What is Drop Shipping?

People have been distributing products since before the first mastodon skinner traded a fur coat for a flint axe.
Here’s how it works.

Let’s say ABC Manufacturers makes a product called Mom’s Ankle Wax. We’ll say that Mom’s Ankle Wax has been around for years. It’s a very well known brand name product. It will without a doubt give you the shiniest ankles on your block, and everybody wants some.

ABC Manufacturers makes Mom’s Ankle Wax, but they don’t sell it directly to the public. They’re a manufacturing operation. They’re far too busy melting paraffin and waxing test ankles to go around building stores all over the place. They need distributors; companies who will take their product and distribute it to the places that will sell it.

For years, ABC Manufacturers has sold Mom’s Ankle Wax to a company called DEF Distributors. The founder of DEF Distributors knew Mom herself, back in the old days when she made her Ankle Wax by hand, out in the turkey barn.
Today, DEF Distributors buys Mom’s Ankle Wax by the truckload. They pay $5.00 a case for it, which is a very good price. It’s such a good price, it has it’s own name: the Manufacturer’s Wholesale Price.

However, DEF Distributors does not sell it to the general public either. They are a distributor. They distribute Mom’s Ankle Wax.

DEF Distributors works with a chain of retail stores called Wax R Us. This place was founded by a retail business visionary who saw the incredible potential of Mom’s Ankle Wax a long time ago. Today there are Wax R Us retail stores on every street corner in every major city in the country. Wax R Us buys truckloads of Mom’s Ankle Wax from DEF Distributors for $10.00 a case.

So, DEF Distributors makes $5.00 on every case of Mom’s Ankle Wax they sell to Wax R Us retail stores. This makes DEF Distributors very happy.

Cases and cases of Mom’s Ankle Wax arrive in the stockrooms of Wax R Us stores everywhere. The Wax R Us employees open those cases, and pull 12 cans of Mom’s Ankle Wax out of each case. With their pricing guns, they stick a price of $4.50 on each and every can.

Wax R Us stores make a total of $44.00 on each case of Mom’s Ankle Wax. (12 cans x 4.50 per can = 54.00, minus the 10.00 they paid for the case = 44.00).

Wax R Us is even happier than DEF Distributors.

However, the happiest people of all are the people who can stroll into Wax R Us and purchase a can of Mom’s Ankle Wax for only $4.50. They think this is a great price, and they’re walking around with the shiniest ankles in town.

Well, that’s it…basic product distribution. The manufacturer sells to the distributor, the distributor sells to the retailer, and the retailer sells to the end user (the customer). The manufacturer, the distributor and the retailer all make money because the customer is willing to spend money for the product.

Drop Shipping has been around for a long time, too. Probably as long as mail order catalogs; maybe longer. If you want to use a buzzword to impress a corporate type, call it “second party addressing”.

Above, we talked about the manufacturer-distributor-retailer relationship. When you use drop shipping to sell products on the Internet, (or anywhere else), YOU become the RETAILER in that relationship.

It should be noted here, if only to keep the Punctuation Police happy, that if you use the method of drop shipping in your business, YOU are not the “drop shipper”. The company(s) who supply the products to your customers for you is the drop shipper. YOU become a “Stockless Retailer”.


How Drop Shipping Works

1.) You open an Internet Store, with a shopping cart and the ability to accept credit cards.

2.) You find a distributor who is willing to DROP SHIP the products you want to sell. The best place on the Internet for this is www.WorldwideBrands.com. This is our website, the home of OneSource, recognized as the best source for legitimate Wholesale Suppliers on the Internet.

3.) You establish an account as a retailer with the Drop Ship Wholesale Supplier.

4.) You receive images and descriptions of the products you want to sell from the Drop Shipper and post them on your Internet Store.

5.) A customer surfs into your Internet Store, and falls in love with a product that you have priced at, say, $80. They purchase the item with their credit card. Your Store charges their credit card $80 plus your shipping fee.

6.) You turn around and email the order to your Drop Shipper, along with the customer’s name and address.

7.) The Drop Shipper sends the product directly to your customer, with YOUR Store’s name on the package.

8.) The Drop Shipper charges you the wholesale price of, say, $45.00, plus shipping.

9.) Your customer gets a cool product from your store shipped to their door, and they tell all their friends about you, and you make even more money.

There you have it. You just made a $35.00 profit on one item. You didn’t have to buy a whole bunch of the product and keep it in your warehouse, hoping you would sell it. You didn’t have to pay to have it shipped to you, and then pay to ship it to your customer. All you did was send an email to your Drop Ship Wholesale Supplier.

That’s the drop shipping process in a nutshell!

How to Choose Your Product Lineup - Product Selection Criteria for Your E-Biz

The Internet has come a long way – a few years ago, it provided an extremely limited selling venue. Only the most daring buyers ventured online to make purchases. "Today, nearly anything that can be sold can be sold online," asserts online business advisor Ana Rincon, of OnlineBusiness.About.com. "Even the most conservative shoppers think nothing of buying a complete set of furniture over the Internet."

Asking the Right Questions
So with almost unlimited options to choose from, how do you select the right product offerings for your E-Biz? What factors should you consider? Rincon recommends asking five specific questions before determining what merchandise to sell:
·Can I be profitable with this product?
You need to know, not just the cost of sourcing an item, but the total cost of selling it, because some items have hidden expenses involved in selling them. Packaging, shipping, storing, marketing, and maintaining listings for your wares are all a part of the total price of selling.
·What's the demand for this product?
Before you sell an item, you need to know if anyone is searching for it online. There are a number of research tools you can use to determine if there's sufficient demand for your goods:
oGoogle and Yahoo! both have Keyword Tools that show you how much people are bidding on keywords and how many people are searching for your item.
oEBay's active and completed auctions give you an indication of how many people are looking for an item, how much competition you have, and how much people are willing to pay for your item.

Note: Many new sellers want to source high-demand "hot" products – but these often produce too much competition to leave room for good profits. Finding medium-demand, niche areas is a more stable option than chasing down every "hot" product on the market.
·What purpose does this product serve?
Every item plays a different role in your overall selection. Some have lower margins but are easier to sell or generate more traffic and are, therefore, worth carrying.
·How complicated is this product to sell?
The time and effort you put into selling a product is part of your total profitability equation. Customizable items may have high margins, but if you can only produce a few because it takes too long, the profits may not justify the hours and energy you'd invest.

Many items also have unique parameters. Some require detailed explanations and diagrams or necessitate a greater amount of customer service. Others, such as perishables, have special storage and shipping needs. These extra tasks can add up to a lot of your time and need to be taken into account.
Before investing in a product, it's critical you consider how well it will do online. Look at whether you can be profitable with an item, and whether or not that profit justifies the workload that selling it demands. Says Rincon, "What you sell is one of the most important decisions you'll make in your E-Biz. The online companies that excel are the ones that take time to ensure they have a successful product mix."

4 eBay Selling Strategies - How to Build Your eBay Business

Selling on eBay is a great opportunity for any eCommerce entrepreneur, but making a steady, livable income there isn't just a matter of throwing a few products up for auction. In fact, of the more than 200 million registered eBay users, only a little over a million make a part- or full-time living there.

What separates this group from the masses of recreational eBayers? The difference, according to eBay veteran Sydney Johnston, founder of Auction-Genius-Course.com, is that this small percentage of sellers have developed profitable selling strategies to help them harness the power of the Internet's busiest traffic machine. She shares four of these proven strategies that have helped many of her students reach, and exceed, their eBay goals:



1. Do your product sourcing in the right order.
The biggest question new sellers have is, "What should I sell?" But they often begin their research process backwards, looking first for good product niches, then for suppliers. Unfortunately, they can't always locate suppliers for their products, so they waste hours and days gathering information they can't use.

First, find your product suppliers. The most basic technique is to call the manufacturer, tell them you're a retailer looking to carry their products, and ask for a list of their authorized wholesalers. You can also find potential suppliers through trade shows, trade publications, and trade organizations. Once you know which products you can get suppliers for, then begin researching those product markets, using a market research tool like Terapeak or HammerTap.

2. Put your research results into practice.
It's easy to get caught in "paralysis by analysis." Many new sellers agonize over taking action for endless weeks, months, and years. Advises Johnston, "Knowledge without action is useless. If you've done your research, found a supplier and a promising product niche, then take that next step and do what your research is telling you."

3. Start small and scale up as you gain experience.
Sometimes, brand new sellers are eager to sink their savings into a liquidation lot or a container load of imports. The problem is, they don't know the first thing about what they're getting, and they often end up losing their money and giving up on eCommerce all together.

The best way to minimize your risk is to start small. You might use drop shipping to test a product without investing any funds in inventory. If it proves successful, you can move up to buying in light bulk quantities, for a better price-per-piece. Then, if you find it's still a strong, consistent seller, you can buy in even greater volume, to further increase your profit margins.

4. Take advantage of the eBay store.
If you sell on eBay, you need to capitalize on the benefits an eBay store offers. The listing fees are substantially cheaper than with auctions. And you have a place to send the search engines (whereas your auction listings only last ten days, max). Your customers, who came in for one item, can view and purchase many. And you gain the ability to send newsletters, telling buyers what promotions you're running and what new products you're carrying.
While implementing these practices can help you increase your selling success on eBay, Johnston insists that the most successful sellers aren't the ones who get everything right – they're the ones who refuse to quit. Choose to learn from your feedback, your customers, and your experiences – good and bad – and just keep going. States Johnston, "There really are no failures – only learning opportunities. If you refuse to quit, you will succeed. Period."

Locate Qualified Drop Shippers for Your Internet Business

Whether you're opening your first internet store or you're an old hand at online selling, drop shipping offers an easy entry point into buying wholesale products. A drop shipper is a wholesale supplier or manufacturer that will send individual items straight from their warehouse to your buyers' homes, on your behalf.

The Ups and Downs of Drop Shipping
For an ecommerce business, drop shipping presents several considerable advantages:

There is no risky inventory investment.
There are no storage or shipping issues.
It lets you offer an extensive product lineup.
It provides a model for testing out new products and identifying hot sellers (that you can then purchase in volume for higher margins).
That's not to imply that drop shipping is the end-all solution for all internet sellers. It poses certain limitations as well:

Because the majority of the work falls on your wholesaler, the profit margins are notably thinner than if you were purchasing in volume. They are true wholesale prices, but they are wholesale prices on single items, rather than bulk lots.
Since the supplier is handling the shipping, you have less control over that area of your customer relations. Any late deliveries or poorly packaged products will reflect badly on your business. For this reason, it's always a good idea to place a small test order with a drop shipper before listing their products on your website.
Identifying True Wholesalers
Finding legitimate wholesale drop shippers isn't easy. Many new online sellers begin looking in the worst possible place--the search engines. You will rarely find genuine wholesalers there. What you will find are a great number of middlemen and con artists, posing as true wholesale sources.

One way to find reliable sources is to attend tradeshows. The wholesalers and manufacturers you'll meet there have been vetted by a trade association. Not every vendor at a trade fair will be willing to drop ship, but many will; and you'll feel confident that they've been verified.

You can also check out industry publications. Trade magazines are a good source for finding wholesale suppliers. Lastly, you can call the manufacturer of the product you're interested in selling. Ask them for a list of their factory-authorized wholesale suppliers. Then call the wholesalers on that list to see which ones are willing to drop ship.

Finding the Right Fit
Once you're certain you're talking to real suppliers, narrow your list to the companies you want to do business with. To decide if a drop shipper will be a good fit for your business, ask pertinent questions.

Early on in your conversation, ask if the supplier will work with your business. Many wholesalers aren't anxious to sell to online businesses. They operate on thin margins and make their money selling in volume. So naturally, they don't believe an online store will place any large orders on a consistent basis. Some also have sales territory agreements with their physical retailers that restrict their customer from selling across the internet.

Even if a wholesaler will work with online sellers, that doesn't always mean they'll work with eBay sellers. So if eBay is your primary sales venue, you need to ask up front if they'll sell to you. Sometimes, the manufacturers fear their merchandise will be devalued in the market if it sells for too little on eBay. If you sell mainly on eBay, make sure your drop shipper permits their merchandise to be listed there.

Another important question to ask is whether the supplier offers single-item drop shipping--the critical word being "single-item." If a supplier sets a drop shipping quantity minimum--say five items--you're forced to require your own customers to purchase products at least five at a time. Find wholesalers who will drop ship individual items for you.

Also find out if the supplier has a minimum dollar amount requirement for drop shipping. Some drop shippers set a minimum dollar amount, known as a minimum ticket. To sell their items, you need to bundle them or simply steer clear of offering any of their individual products whose price points fall below their minimum ticket.

Lastly, ask if your supplier offers blind drop shipping. This means the supplier's name doesn't appear on your package invoices, inserts, or labels. The drop shipper may simply use a "fulfillment center" label or a blind PO Box, so your buyer never knows where their package arrives from. The point is that the drop shipper is invisible to your buyers, and your home based eBiz looks bigger than it actually is.

Finding and qualifying genuine wholesale drop shippers is a process that requires patience and a willingness to do the work. But the pay off is having those legitimate supplier relations that provide you with a steady, reliable source of products you can sell through your home business, at prices that let you make a profit. The bottom line is using drop shippers affords your eBiz tremendous benefits and supplies an excellent supplement to your other sourcing techniques.

Drop Shipping Pros and Cons - the Cost of Convenience


by Chris Malta & Robin Cowie


Many online sellers tout drop shipping for its ease; others dismiss it, arguing it leaves no room for profit. Like every other product sourcing method, drop shipping brings its own unique set of advantages and drawbacks to your E-Biz:

The Basics
Drop shipping is service some wholesale distributors provide that enables you to sell items on your web site without physically stocking them. The wholesaler warehouses large quantities of product, which you list in your web store. Your retail customers place their orders with you, and you pass them on to the drop shipper. The drop shipper sends the product directly to your customers, but remains invisible to them. The end result is that your small business appears much larger than it really is.

The Upside
According to Jason Sanchez, CEO of One Net Enterprises (OneInc.com), drop shipping presents your business with numerous benefits:



Lower Overhead
Says Sanchez, "The costs that go into warehousing and shipping individual items can be tremendous. It doesn't become efficient to do so, until you do it on a large enough scale."


No Inventory Investments
You don't pay the wholesaler for an order until your customer pays you. And you can test new products without purchasing inventory that may not sell.


Recovered Time
The time you spent receiving and organizing inventory, printing labels, and packing and shipping orders is time you can now spend promoting your web site and providing faster customer service.


No Order Minimums
Your wholesale orders are based on your customers' orders. You can order as many or few items as you need — even down to individual products.


Broader Product Selection
You can carry items in your product line-up that would be difficult to physically stock. You're also able to offer large items, such as furniture, without the hassle of trying to ship each piece.

The Downside
Of course, drop shipping has limitations, as well — two in particular:


Thinner Profit Margins
Wholesale is a volume business — the more you buy, the better your price-per-piece. Explains Sanchez, "Although your drop ship prices are true wholesale prices, they are wholesale prices on one item." You're not receiving additional discounts for buying bulk, so your per-item-costs are naturally higher. You're also paying a drop ship fee, either per container or per unique shipping location, to cover the extra labor and material costs the drop shipper incurs.


Occasional Delivery Issues
If your drop shipper is slow filling your orders, or does a poor job packaging them, it reflects badly on you and costs you repeat business. When using a new supplier, it's always a good idea to test them out first and get an idea of what your customers will experience. Place an order with them yourself, and see how quickly and competently they handle it. If you order a few of your most popular items, you'll also have them on hand in case your drop shipper ever runs short.
The Bottom Line
Particularly when you're getting started, drop shipping is an easy, cost-effective tool for your E-Biz. That doesn't mean you should limit yourself to using only drop shipping — the most successful retailers use multiple product sourcing techniques. Drop shipping provides a great complement to your other product sourcing methods, and should be one part of your overall product sourcing strategy.


BIOGRAPHY: Product Sourcing Radio is Created and Hosted by Chris Malta and Robin Cowie of WorldwideBrands.com, Home of the Internet's Largest Source of Genuine, Factory-Direct Wholesalers for online sellers. Click Here for more FREE E-Biz & Product Sourcing info!  


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