Drop shipping is the process of selling a manufacturer’s products on their behalf. You will effectively act as a middleman. You will operate an online store, and instead of holding stock, any orders you receive will simply be fulfilled by the manufacturer that you have an agreement with. You will send the order details and shipping address to the stockholder, and pay them for the item(s), they will then dispatch the order to your customer. To make a profit, you will pocket the difference between the manufacturers stock price and shipping, and the price you sold the items to your customer for.
Drop shipping has many advantages and disadvantages but if you establish your business carefully and consider the below tips on starting a drop ship business, there is no reason why you cannot be successful and make some cash.
Concentrate on one product line
Many new drop shippers will make the mistake of trying to diversify and sell a huge range of products. While this may seem like a fine idea, it is actually counter-productive. Customers are much more inclined to buy from a business that specializes in one particular product – A company who specializes, should theoretically have a great knowledge of the products and industry.
Check the security and authenticity of your wholesaler
Security is paramount in the online world. Ensure that you check the security credentials of a wholesaler before you engage in a contract with them. What regulatory bodies are they checked by? What guarantees do they offer? Do they offer secure payment methods and HTTPS?
Look for wholesale pricing
A key to making profit when Drop Shipping is buying your stock at the lowest possible rate. Ideally, you want to purchase your stock from a wholesaler as opposed to a retailer. A retailer will be buying their stock from a wholesaler, and thus will add a margin on top of the wholesaler’s price. If you buy directly from the wholesaler, you cut out that extra margin and make a saving.
Understand the available shipping methods
What shipping methods does your stockist offer? Do they offer a next day delivery service? How much do their different shipping methods cost? What time must next day deliveries be placed? Do they offer international shipping? All of these questions should be considered so you have a clear plan of what you can in turn offer to your customers.
Don’t simply concentrate on offering low prices
While a competitive price is important, it is not the only factor to concentrate on. There will be many other drop shipping businesses offering low prices also – How can you differentiate from that competition? What can you offer that makes your business stand out as the logical choice? Consider your customer service and product knowledge as potential areas to develop and showcase to your customers.
Drop Shipping is one of the easiest ways to sell online, however, it is also one of the most competitive! Ensure that you fully understand the market, your customers, and most importantly your supplier.