How Drop Shipping Works
Drop Right Into A Great Business Opportunity
Many people have asked me how drop shipping works and having done it myself I figured I would share a bit of my experience and show you how it works. Drop shipping can be a very lucrative business if you follow the right steps to build the right foundation for success. You will need any one of many drop shipping wholesalers as part of your arsenal. I will explain as we go along.
When I started Drop shipping I did a 2 fold option of selling on eBay as well as having a website dedicated to one product type. I sold memory foam mattresses on my website, and eBay and other action sites. But also used other suppliers to have a variety of other items to sell on auction sites like yahoo auctions and eBay, I sold Items like fire safes and radar detectors as well. But my website was specific to memory foam products. You certainly do not have to do it this way, I am just explaining what I did so you see how it can diversify your business. My business was at that time setup as a drop shipping format.
What is it?
So what exactly is drop shipping?
Wikipedia has a good description of what drop shipping is ( listed below)
- Drop shipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. Here is the link to the description if you want to read more about it.
In a nut shell, you do not deal with inventory nor shipping costs. You do end up with a bit of customer service as you get questions from customers about your product or service but the main labor is taken away from you by having a supplier do the shipping and storing the inventory. This is a great benefit because it means you can run your business from your easy chair without having to worry about over head costs for inventory and storage.
Work From Home
Like I stated above you can run a drop shipping business from anywhere there is an online connection. This makes the prospect so much easier and less time-consuming in many ways. You deal with advertising your brand and updating your ads or website if you go that route, instead of handling inventory of products
Not quite on auto pilot like affiliate marketing does but your business can run well and once you are established you can get into a routine that allows you more free time for doing the things you like to do with family and friends.
So the nuts and bolts of this business is the process of setting it all up and making transactions.
You will need to figure out what you are selling and how you want to do that What I mean is, are you selling via eBay or with a website? or both. Getting started with the auction route is easier since you do not need a website, but you will want to consider one in order to scale up your business to make quite a bit more money from it at some point.
Before you do either, you need a supplier for your products or multiple suppliers depending on what you are promoting I would recommend you check out my Worldwide Brands Review for that information. They are the industry standard for wholesale supplier directories with over 8 million products available from suppliers.
The auction route means you set up an account and place adds from within your account using their website, which is simple and fairly step by step. The website route takes a bit more to get going with but pays off more and gives you a much better connection with your customers in more of a one on one interaction instead of the clunky tools within an auction format. Many of the top retail drop shippers are primarily website only companies. See my post about Building a Website for Free if you are interested
Once you are set up. You make your money from the difference between what your cost of the item is from a supplier and what your customers pays for it. You set the price and can determine profit from that. Advice? do not get greedy and try to get huge profits from each sale. I made mine work just fine by selling in volume and making a small profit from each sale. Here is an example I sold a memory foam topper that I paid $87 for from my supplier and I sold it for $129.99.99 and after all costs associated I made about $25. I chose to pay for shipping, it helped promote sales since I advertised free shipping on my site, You certainly do not have to do that but it worked well for me.
Note to remember: You get the money from a sale and use that money to purchase an item from your supplier who then ships the item with your label on it to your customer. Your customer never interacts with your supplier directly they deal with you as the middle man. Returns come to “you” and you return them to the supplier based on their return policy. You can determine if you charge for return shipping or not.
The next step is to learn keyword research and promote your products via advertising so you get visitors to your website or auction listing. You can do that in may ways. Social media, quality content, word of mouth, link sharing and so on, there many ways to promote your brand. Yo can really step it up a notch by using email marketing as well to share information on products or services you offer see my Aweber email marketing review to understand that process.
The Risk and Rewards
Your own drop shipping business has its perks as well as a few pitfalls that you need to be aware of. You may find other information about this online but I am simply sharing my personal experience as a gauge for you to see how it works.
One thing I learned early on is I needed to be knowledgeable about my product I was selling. I received many questions from customers that I did not initially have an answer for so I had to learn quickly about what I was selling. Also, having a good relationship with your supplier is a must, be very aware of their return policies and if they charge any fees for restocking of products. This is a big deal. I actually changed suppliers because my first supplier had what I considered a sub par return policy that ended up being a hindrance to my business. Because no matter what happens there will always be someone who wants to return what they bought. The Worldwide brands’ directory I mentioned above helps weed out suppliers that have bad policies, they have strict guidelines to be in the directory so the behind the scenes work is done for you.
The rewards can be fabulous if you find a great supplier or many that you can work well with. Many provide even better discounts for long term customers or certain sales levels which allows you to add more value for your customers and in turn make a better profit. Just like in the affiliate marketing world, your first priority should be helping your customers solve what they need help with like finding the right item or information. You build trust and that leads to a better reputation and in turn more revenue for you. I can’t be fake, you need to be real and honest in what you do, it will help your business grow way faster than if you are just trying to make a buck anyway possible.
So Let’s close this out with a quick summary of how this works.
- You find a supplier or multiple suppliers and set up a free account with them
- You use either auction sites or a retail website or both to sell your items
- Handle transactions from customers and provide solutions to customers problems
- Advertise your brand via multiple sources including email marketing
- Grow your brand with honesty and integrity in how you conduct business
This post has shown you the basic steps to get a drop shipping business going and also has shown some things to be aware of along the way. I would be happy to help guide you along the way to get started on your business. From website creation, quality content, keyword research to email marketing as well as what to expect as your business grows. I am wiling to help.
Feel free to comment below and Let’s start a dialog and get you started, are you thinking of a product line? Let me guide you to an answer, I won’t do your job for you but I will help you find the answer. You can also email me and I will respond, see my about Todd page for my contact information
Thank you for your time and have a great day