Drop shipping isn’t a new concept but the internet has made this source of extra income accessible to a great number of people. Drop shipping is big business around the world and is one of the actual online money making methods that can bring in some extra income.
What Exactly is Drop Shipping?
Drop shipping is method whereby the drop shipper acts as the middleman between a customer and a wholesale distributor. The drop shipper holds no actual stock but takes orders from customers and the goods are shipped to the customer from the wholesaler. This method of retailing can be used by small businesses who do not wish to carry large amounts of stock. It can also be used by individuals trading online.
Where Does the Profit Come From with Drop Shipping?
A drop shipper will prearrange a price with wholesalers usually at a discounted cost. The drop shipper will then advertise the goods with their own mark up included. The profit for the drop shipper is the difference between the wholesale price and the drop shipper’s sale price.
Can Drop Shipping Only Be Conducted Online?
Not at all, drop shipping has existed for many years before the internet actually existed. Home shopping through catalogues is a common example of drop shipping. The internet has simply added a new dimension to this trading process. Viewing products, the amount of products available, ordering, and paying for goods have all been simplified thanks to the internet.
If So Many People Are Doing This How Can I Make Money?
The beauty of drop shipping via the internet is that drop shippers can advertise their virtual store fronts on a global scale. It is true that drop shippers face an enormous amount of competition when it comes to products. However, niche markets can be profitable and drop shippers who are astute enough to cotton onto the next popular product can maximise their profits. Thoroughly researching the marketplace and the products available should give an edge when it comes to the competition and profitability.
What Are the Drawbacks to Drop Shipping?
Competition in the market place is one of the major drawbacks to drop shipping, although this can be said of any retail outlet. Another drawback is that some wholesalers will only deal in bulk orders; bad news for drop shippers who only wish to order a few items at a time. Control is another aspect as the drop shipper is dependant on the wholesaler sticking to time schedules when it comes to deliveries. Customers who have to wait for their orders if the wholesaler is inefficient might not use the drop shipper again.
What Are the Major Benefits of Drop Shipping?
Both trading online and drop shipping means very low overheads; all that is required is an online store. The overheads can be further reduced by using websites such as Ebay. Drop shippers can also set their own retail price giving them more control over their profit margins. In most cases payment for products is guaranteed as drop shippers only pay for goods once an order has been placed. There is never a problem with acquiring and holding excess stock as this is the wholesaler’s problem not the drop shippers.
Where Can I Find Information About Wholesalers?
There are reputable companies on the internet that will supply information for those who need it for a very small fee. Companies such as World Wide Brands can be useful when it comes to a database of wholesalers. Always be wary of those who charge huge amounts for this type of information. In many cases it is not hard to do some online research and contact wholesalers at absolutely no expense.
Is Drop Shipping Not Just Another Online Scam?
As with all online money making schemes there are scammers on the internet trying to make money from those simply trying to make a living. Those considering this method of bringing in some extra income should be aware of the common drop shipping scams. These can include charging drop shippers a membership fee for lists of wholesalers or even trying to supply drop shippers with fake licences. Also beware of those internet sites that will inform you how to beat drop shipping scams and then charge you for this information.