What is Drop Shipping?
In simple terms, drop shipping is a way of selling or order fulfillment wherein a seller can buy an items individually from a wholesaler who will then ship the product directly to the buyer.
Sounds complicated? Not really. It’s just like selling items regularly but instead of keeping a whole stockroom of inventory, your drop shipping partner keeps the inventory for you. As soon as you receive an order from your clients, you just forward the order to your drop shipping partner. Your partner then fulfills the order and ships the product directly to your buyer from their warehouse. You only have to pay for the price of the item bought by your customer.
What are the benefits of drop shipping?
Drop shipping cab give a seller numerous advantages. Here are some of the benefits you can get from drop shipping:
- Greater item selection
Due to the nature of drop shipping, you will have a larger item selection for your buyers. This is because you will just be “copying” whatever items your drop shipping partner is selling. If they have 10,000 on inventory, then this means you have all 10,000 items ready to sell to your own clients.
- Low capital
You only have to pay for the item you just sold so you don’t have to pay thousands of dollars to keep an inventory. This also reduces any risk of losing large amounts of money.
- Sell internationally
Because your dropshipping partner takes care of the inventory and shipping, you can virtually sell just about any item anywhere in the world. All you need on your end is an Internet connection and a laptop.
- Unlimited Potential
You only take orders and your dropshipping partner will take care of the preparation and shipping of each order so you won’t be limited in any way. You can scale your business easily all thanks to drop shipping.
Is drop shipping a profitable business model?
There are a lot of things that can affect the profitability of a certain business model. While drop shipping may seem all too promising, it still needs effort and time from you. But if done correctly, drop shipping is a promising venture that is both easy and profitable. Do note that drop shipping is in no way without problems. In order to ensure that the business works, you need to study about the business model and maybe invest time on finding the right dropshipping partner. Drop shipping is one of the more popular business models that people use to earn money after quitting their day jobs.
How much can I make with drop shipping?
Again, it depends on a lot of things but the potential for earning in drop shipping is only limited by your drop shipping partner’s inventory. A six-figure income is not impossible in the world of drop shipping but you have to work for it. Note that because you only have to take care of getting customers and making them take orders, your job will be a whole lot easier compared to the regular online shop owner. Building an online business centered around drop shipping may take some time to build. Months and even years of slow selling can lead to a profitable business that will survive for years.
What kind of profit margins can I expect with drop shipping?
The profit margin will be dependent on the kind of products you sell. For example, selling expensive items such as electronics and gadgets will give you around 5-10% profit margin per sale. On the other hand, smaller items costing less will allow you to enjoy a profit margin of over 100% at times.
Aside from the type of items you sell, it will also depend on where you are and who you are selling to. Sometimes, hard-to-find items allows you a much greater freedom in dictating prices. Prices for items that are sold locally and are pretty common need to be negotiated in the sense that you need to provide the most alluring price tag among your competition while still gaining some profit.
Where do people sell drop shipped products?
There will be people telling you to sell your items on eBay, Amazon or some other online marketplace. While that may be a good place to start, starting your very own online store is still the best way to go. With your own online store, not only will you have all the freedom in the world to set it up the way you want, but you can also sell as many items you want.
Another important thing about setting up your own online store is that it will become your online “headquarters” of your business. Having your own online store will help in your branding and people will always know where to go when they are looking for something.
How to pick products to Dropship?
There are a number of ways of which you can determine the best products to sell using a dropshipping method. Here are some qualities you might want to look into when choosing products to dropship.
Certain items garner a high demand depending on the season or trend. For example, selling swimsuits and bikinis prior to the summer months is always a good choice. Another one would be fancy gift items and electronics during the holidays. Also, it would be great if you can watch out for certain items that are hyped. A few months ago, the idea of a hoverboard was seen as fantasy so when certain online stores sold a personal transportation machine that looked like a hoverboard the people went berserk and bought lots. There are also some items that are not really affected by demand but can be sold all throughout the year so you might want to look at those items as well.
Will the items you are going to sell available readily in your target market? Is it something they can buy on a nearby mall or store? Ask yourself these questions. Items that are harder to find sell like waffles especially when there is a demand. So check the availability of items that you might want to sell. If the items are available readily, can you provide a much better price tag for your customers?
How do I find drop shipping companies/wholesalers?
Oftentimes, a simple Google search can net you hundreds of companies who are just waiting to become your drop shipping partners. But remember that not all of them are legitimate. As a matter of fact, results from a Google search can net you more fake companies than legit ones. So search extensively if you want to use this method and don’t just trust a website just because it “looks” legitimate.
Another way to look for a dropshipping partner is to contact the manufacturer. If you know the items you want to sell, call their manufacturer and as for any wholesale distributors. Call the distributors and ask them if they do drop shipping and ask for more details. This way is safer than just searching on Google because you know that these are licensed wholesale distributors from the manufacturer.
Attending trade shows is also another way of connecting with manufacturers or distributors from a certain niche. While this is a very good way to look for drop shipping companies, finding the right trade show to attend might become a problem for people who have limited budget as some trade shows take place on various locations in the world.
Lastly, you might want to go and check out supplier directories. These supplier directories contain a list of legitimate suppliers who can work as your drop shipping partner. No need to worry about legitimacy because most supplier directories filter the suppliers to see if they are actually a real business. These databases are usually run and managed by a different company and they may ask for a fee to access their directory. While helpful, this is not really a necessity but they will be of great help especially when you are starting out.