Drop-Shipping transpires when a retailer receives customer orders for products that the retailer does not carry in inventory. This retailer forwards the customer’s request to either a manufacturer or a drop shipping wholesaler that keeps a list of the product(s) in question. This manufacturer or wholesaler now ship the product(s) directly to the customer (order fulfillment) and bills the retailer at the wholesale price. The retailer who initially took the order has already billed the customer at the retail price and records the difference as gross profit.
Benefits of Drop Shipping
Thanks to the ubiquity of the Internet, e-commerce has become a very common business. What is e-commerce? This is buying or selling products on online services or over the Internet. Here are a few reasons why people are doing drop-shipping.
You do not require storing inventory, which reduces risks like overstocking, losses from unsold stocks, damage to stored items, unavailability of product due to under stocking and so on. You do not need to rent warehouses to stock items, and you do not have to handle shipping or packaging. Start-up costs are low because the seller does not require storing inventory.
You do not have to follow shipments. Besides, the seller does not have the stress of packaging products and shipping them to consumers.
You can sell as several types of products as you like because you are not restricted by an inventory.
How can you make money from Drop Shipping?
Drop-shipping has become a popular business model, thanks to the ease and accessibility of online transactions. A reliable way to determine if you are getting fair prices is to compare the wholesale prices with listings on Amazon and eBay this is the only way you will know if you are making a decent profit. The most common platform used for drop shippers is Shopify.
When you are comparing your wholesale prices, keep in mind that you are not the one subject to the overhead expense. The shipping fee should also be taken into consideration. Many suppliers provide free shipping, while others may charge higher shipping fees. Add up the shipping fee and the selling price and then compare the total cost with your supplier wholesale price and shipping fee. This will give you the correct result.
Remember that when comparing your wholesale prices, you should always compare them with the average prices you find on Amazon or eBay. This is because not every dealer utilizes drop shipping. Some traders might be purchasing products in large volume at a lower cost, or they might be purchasing cheaper or replicas products from other sources.
Also, note that the quality of the products is critical and will directly contribute to your long term success with your online business. Focus on providing high-quality products, and excellent quality service and your business will thrive.
Drop-shipping is clearly an opportunity you want to consider if you’re thinking of starting an online retail business without all the stress of inventory and product distribution. If you carefully examine the advantages, you’ll realize that drop shipping is undoubtedly a viable choice for the small-business retailer. To start this kind of business, training is essential in order to succeed. Just be careful of who you learn from and in later articles we will go further into the aspect of training to be a drop-shipping champion!