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Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. This is a easy home business and does not take allot of training.
Two main benefits of drop shipping are - no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer's money, but has not yet paid the wholesaler.
Other benefits of drop shipping include:
Risks include:As in any business, some risks are involved in drop shipping. For example, back ordering may occur when a seller places a shipment request with a wholesaler, but the product is sold out. Back ordering may be accompanied by a long wait for a shipment while the wholesaler waits for new products, which may reflect badly on the retailer. A good wholesaler will keep retailers updated, but it is the business owner's job to be aware of the quantities that the wholesaler has available.
Scams to look out for:
Drop shipping has also featured prominently in some Internet-based home business scams. [7] Scam artists will promote drop shipping as a lucrative "work from home opportunity." The victim who buys into this scam will be sold a list of businesses from which drop-shipment orders can be placed. These businesses may not be wholesalers, but other businesses or individuals acting as middlemen between retailers and wholesalers, with no product of their own to sell. These middlemen often charge prices that leave little profit margin for the victim, and require a regular fee for the retailer's usage of their services.
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Tips
- Ensure you have multiple sources to get your goods. One thing you should always do is look for new suppliers to ensure that you always have good sources of product and to reduce the risks of out of stocks. You should use a drop shipping directory like SaleHoo or OneSource or others to find your sources.
- Be honest with your customers and let them know that the product is coming from a drop shipper and they should allow a few extra days for the product to arrive. Also ask the drop shipper how long the delivery time will be so you can let your customers know when to expect the item.
- When you find a item you want to sell you will need to find a drop shipper and sometimes the best way to do that is to contact the manufacturer directly to find out who the authorized wholesale distributors are. Remember not all items are available from a drop shipper as some items are only sold to retailers.
- When buying from a new drop shipper, order a few products from them as a test to see how the process works and to make sure you have a good comfort level of there service. Your reputation is on the line and you spend allot of time to build it up and the last thing you need is for a drop shipper to ruin your reputation. You can also send a test email to see how quick a supplier responds.
- Follow up every sale with a quick survey to find out how your drop shippers are doing.
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Introduction
On this page I will let you know the tools that work for me in drop shipping and which tools are a waste of time and money. Please feel free to post any questions you like about drop shipping. I will also review some drop shippers and some good items to think about drop shipping.Thanks for looking.
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Finding a product to sell
When you are first starting out with drop shipping it is best to find a product that you know something about and are passionate about. This will help keep your interest and you can feel confident if questions are asked about the item.There are so many so called drop shippers on the internet that you need to do your home work and find the best ones. I found the best place for this was a drop ship directory, A directory is like a yellow pages of drop shippers. The 2 biggest and best are SaleHoo and World Wide Brands. There is a one time fee to join both. SaleHoo is cheaper than World Wide Brands but it is a great place to start out. Once you join one of these you will be amazed by the amount of product you can get. And both SaleHoo and World Wide Brands screen the drop shippers to verify they are legit. They both offer message boards for you to ask questions and have some reporting as well. You can also look on ebay to find which items have the most interest but understand that there are probably many drop shippers and wholesalers already selling the hottest items. You need to find a item that there is not allot of competition. One important thing I learned early on is that some drop shippers and wholesalers are selling on ebay as well and it is very difficult to compete on price with them. So make sure you look to see what the average sale price is on ebay under advance search/completed auctions.
There are also programs like Micro Niche Finder that can help you find items that are being searched for on Google. This program cost a one time fee. You can also use google to find some good items to sell. I will talk about both of these tools in my next post.
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