Drop Shipping Information
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David
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February 20th, 2012
Drop shipping is a great way to start selling products online without having to spend a ton of money to carry inventory. The idea works like this, you sell other people's stuff online and once the sale is completed you notify the merchant and they will fulfill the order.
I still use drop shipping to this day because of the lack of risk. Think of it this way, if I were to purchase a large number of items for a new website I'm out all of that money. Since I choose to start out by drop shipping I have no investment so if the product doesn't sell well I'm not out anything.
How Drop Shipping Works
The process of drop shipping is actually very simple. You first will want to find a company that drop ships a product that you want to sell. You would then add those products to your website through some sort of shopping cart software.
At that point you would accept the orders on your website so you'll need to have some sort payment processor such as a credit card processor or even a free option such as Pay Pal.
Once an order has been completed on your website you'll need to notify the drop ship vendor. This can be done a variety of ways, you'll need to get that sort of information from the vendor.
A few ways that I've had to submit orders in the past was by simply emailing them with the details, submit the order online and some requested that I fax the details to them. Again, you'll need to get this information from the drop ship vendor.
Finding Drop Shipping Companies
The process of selecting a new product to offer and finding a vendor that offers drop shipping is actually very simple. Worldwide Brands has put together a directory of vendors that offer drop shipping, all you need to do is type in a product an it'll display vendors that offer products that you're looking for.
The biggest obstacle that you'll run into right now is the $299 fee for use of the directory. I realize that this is pretty steep but if you can get a site online you should be able to make it up quickly. With that said, a free source of drop ship information can be found at www.WholesaleCentral.com.
The only obstacle that you'll run into is that they will accept just about anyone who requests to signup with them. This can be a problem if you sell a product and then find out that the merchant is some sort of scammer. Worldwide Brands actually has a group of people that go through a verification process so you'll know that they vendor is legit.
Fees Associated With Drop Shipping
When you select a drop shipping vendor be sure to find out if they charge a drop ship fee. This fee is generally added to cover expenses related to shipping materials, handling or just the convenience of not having to purchase inventory.
Through my experience, the standard drop ship fee ranges from $1.50 PER ITEM to $2.50 PER ITEM. I'm not big on using capital letters but I felt that it was important to stress that this fee is usually attached to each item you sell, not just per sale.
Every once in a while you'll find merchants that charge $5 or more as a drop ship fee. I can tell you this right now, I would never do business with them. That $5 is coming from your profit so the only company that's making money is theirs.
Pricing Associated With Drop Shipping
The pricing that you receive from a drop ship vendor is going to vary. I couldn't even start to give you ideas on what to expect. Often times you'll pay somewhere between 50% - 60% of the retail price.
With that said, you'll also find merchants that offer more than a 50% discount and you'll find that offer less than a 30% margin. This is often times dictated by value of the product but as I mentioned, it's going to vary so be sure to get this information before taking the time to develop a website.
Pricing Products That You Drop Ship
When it comes to pricing the products on your website you'll generally stick with the MSRP. If you price it for more you'll run into lost sales for those people who research a product before purchasing it.
You definitely don't want to price it much under the MSRP because that cuts into your margin and with the drop ship fees you'll be working for pennies.
A saying that I have addopted in my price testing is that 'I'd rather have a little bit of something rather than a whole lot of nothing'. My point is that although I think that if I can sell an item for more I'd rather not take the chance on losing a sale because I get to greedy with my pricing.
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