Make Money With Drop Shipping

So what exactly is Drop Shipping? With the ever rising competition to online markets, many people shy away from selling online. Drop shipping is often claimed as the easiest way to sell products online - especially when using eBay and Amazon as a selling platform. Let's see why this is the case!

By definition, drop shipping is a supply chain management strategy in which goods or stocks are not kept by the retailer. Instead, the customers' orders and shipment details are transferred to the manufacturer or wholesaler, who then sends the goods to the customer directly. 

Opening an eCommerce store requires an inventory or service of some kind to sell. Getting enough merchandise together to open a store that can attract the attention of buyers on the Internet could take quite an investment. However, methods exist that eliminates the need for physically holding merchandise to sell on the eCommerce website. Using Drop Shipping methods to sell inventory could be quite the lucrative experience.

Drop shipping is when a website owner uses inventory supplied by a third-party company to sell on his or her own site. It is a way to get an eCommerce website up quickly and with little money. Here is how it fits together:

1. A website owner signs up with a drop ship company.
2. Using the merchandise available with the drop ship company, the owner posts those items to sell on his or her own website.
3. When a customer purchases an item on the website, the owner purchases the corresponding item from the drop shipper.
4. Using the customer’s address, the drop shipper sends the item using the website owner’s return business address.

Although, it may sound like a lot of work, it’s actually quite simple. The eCommerce website owner buys what items he or she needs as they sell to customers.

How Is Drop Shipping Ideal For Some eCommerce Websites?

1. No Inventory – Instead of requiring a warehouse to store the items one is selling online, there is no need for shelving or space. This could greatly reduce the costs of overhead for running an eCommerce website.

2. No Investment Costs – Most drop shipping companies are free to use as they make their money from the eCommerce website owner. All one would need in order to be a success is an eCommerce capable website. Using a hosting provider such as HostGator.com and a free CMS for eCommerce such as PrestaShops, the entire investment should be around $120 per year and the time to develop the site.

3. Home Office – With time, someone could develop a robust and merchandise filled website from the comfort of their own home. Customers would have no idea that the website owner could be working in his or her pajamas from a home office. If it seems ridiculous, it happens more often than one may think.

4. Variety of Items – There are a lot of successful drop ship companies on the Internet that have access to thousands of brands, types, and colors. A website developed using a specific niche can be easily accomplished using these companies.

5. More than One – A single drop ship company may have some good items for the eCommerce website owner to post. However, there is nothing to stop someone from using several drop ship companies in order to develop a more diverse collection of goods. As long as a tracking method is in place so the eCommerce owner knows what item is sold from where, an expanding list of Inventory can be acquired.

 Drop shippers provide a way for beginning eCommerce businesses to make money without investing thousands of dollars into inventory and shipping supplies. All the eCommerce site owner has to worry about is purchasing the correct item and customer support. For those who don’t have a lot of money to get started with making money online, the drop ship method is one that could help get the ball rolling.

 Many retailers earn the difference between the wholesale and retail price as profit. However, some retailers may earn an agreed percentage in commission for sales paid by the wholesaler. 

Often, drop shipping retailers display items, which they can easily order from the wholesaler, in their stores. As such, sometimes they may provide only a catalog or a website of their products. A lot of products sold on eBay and Amazon are good examples of this. There are various methods to keep the wholesale source unknown such as “blind shipping”, where the product is shipped without a return address. 

Another method is called “private label shipping”. In this case, the product is shipped from the wholesaler with a return address that is customized to the retailer. 

Advantages: 

Let’s look at some of the advantages of drop shipping. One of the obvious benefits of drop shipping is that there is no need for an upfront inventory to store the products. 

Furthermore, drop shipping creates a positive cash-flow cycle, because the seller is paid when the purchase is made. This is because generally, the seller pays the wholesaler by credit card or credit terms. Hence, there is a lag interval during which the seller accepts the customer’s money, but has not yet paid the wholesaler. 

An additional advantage of drop shipping is the elimination of duplicated efforts in regards to warehouse storage, packaging and shipping. Thus, the reduction of total inventory management needs and shipping costs mean that the products can be made available at a reduced price to the customer. 

Disadvantages: 

All businesses involve some risks and this, of course, also includes drop shipping. One example is “back ordering”, where an order might be placed with a wholesaler even though the product is temporarily out of stock. 

This in turn can prolong waiting times for a product to arrive and this often reflects badly on the retailer. For this reason, it is important to select a trustworthy and reliable wholesaler – ideally, one that makes an effort to update the retailer on the number of products available. Having that said, the ultimate responsibility rests with the business owner to follow up on the quantities available from the wholesaler. 

Finally, when searching for a wholesaler, it is important to do thorough research of the current market prices of the different products. This is because we want to have a profit margin that is significant enough to make the drop shipping business worthwhile while at the same time staying competitive.