Drop Shipping, or How to Start a Business Without all the Bells and Whistles
In case you didn’t know, affiliate marketing has a distant relative that does not appear often in the Internet marketing industry talks. Its name is drop shipping, and today I am letting our guest author, Jorge E. Aguayo, tell you more about the topic.
Being a drop shipper is almost like being a re-seller. The difference with drop shipping is on the way you handle stock.
In a normal re-seller business, you buy wholesale and sell retail. You need some storage space for the products you bought while you sell them. You do make profit, but you also have some costs. Costs may include customs taxes, storage space, packaging and shipping, just to name a few.
In a drop shipping business you do not have any stock. You sell the product online, and then you ask the manufacturer to ship the purchased product to your client for you. Needless to say, you pay them their share and keep the rest as your profit.
It sounds good, doesn’t it? Yes, it is that simple, making it perfect for any stay-at-home mum who knows how to sell a product. It is a great way to start a business without all the bells and whistles.
If you add to that the fact it is not as popular as other online marketing options out there, it may be the side income you have been looking for.
Yet we are on Honest Housewife here, so let’s take a deeper look at all the pros and cons of drop shipping.
- Drop shipping is easy to implement. You may start with just an online store and a few products.
- You do not need to invest in renting a shop, getting business licences, buying furniture to begin. You just need a domain name, an e-commerce software.
- You do not need to drop ship for just one store. You may make profit from many sets of products in the same online shop!
- As mentioned above, you do not need to keep any stock of products in your house (or office).
- Tax-related issues are easier, as you do not need to count your stock as assets in your tax returns.
- Your clients may never learn who the real manufacturer is, so they may keep coming back to your store to buy again!
- You receive your commission in advance. You do not need to wait until the next payment cycle.
- You may need to sign agreements or contracts with the suppliers.
- As you do not control the stock, eventually you run the risk of selling an item that the supplier does not have anymore. Let me repeat that: eventually. Don’t let this discourage you.
- It is a little bit harder to provide warranty, or to return or change defective items, as you need to arrange that with your suppliers.
- Unless you buy one product for yourself or read the manuals thoroughly, you may not be as able to provide customer service as the real manufacturer.
- You need to learn about online marketing and online advertising. You may open your store fast, but it doesn’t mean the world will freeze to go and buy from you.
Now, don’t let the cons discourage you. With some work, drop shipping can make really good money for you. Many drop shippers start with an eBay account drop shipping items that are on sale at Walmart or Alibaba. Of course, you want something more elaborated, something that may become a business in the long run and that can stand the test of time.
So here is what I suggest you doing if you want to start in the drop shipping business:
The most important task is to select good sources. The better the suppliers the better the business. I can’t stress this enough!
Try to find uncommon goods. Everybody sells USB pen drives. Come on, be creative!
Try to find items that can be sold all year round, or sets of items from a few stores that will supplement each other so you can sell all year round. It doesn’t matter if they need to come from more than one supplier. You need a steady income to keep a business moving all year round.
For example, you may start drop shipping the exclusive baby alpaca sweaters and cardigans for men and women we sell on our site; but if you don’t find a delightful set of bikinis for the summer, you run the risk of only being able to do business in autumn. That makes not sense, does it?
Double-check the supplier. Search online, surf drop shipping groups and try to find reviews about the supplier’s reputation before joining their drop shipping program. You do not want to feed a scammer. Drop shipper communities are a good place to look for sources too.
About Jorge E. Aguayo
Jorge (a.k.a. Tedel on the Internet) is a South American online marketer born in Peru. He is currently working for Tinkuy, an online store of hand-knit baby alpaca products made in that country. In his free time, he likes riding his bike, swimming, reading and writing.