue, but which probably cost pennies a
copy to mass-print. When I went back to order, the website had
disappeared without trace. At least all I lost was the dealer
fee. Others might not have been as “lucky”.
Back-ordering is another big concern in this type of business,
especially with hot items. If you are selling a product quickly
and easily chances are, someone also else is. Since it’s a hot
item, you and others are ordering several at the same time. Soon
the product runs out of stock and you have to wait for the next
shipment. Meanwhile your customers are screaming for their
orders.
Okay, But Can You Make Money with Drop Shipping?
Can you make money with drop shipping? Yes and no. What do I
mean? Well, as with any business, drop shipping will only work
if you work and apply age-old principles of service, common
sense, knowledge and a dose of wisdom. It is not a magic pill to
make your money problems disappear. Sorry if I just busted your
bubble.
Some eBay™ Powersellers, Internet marketers, and top mail order
companies operate on drop shipping and are selling like crazy
and making six-figure incomes, even multi-millions. Drop
shipping works, big-time.
It is simple (and I don’t mean easy). Find the right drop
shipper(s). Decide what products to sell, find a way to let
people know what you have to offer (examples; through eBay™,
running ads, building a website etc.) and you could be on your
way to an enviable lifestyle.
It does take some homework, and that word that gives most people
the creeps: testing. But you must have right product supplier(s)
to start with.
Finding a Good Drop Shipper
There’s a hard way and an easy way to find a good, reliable drop
shipper.
The hard way is, do your own research. Attend trade exhibitions
and/or call or write manufacturers and distributors, and
negotiate drop shipping terms. Used to large-scale buyers, most
will just not be interested.
You could also use search engines and/or trade publications. In
both cases you may have to weed through the dozens or hundreds
of companies one at a time. Fine, if you have the time (and
patience).
The easy (and quicker way) has two options. First option: talk
to a friend who does it and who is willing to tell you his/her
secrets and possibly become a competitor.
The second option and one most favored is to find the research
done and ready for you to use, for a nominal fee. Where to find
this?
The answer is, a reputable drop shipper’s directory. Why?
Because, with a reputable drop shipper’s directory, you get a
large database of verified, updated and tested drop shippers,
all ready for you to use. Also, you get a wide selection of
products to choose from, so you can pick a line of products to
specialize in and avoid hyper-competitive ones.
What to Look For in a Drop Shipper
When shopping for a drop shipper, look for one who will ship
small orders, especially if you’re just starting out as you will
likely not have many orders.
Also important is the experience of the drop shipping company.
One more reason for going with a reputable drop ship directory
as they likely will have some history and user feedback about
their listings.
Of course, you don’t want customers to know that you use drop
shippers, or find out your source. Therefore the drop shipper
must use your name and address on package labels as well as
invoices.
Instant updates on inventory would be additional advantage as
this helps avoid or lessen problems of back-ordering. Top-rated
drop shippers will almost certainly have this benefit.
What to Avoid
Avoid drop shippers that require you to pay a monthly fee,
unless they are a known franchise. Why should you pay a monthly
fee to help sell their products unless they know that you’re
unlikely to make sales?
Also, don’t accept offers for free websites or “turnkey
business”. There are exceptions, but most free websites are
nothing but electronic catalogues. Your website will look
exactly like hundreds of others, and you can only sell products
from that company.
And oh, steer clear of those cheap drop ship directories you’ll
find all over the internet, in business opportunities magazines
and online auctions. You will simply get a bunch of non-working
phone numbers, broken or dead internet links and scam companies.
The company’s physical address should be clearly displayed
(check the “contact us” or similar page) on their website. If
it’s a PO Box, tread carefully. If no address, run!
Look for a working phone number. If they are as big as they
claim to be they should be able to afford a business phone and
someone to answer it. Call and insist on talking to a real
person. Ask questions: they should be happy to answer questions
from a prospect and if not, be very suspicious.
Avoid companies with an exclusivity clause in their terms as you
can only sell that company’s products unless, of course, the
company is a known franchise.
All costs must be disclosed before you commit. Watch out for
companies that appear to have very low prices but sneak in
exorbitant shipping and handling costs or “drop shipping
charges”.
Setting Up Drop Shipping Accounts
Some distributors will require that you have a tax ID number in
order to set up an account. Others (not all) may require that
you pay a dealer fee or place cash deposit. These, mainly, are
measures to ensure that you’re serious and not just another
curiosity seeker or bargain hunter.
With stiffer competition, rules for setting up accounts are
getting more relaxed.
Some distributors will mail you a wholesale catalogue and price
a list. One company sends three price lists: one with lower than
wholesale prices, so you can sell in wholesale, another with
wholesale prices and a third with suggested retail prices.
Others will send you a CD or let you access pictures and prices
through their website once you sign up.
Conclusion: Drop shipping is a high-profit, low-cost
business with unlimited potential, that can be run successfully
from home. Drop shipping is one of greatest business innovations
ever. With reliable drop shippers, your little home business is
ready to sell brand-name products worldwide just like the big
guys.