Knowing What is a Drop Shipping Business may inspire you to start your own online business. Obviously, the main reason why anyone would want to start one is to earn money. Most certainly, it supports a quick way for both newbies and experienced entrepreneurs to earn income. Of course, it can be a dream come true if you build a successful business online.
The key focus of this post shares exactly What is a Drop Shipping Business and some reasons why it’s a good time to start one. Basically, in a drop shipping business, you will market and sell products that you don’t create. That is to say, you are marketing other people’s products. A company that you can start with is SaleHoo.
For one thing, you don’t have to carry an inventory. Neither do you have to pack and ship the products. As a seller, you strike up a deal with a supplier who is a manufacturer. Or a wholesaler. As long as you get sales, the supplier fulfills the orders, to your customers. Matter of fact, you can discover more about the Drop Shipping Business here.
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What is a Drop Shipping Business?
Primarily in a Drop Shipping Business, you are doing a form of retail. To point out, you do not have a physical store with products. Rather, you operate an online store. Is there a product that you really love? Maybe, it has a high demand.
Usually, you will have products for sale on your website that can be a solution to problems. One word of caution here is to make sure your supply partner has the products in stock. Whenever customers make a purchase on your website, you forward the details to the supplier. Forthwith, the supplier ships the products directly to your customers.
Writer’s Note: Don’t have a website? Click this link and create one for free.
“Tomorrow is too late. Yesterday is over. Now is exactly the right moment to start.”
(anonymous)
Important Facts You Should Know
Starting a Drop Shipping Business may sound like a great idea for any online store. The question to consider though: Is it that easy? Considering the business method, it may be budget-friendly for some people. Do you have a laptop/desktop and the internet? Simply signing up with this company, can actually help you to get going.
Assuredly, Drop Shipping is ideal for entrepreneurs who don’t want to deal with running a traditional store. Once you build your website though, you will need to get traffic. Markedly, getting traffic results in customers and profit. Keep in mind that for you to get a share of the profit, you need to mark up the prices of the products you sell.
A Drop Ship Supplier Takes Care of Everything
Remember, you may not even see the products that you are selling. Surely, the supplier knows this. Therefore, it’s good to have an agreement with the supplier in the way the products reach customers. Often times, the drop shipping company ships the products in a way that looks like it is coming from you.
Like making sure your company information is on the packing slip. Take, for instance, your logo, the name of your company, and your contact details. Of course, your customers won’t know that the products are not coming directly from you. Generally, the supplier also deals with returns.
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Can You Earn From Home in Drop Shipping?
Assuming that you have a good niche website, you can certainly earn from a Drop Shipping Business. Almost certainly, your profit margin can range between 15% – 45%. More specifically, products like jewelry and electronics can return 100% revenue.
Essentially, you’ll need to find the right supplier with unique items. Ideally, you don’t really want a product that everyone is already selling in a supersaturated market. Watch this short video for niche inspiration.
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Who can do a Drop Shipping Business?
Newbie Entrepreneurs: Comparatively, when you look at other online business opportunities, drop shipping offers little risk. Depending on the company that you choose to join, you may not have to invest a lot of money to start a business.
Experienced Entrepreneurs: Those who already have an online store can also benefit from this dropshipping opportunity. Mainly, entrepreneurs can use it as a way to test the sales of specific products that they would like to add to their inventory. Based on the sales you’ll know whether to continue with these items.
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How to Source Products for a Drop Shipping Business
Manufacturers: Directly, you can source products from dropship manufacturers. They primarily create and mass-produce products. Nonetheless, many manufacturers do not support the drop-ship business method.
Partnering with a manufacturer is certainly better for your profit margins. Needless to say, this allows you to eliminate the third party. Moreover, you get the best prices for the products. Truly, this is a big deal for any dropshipping business.
Wholesalers: Working hand in hand with the manufacturers, wholesalers purchase a preferred product in large quantities. Then they resell the products at a markup price. Also, there are drop ship wholesalers who will pack and ship products to your customers. Fees for this service vary with the wholesaler.
Using an Aggregator
Similar to the typical wholesaler, an aggregator is also a wholesaler. Different from the regular wholesaler the aggregator makes purchases from several manufacturers. Hence, the aggregator offers a wide range of products to customers. A typical example is Worldwide Brands which have multiple categories. Providing tons of merchandise, you can check out the ones that appeal to you most to sell on your website.
Using an aggregator can cut out some problems that may arise with a drop shipping business. For instance, you can eliminate mistakes and delays when transferring several orders to suppliers. Additionally, you can avoid different shipping costs for multiple products. Notably, you pay for this service which means a cut into your earnings. Nevertheless, this eliminates some discouragement with the business.
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Pros of a Drop Shipping Business
First and foremost, you can test out various products to see how well they sell. Correspondingly, you can identify the products that have a demand. Thereafter, you can focus on providing those products to customers.
- Start With Little Funds
Perhaps this is the most important advantage especially for newbie entrepreneurs. Under this business model, you don’t have to pay for products up front. Whenever a customer pays you for a product, that’s the only time you’ll pay the supplier.
Again, the key point to note is that you do not have to carry any inventory. Unlike the traditional way of purchasing goods to sell, you don’t have to spend hundreds of dollars in a drop shipping business. Because you don’t have to make a commitment to sell through an inventory, there is little risk.
2. Not Hard to Start
Not having to handle any products directly makes this drop shipping one of the easiest business to start. Imagine, the opportunity to even sell items Amazon consumers always want. Why is this business easier to start? Here are a few other things to note:
- No need to pay for a storage place
- Packing and shipping products to customers is not on you
- Updating inventory isn’t in your hands
- Don’t have to handle returns
“There is no success without commitment and action.” (Vantel Pearls)
More Drop Shipping Pros
3. Minimal Overhead Cost
Seeing that you can start your drop shipping business from home, there is not much cost to your overhead. Important to realize that you may have a monthly fee to pay if you choose to sign up with Ecommerce platforms like Shopify for example.
4. Work From Anywhere
All things considered with good internet service, you can work from anywhere. Additionally, you will also need to have good contact with your customers and of course your suppliers.
5. Able to List Many Products
Since you will not carry an inventory, you can list several items on your website. Any product that your supplier has available, you can list it as long as you want to sell it. At the same time however, remember to check to make sure that there is a high customer demand for the items you sell.
6. Easy to Manage
Given the fact that your suppliers take care of customer orders, this gives you more time to concentrate on developing your website business.
Cons of a Drop Shipping Business
Despite the fact that a drop shipping business seems ideal for those who want to start an online business, it has its setbacks. Below are a few caveats to keep in mind.
1. High Niche Competition
Undoubtedly, competition can be high especially with popular products. Consequently, you have to weigh the pros and cons with your chosen niche. Likewise, you also need to be mindful of the pricing of the products.
2. Low Margins
Operating in a niche with high competition may result in low margins. Chiefly, competitors may sell products at a low price to earn revenue quickly. Investing in the business is at a minimal cost, so some people will want to sell items at a low cost. Obviously, if the prices are low, your margins will also be low.
3. Inventory Glitches
Granted that suppliers may have many orders from different merchants, there may be glitches with the fulfillment. At the same time, you do not have any control over the inventory. Neither do you know exactly what is in stock. As a result, there can be changes to the inventory without you knowing.
More Drop Shipping Cons
4. Unexpected Shipping Charges
Sourcing products from different suppliers may result in extra shipping charges. For instance, a customer may purchase different products which are not from the same supplier. In reality, each product may have a different shipping cost.
Passing on these shipping costs to the consumer can be an issue. And this can discourage customers from completing purchases.
5. Order Goes Wrong
No matter how careful suppliers are, there are times when errors are made with an order. Possibly, the supplier can ship the wrong product. Or, a supplier can ship a lower quality product that does not match the description on your website.
By the same token, packing and shipping a product may not be up to standard. Moreover the customer receives a damaged product. Needless to say, the backlash is on you the merchant. Accordingly, you have to make all the apologies, and arrange for product replacement.
Creating Your Own Website
Realistically, not everyone will want to use the drop shipping model. Sure enough, there is a better alternative. See my #1 recommendation for free hands on 5 day training. Truly, there is no commitment to pay a dime. This is the training that I use to learn how to create my own websites.
Compared to drop shipping, there is no connection with suppliers. Plus, you don’t have to take orders to pass on the information to them. Particularly, you’ll just be recommending and promoting products using text links and banners.
Concluding Thoughts
What is a Drop Shipping Business? Given the many positives, it may seem like the ideal business model to start selling online. Even though there are a few negatives, you can work to overcome them, and still have a successful drop shipping business.
Most important is finding the ideal products and reliable suppliers. Rest assured that once you have this going, your business can grow. In case you are stretched financially and want to sell online without carrying an inventory, then you can certainly try a Drop Shipping Business.
Hope you are happy with your experience at theworkathomebusiness.com. If you have any questions, concerns or suggestions please let us know. Feel free to share this page or leave a comment.
Carol
theworkathomebusiness.com
This concept of drop shipping is quite interesting. Is it similar to what Amazon does? Because I’ve noticed when I choose Amazon Prime for fast shipping, it literally comes in a few days, even if I live in Canada. I suppose someone has the item I want in stock at home.
I like the idea that this business type requires no storage space to grow your inventory. I’d love to make some money that way. But how do you go on to find a reliable supplier?
Thank you for making people aware of this business opportunity!
Didi
Hi Didi,
Thanks for visiting. Let me assure you that a drop shipping business is worth trying especially if you are pressed for storage space. Typically, shipment of products are not as fast as Amazon Prime, so that’s one drawback. In case you are interested and want to start a drop shipping business, SaleHoo is great to find reliable suppliers.
Thank you for the information. I really like it and this information is very helpful. Actually I am interested in this type of article. Since this is a good idea for a new business. You have clearly explained everything. As you mentioned it is easy to start with a small amount of money. Really this article is very helpful for persons who are seeking new business ideas.
Hi Samantha,
A drop shipping business is definitely a great way to start a business. Like any other business, it does has its pros and cons. With the right product however, the possibility is certainly there for success.
I think of starting dropshipping in future. Right now I have a project which takes a lot of time. I wonder how should I choose the niche. Of course I want to start a profitable one which has low competition. Is starting a jewelry store good idea? How will be the profit margin?
Hi Furkan,
Drop Shipping is a great business, but you have to get it right to be successful at it. Here is an article from SaleHoo, one of my recommended drop shipping companies. It will help with your jewelry store idea and how to profit.
Deciding What to Dropship
Hi Carol, Just took a look at your website. It was simple and to the point. Like anything we do keeping things simple is always the best formula. You covered everything like Drop shipping, making products from home and being an affiliate. Do you provide and one on one coaching for those who may way want to get started and would like a personal touch.
Good Job!
Hi Tony,
Thanks for visiting. I do not offer coaching right now, but it’s something to think about for the near future.