You’ve heard the word…but what does it mean…exactly?
Drop-shipping is an e-commerce business model that allows you to sell a product directly to the consumer through your own online “Company store” without having to buy any inventory, or rent a storage / shipping facility. No financial investment in inventory or storage = less financial risk.
No shipping to the customer = easier for you. Your job is Marketing, Sales and Customer Service.
The beauty of drop-shipping is that you can carry a variety of items in your store because you don’t have to warehouse any of it. You can choose to carry as many or as few products as you want to manage. Once you decide what you want to sell, you can usually find a drop-ship supplier to supply it.
Here’s how it works:
- The customer places and pays for an order through your online store
- You forward the order and shipping details directly to your drop-ship supplier
- Your supplier packages and ships the order directly to the customer
- You pay the wholesale price to the supplier and the difference is your gross profit. You can expect between 10-30% based on your chosen retail pricing strategy.
A drop-ship directory is a database of suppliers that are organized by niche where you can find products to sell. Companies like Worldwide Brands vet every company in their directory for legitimacy.
Because your business hinges on the quality of your drop-shipper, keep in mind that a successful partnership between you and your distributor is essential.
Before you choose any vendor, you should always place a test order to see…
- Shipping time within 1-2 business days
- Did the product arrive safely and undamaged?
- The quality of their Customer Service
It’s also very important to ask if the vendor offers a real time inventory feed so you don’t sell sold out or backordered items.
Customer service and your online reputation can make or break your business, and you are staking the reputation of your online store by linking yourself to your drop-ship distributor. If they are unreliable, it will reflect negatively on your Company. In the age of social media, news spreads lightning fast, so it is crucial that you do whatever you can to maintain a positive image for your online store. Unfortunately, you will have very little control of product fulfillment – you can’t control when a customer will receive their product.
Want to start your own drop-shipping business? You can literally start for under $5 with a free open source shopping cart.
All you need is a website, free credit card processing – and you can start taking orders immediately.
- Sign up for webhosting – $3.95/month
- Install an open source shopping cart – Free
- Install an SSL certificate – Most hosts will give you an SSL certificate for free to secure your website
- Free credit card processing service – $0/month, 2-3% fee per transaction
- Website template – $20-$50
Total = $3.95 to $53.95 (if you purchase a template)
An easier, but more expensive method is to utilize a site like Shopify with Oberlo extensions and a processor such as PayPal or Stripe which make automating your shop and inventory a breeze. This option gives you more creative freedom if you are not a technical wizard. But, they will cost you approximately $50/mo. plus processing fees.
As with any business venture, there are always downsides. Any expectation of a get rich quick option needs to be realistic…making money with a drop-ship store still requires time and attention to produce an income. The most important thing is to research your options before opening your Store.