subject: Is Drop Shipping Right For You? [print this page] Drop shipping provides an ideal business model for anyone starting out with a new internet store and a limited budget. You get the order, organize payment and keep the customer happy, but somebody else holds the stock, packs and ships it to your customer. Because the stock is held by someone else, you buy stock from the drop shipper ONLY when the item has already been bought from you. No risk involved and no up front capital needed to buy stock. It sounds ideal.
Of course there is a downside. There is usually more apparent profit to be made by buying from a wholesaler in bulk and shipping to the customer yourself, and of course you are more in control of the process, but with increased profit comes increased risk. Can you afford to lose the money you spent on inventory if your product doesn't sell?
If you have started an internet business in a field you already know well, you may already know what will and won't sell, but many internet entrepreneurs sell products they initially know little about. Working with a drop shipper allows you to become knowledgeable about your product niche before taking any major, expensive risks like buying stock.
Day to day your life should be easier - your web site does the selling, your drop shipper does delivery, you take the money. But in the initial stages, life is more complicated; selecting the right drop shipper is crucial. You have to be sure you've chosen a drop shipper who's reliable, trust worthy and leaves you enough margin to make a decent profit.
A good relationship with your supplier is vital to your business success, because the chances are your business will expand to other products, or you may open more than one store. Few internet fortunes are founded on a single product. Keeping in touch with your supplier is very important, so be sure to choose one you can actually talk to, and spend time cultivating the relationship.
Something that is working well this year and delivering consistent sales and profits, may be useless in six months time, due to the 'race to the bottom'; as more and more sellers attach to a product more and more undercutting occurs until the customer expects the lowest possible price. When the race to the bottom is finished nobody makes any money. Your choice of products will change with time.
If you're convinced that drop shipping is for you, think carefully about how many drop shippers you want to deal with simultaneously. Many intermediates sell the same products, so you could keep two drop shippers going together, but is this a good idea? While it is sensible to find several sources for your products (in case one dries up) consider the situation where a customer buys two products from you, each from a different drop ship supplier. The customer will expect to pay one shipping fee, but you will pay two, something which will eat in to your profit margin.
All decisions in business need to be weighed for cost versus benefit. For most new internet businesses the benefits of reduced start up costs, lower workload AND lower risk make the choice to use a drop shipper very simple.
by: Kirsty Hale
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