Drop Ship Your Way To Wealth

Drop Ship Your Way To Wealth

Your customer sees a​ marvelous array of​ products on your website. After thoughtful consideration, she purchases the​ product she wants. Amazingly, you have never actually seen the​ product. That is​ because your supplier shipped the​ order directly to​ her.

1. Problems With Stocking Inventory

After deciding what products you will sell, you are immediately faced with many challenges.

First: "To stock my products, will I need to​ rent store or​ warehouse space? I was hoping to​ sell by Internet, mail order, or​ export, but I don`t have much storage space for​ inventory at​ home."

Second: "Will the​ supplier even deal with me if​ I don`t have a​ retail location? I was counting on keeping my overhead down by operating from home."

Third: "I know that many manufacturers and​ distributors have a​ minimum order, sometimes in​ the​ thousands of​ dollars. I don`t have that kind of​ money!"

Fourth: "Even if​ I did have the​ money, why should I tie it​ up in​ inventory? How do I know if​ the​ product will even sell?"

Fifth: "I guess I will have to​ add extra insurance coverage for​ my inventory. Maybe I better upgrade my security system while I`m at​ it."

Sixth: "The shipping charges are going to​ kill me. First, I have to​ pay to​ get the​ goods here (freight-in). Then, I have to​ pay to​ ship the​ goods out to​ my customers (freight-out)."

Seventh: "If I expand and​ hire employees, how will I control the​ inventory? How will I know if​ my employees are stealing from me?"

Eighth: "How much time and​ money am I going to​ spend packaging and​ fulfilling orders?"

These problems can be reduced or​ eliminated by drop shipping.

2. Drop Shipping to​ the​ Rescue

Drop shipping is​ a​ method of​ selling products without stocking inventory yourself. You don`t need to​ stock inventory, because you only order an​ item when a​ customer requests it.

With drop shipping, when you make a​ sale you contact the​ manufacturer or​ authorized distributor and​ make arrangements to​ pay for​ the​ order at​ your wholesale cost. Your distributor then ships the​ product to​ the​ customer with your invoice and​ shipping label.

For example, let`s assume that you have just sold a​ product to​ a​ customer for​ $100.00 plus shipping charges of​ $15.00. Having received the​ customer`s payment, you now need to​ fax or​ otherwise send your order to​ your drop ship supplier. You will need to​ pay your supplier, by credit card or​ other means, your cost of​ $50.00 plus $15.00 shipping. This leaves you a​ $50.00 gross profit. Your supplier will now ship the​ product to​ your customer.

With this arrangement of​ not having to​ stock inventory yourself, there are many advantages.

You eliminate the​ high costs of​ holding inventory. There is​ no need for​ you to​ rent expensive storage space, finance high minimum orders, get stuck with goods that don`t sell, or​ pay other expenses associated with maintaining inventory.

Indirectly, you do pay inventory costs. Your drop ship supplier must maintain his inventory and​ pay all associated costs, including freight-in, storage space, insurance, accounting, shrinkage, and​ so on. to​ make a​ profit, he must pass these costs on to​ you.

The real advantage to​ this drop shipping arrangement lies in​ keeping your costs variable. Instead of​ being stuck with these expenses up front, whether you sell or​ not, you pay only when you make a​ sale.

3. Profit From Drop Shipping

Many legitimate drop ship suppliers may not require you to​ have a​ retail location, but they will want to​ see evidence that you are in​ business. They may require you to​ produce a​ resale license or​ retail sales tax permit.

To be sure, there are pitfalls to​ watch out for​ in​ drop shipping. for​ example, some suppliers claim to​ sell at​ wholesale prices but are actually selling closer to​ retail. Also, margins are very slim in​ some competitive areas, such as​ electronics. However, with proper research and​ information, you should be able to​ avoid these problems.

Whether from your home, retail store, directly from your website or​ through an​ online auction, you can arrange to​ sell an​ item before you purchase it. That way you have nothing invested in​ inventory and​ won`t get stuck with stock that won`t sell.

Rather than financing and​ stocking inventory yourself, consider drop shipping your way to​ wealth.

Drop Ship Your Way To Wealth

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