You may not have heard of drop shipping. It is a method that is a retail merchandising well-kept secret that has made many people extremely wealthy.
The thought of stocking inventory, renting warehouse space, and shipping customer’s orders can be a bit intimidating. Drop shipping is a way of selling offline or online without stocking merchandise which uses a chain management technique. Limited working capital can be a problem.
If you are an entrepreneur with limited working capital, you should consider drop shipping. It’s a very simple procedure. When a customer places an order, as retailer, you simply transfer your customer’s order and shipping information to your wholesale drop shipper. The drop shipper ships the order directly to your customer. When the customer pays you, you pay the drop shipper. The difference between the wholesale and retail price is your profit.
No business method is without disadvantages that can reflect badly upon the business. Drop shipping is no exception.
1. Delivery Delays.
• Your drop shipper may be slow in fulfilling your order.
• They may do a poor job packaging orders.
The best way to keep these problems from costing you repeat business, is to always practice order to test your drop shipper before you order. You could place an order yourself for your best-selling product and keep them in stock. This will let you know for yourself how efficient your drop shipper is.
2. Lower Profit Margins
• You won’t be taking advantage of the economy of scale by buying in large quantities. This will result in a higher per unit cost.
• Your drop shipper will add a premium to cover their labor, warehousing and packaging costs.
You may wonder why everyone in the free world isn’t doing this. I mean, if it’s easy and has little financial risks, you’d think everyone would want to get in on it. The answer is, it’s hard to find real wholesalers to drop ship. Not wholesalers, REAL wholesalers. There are two options you have to uncover drop shipping distributors.
1. You can do the research yourself. You could spend hours of time, and a lot of energy and effort researching on the internet or staring at Yellow Pages. This can cause you a lot of unnecessary stress.
2. You can pay someone to do the research for you. Do you think big companies like WalMart, Amazon, or Buy.com spend hours researching material themselves. No, they use supplier research services to find the best products and manufactures. This allows them to focus on areas they do best. If you want to leverage your time profitably, that is what you need to do.
Doing this is not as easy as it sounds. If you do a search on Google, you won’t find a shortage of enterprising people who our out to make a quick buck. They’ll claim to have a “secret” wholesale list. A lot of people have bought these “insider wholesale directories” and it ended up costing them more than they calculated for. A lot of people get tricked into buying inaccurate, outdated, or outright fake wholesale lists. Getting burned is not uncommon, so don’t feel bad if it’s happened to you.