Drop Shipping Made Easy
What Is Drop Shipping?
What is drop shipping about? – Drop shipping can be a very effective and simple way to get involved in ecommerce. Many established online merchants are now turning to drop shipping as a method for minimizing stock on hand, and decreasing overall shipping costs.
What about drop shipping – Drop shipping allows website owners to send single/low quantity unit orders they have on their websites. They send to manufacturers, or major warehouses, who in turn “drop ship” the items directly to the customers.
What are the Advantages Of Drop Shipping?
- Because a warehousing company can buy in huge volumes… they will also be able to offer you the best prices on products and shipping. This means a greater profit to you.
- There’s no capital investment and no need to invest in inventory.
- Using drop shipping allows you greater flexibility in terms of product range – promote a dozen items or promote a thousand!
- Instead of worrying about inventory and delivery, you get to focus on listening to and keeping your finger on the pulse of the market. This will allow you to discover the products your visitors you want.
What Do I Need To Know To Select A Drop Shipper?
Many companies will have an interest in teaming up with you in a drop shipping arrangement. Mainly because it’s an easy way for them to generate extra revenue. However there are a number of points to consider, and things to look out for:
Don’t accept that the first drop shipper you come across unless they are willing to provide you a “Best Price Guarantee.”
Drop Ship Fees And Charges
Some companies will have a handling fee over and above freight costs. Therefore it’s important to know all the costs involved so you can calculate your profit margins accurately.
Are they using small private shipping companies or UPS? Will they ship internationally? You’ll want to be sure that their shipping methods will ensure your clients receive their orders in one piece.
Also, keep in mind that you may need a specific type of shopping cart in order to handle drop shipping. Many shopping carts only allow for one “ship from” zip code in the configuration for freight calculations. If you are dealing with a number of drop-shippers you may have dozens of point-of-origin zip codes. This can be a real headache if freight is based on distance.
Will the drop shipping company automatically debit your credit card on each order you submit, or can you get monthly payment terms? When you are starting out with a company, they are unlikely to offer credit. Its a good idea to check if this will be possible once you’ve established credibility.
Support, Returns, and Refunds
The last thing you’ll want is to be caught up in a nasty situation where you have a number of returns – and have to cover the bill. Ask the drop shipping company about their returns policy. What kind of support will they offer you for their products. Ask about any guarantees associated with their products, and get it in writing.
How long has the company been around for? Do they respond to your requests for information rapidly and professionally? Young companies have the habit of going belly up quickly, or growing too rapidly. As a consequence basic good customer service suffers.
How Do I Get Started In Drop Shipping?
It’s fairly simple:
Set up a website that includes a Shopping Cart and credit card processing facilities, or setup an eBay or other auction account. Shopify is a great favorite for those just getting started. Shopify handles everything for you from marketing and payments, to secure checkout and shipping.
- Find suppliers of products you wish to sell that incorporate drop shipping as a business method.
- Open an account with them.
- Gather content and images relating to the products you’ve chosen, incorporate them on your site and shopping cart.
- Collect the order and payment from your site.
- Provide the supplier with the customer details.
- The supplier then bills you at the special price you have agreed upon; full-fills the order and sends it to your client. In most cases with labels referring to your business/website instead of the company.
In the next part of this article I will try to dispel some myths you may have heard about drop shipping.
Drop Shipping Myths
The drop shipping industry’s most common myths discussed and dispelled.
For a lot of people, drop shipping can seem like a perfect solution to start an internet business. While drop shipping has its place in the world, there have been many myths associated with it.
Myths are propagated by people who think they understand something, but don’t. You may have heard many things, both good and bad, about drop shipping. If you want to know the truth about something, you should go to somebody that actually works in the business. This is way preferable than someone who has little more than rumors and conjecture to pass on to you. Most of the time they know as little as you do. There are also may books you can learn the basics from such as the one above by Benjamin L. Donohue.
As I said its always best to go to people who have had several years experience working in the drop shipping industry. Here are some of the common myths that you may have heard associated with drop shipping and drop shippers.
Myth #1: Drop Shipping Means Big Money For Little Work
Running a business is a lot of work! Sure drop shipping saves you from warehousing, inventorying, and packaging and shipping items. But in the end, you’ve still got a retail business to run. Furthermore, profit margins are thinner because the drop ship supplier takes on much of the risk involved with warehousing the products.
Myth #2: All Drop Shippers Will Be Happy And Willing To Work With You
Some drop shippers will work with anybody. Those drop shippers will typically have a fee associated with them. Their wholesale price may not be so good either. Other drop shippers have minimum requirements. For example, you may be expected to have several thousand orders per month.
Some drop shippers will even charge you a non-refundable application fee. If they decide you’re not big enough to work with them, you lose your application fee.
Of the more than 50 suppliers Doba works with, several have application fees. A few have monthly fees, and several more only agreed to drop ship if you promise them high volume. On the other hand, and fortunately, Doba does not pass along any application or monthly fees, and you never have minimum requirements.
Myth #3: It’s Impossible To Make Money With Drop Shippers
It is true that your profit margins will be thinner, but some of the internet’s largest retailers use drop shippers exclusively as their product suppliers. Think about it. If they weren’t making money, then they wouldn’t be some of the largest retailers on the internet.
Something that new entrepreneurs often fail to understand is that pricing is only one small part of business. If your focus is exclusively on price, then your business will never succeed. This is because you’ll be completely ignoring the many other parts of business that are required to succeed.
For example: A product sold in a very competitive market. The product has an average 10-15% return rate, and the mean price is $19.95. The product sells for $33 and has a return rate of 5%. The website owners site also has a conversion rate about 2-3 times of their competitors.
Why were they able to sell the product for 65% more than their competitors, maintain a higher conversion rate, and yet still experience far fewer returns? Very simple, they chose to focus on all aspects of their business, rather than just one or two like so many of their competitors were doing.
Myth #4: Drop Shipping Is The Magic Solution
Drop shipping is a specific service that fills a specific need. It is not a cure-all solution for business. Before jumping in, you should be sure that your business will benefit from drop shipping, and you should have a well laid out plan for making that happen.
Like all things, there are pros and cons to drop shipping. Make sure you understand how drop shipping will affect your business so your business doesn’t end up a myth itself.
Now lets finish this article with some words on Backorders and how to minimize them.
Drop Ship Tips: Minimizing Backorders
Some top tips for minimizing backorders in your drop shipping business.
When drop shipping, you lose some control over inventory levels, leaving it in the hands of your supplier. This increases the potential that a backorder situation can occur without your knowledge.
The truth is, there is no way to guarantee that an item will be in stock. This is a simple fact of drop shipping. Its also best if you keep in mind that golden rule of commerce in general. It all boils down to Supply and Demand.
Getting back to inventory and loss of control. It is a trade off, but one that is well worth the benefits. Once you’ve learned how to reduce the possibility of a backorder the benefits of drop shipping become even greater. Here are some top tips for minimizing backorders with your drop ship business.
Monitor Quantities On Hand (QOH)
The most obvious thing you can do to protect yourself from backorders is to closely monitor quantities. Doba provides a data export tool that can help you monitor supplier inventories. If you are able, monitor quantity trends before listing an item in an auction.
If selling items at an online auction, you’ll typically want to list only items that have a large number of items in stock. However, if you have monitored quantities before hand and notice a product isn’t “flying off the shelves”, you may be comfortable selling items that have a lower number of items in stock.
Run Shorter Auctions
For example you could run a three day auction on eBay. The faster the auction got over with, the sooner you can drop ship the item to the customer, and the less you would have to worry about it. You could be a little worried about losing potential business from having a shorter auction because listings typically get the most views and bids in the last 24 hours anyway.
Cancel The Auction If The QOH Reaches Zero
Along with monitoring QOH’s before listing an item, you’ll want to continue monitoring quantities throughout the auction. If you notice quantities dropping each day, you’ll want to keep an even closer eye on it.
You can’t drop ship an item that isn’t there. If the quantity ever reaches zero, go into your auction right away and end it early.
Drop Ship An Item To Yourself To “Pad” Your Inventory
Shipping a few items to yourself to pad your inventory is perhaps the most effective fail-safe to prevent backorders from having a negative impact. This is particularly advisable for items that are regular sellers for you.
Usually, you’ll only need to keep one or two items in your personal inventory. This is true even if you typically have several auctions with the same item running simultaneously.
If an item goes out of stock, you’ll always have the one or two items on hand that you can ship out. You should still have time to go through and end all your other auctions early until the item comes back into stock.
Ok folks that’s all I have to say about drop shipping. By all means feel free to do your own research on the subject but I have researched it quite thoroughly myself. Follow these basic rules, tips and advice I’ve given you and you wont go far wrong.
If you can spare a couple of minutes then please also feel free to leave a comment below.
To Your Drop Shipping Success!
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