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The dropship business is a kind of retailing where, as an alternative to the retailer (meaning you) actually keeping the stock at their own location, they instead pass the order, along with the shipment details from a customer, to a wholesaler. After that, it is the job of the wholesaler to send off the consignment ordered directly to your customer on your behalf.
The great thing about this method is that, you do not need to have a large warehouse for storing all the goods you are selling. Getting involved in the dropship business is just like any other business. The first and most foremost when starting out on any business venture is to do your market research. I can't stress that enough.
If you propose to open a store in your city or town, you surely wouldn't embark on a project of that magnitude without first doing your market research. The same applies to the dropshipping business. The dropship business is truly changing the dynamics of retailing. Under traditional retailing arrangement,a retailer keeps and looks after the supply. With a dropshipping business on the other hand,the retailer no longer have to be concerned about controlling their inventory, as this is done for them by the wholesaler instead.
It is also very crucial if you are seriously thinking of setting up a dropship business,to make absolute certain, that the products that you choose, can be easily sold. You certainly need to know about your competition and to decide if you will be able to compete with them, and ultimately, make a profit. One of the most important factors of a dropship business being, you don't need to pay for an item until it has been sold.
In a traditional retail business, a store owner orders stock in bulk, and will need to be kept in a secure location until they can be displayed and sold. In the dropship business, there is no need to order stock in bulk.
A note of caution,every dropshipper has their own rules and requirement so it is paramount to understand what they are. There are some dropshippers who will require you to buy a minimum order. There are a vast amount of dropshippers available, so only use companies that offer services on your terms. If their terms and services do not suit you,simply find one that suit your needs.
For you to have a profitable dropship business, it is essential for you to find a product which will sell in sufficient quantities, as well as providing you with a good mark up, in order to sustain profitability. It therefore is vital that you try to determine what the demand for the product is, and also what competition, if any. To set realistic prices for your products,and to attain a healthy profit margin, take a look at what your competition is charging.
It is not unusual to find that some dropship businesses will have a much lower profit margin than others. It will be in your interest when first starting out, to test the market only with a few selected products. Try to sell every dropshipping product that is offered to you. Focus on a few selected items to start, until you feel comfortable to gear up.
Do your best to steer away from people offering to sell you lists of dropshippers for 100’s of dollars. Unfortunately, many of these are nothing but middlemen who are posing as dropshippers themselves, and will then charge much more than you should in fact be paying. Remember, the whole purpose of using a dropshipping business, is to keep your costs down to a minimum, and still be able to make a decent profit.
In addition, avoid the “turnkey” internet businesses which are proposing to sell you a package of products, e-commerce and marketing for an exorbitant membership fee or charge you a monthly fee.
These types of businesses, you will soon find, do not in reality help,but rather impede, and you will soon discover that you are not generating any decent profit whatsoever, while they are. In my honest estimation,one of the best ways of finding a trustworthy dropshipper is through looking at such fantastic directories as “Chris Malta’s Worldwide Brands”. This provides you with a whole list of legitimate, as well as reputable,dropshippers that you may consider using.
Dealing with problems associated with back orders and returns,unfortunately, is part and parcel,associated with running a retail business. There will be occasions when you discover that a product your customer has ordered is not in stock, and so will not be available for dispatch straight away. These are matters that you will need to work out with your dropshipper ahead of time, before any of these problems come up.
This will therefore provide you with answers that you can provide to your customer should such an event arise. Alas, refrain from either a personal or free web page address for your online store, and ensure that you register the business with your district Clerk. It is quite important that you register with the Tax office so that you have a Tax ID number…and be prepared to file taxes each year, as a normal trading business would.
The first drop shipper you come across does not equate to the best dropshipper, unless of course they are willing to provide you a "Best Price Guarantee."
Drop Ship Fees and Charges
There are companies who will have a handling fee exceeding freight charges - it's important to know all the costs involved so as to make it easy for you to accurately calculate your profit margins.
Does the dropshipper use small private shipping companies or UPS? Will they be willing to ship internationally? You'll want to be sure that their methods for shipping will ensure your clients receive their consignment in one piece. It is good to keep in mind that you may require a specific type of shopping cart in order to handle drop shipping. A good number of shopping carts only allow for one "ship from" zip code in the configuration for shipment calculations.
If you happen to be dealing with multiple of drop-shippers, you may have dozens of point-of-origin zip codes - and this may tend to be a real headache if freight is calculated on distance.
Find out if the drop shipping company will automatically debit your credit card on each order you submit, or if you can get monthly payment terms? You may find at times,as a new trader,some companies are unlikely to offer credit, but it's always good to check if this will be feasible once you've established credibility.
You definitely do not want to be caught up in a sticky state of affairs where you have a number of returns - and having to personally cover the bill. Ask the drop shipping company about their return policy, the kind of support they'll offer you for their products and about any guarantees associated with their products - and don't forget to get it in writing.
How Do I Get Started in Drop Shipping?
It's quite simple: Set up a website that includes a Shopping Cart and a credit card processing facilities, or setup an eBay or other auction account. Build your site, using both content and images that the dropshipping supplier has provided, or you have produced yourself ( the latter, will distinguish you from other sellers who may happen to be using the same dropshipper).
There will be a need to set up a system on your website, so that you can be alerted when an order has been placed for a specific item, so that payment can be taken. The details of the order needs to be passed on directly to your dropshipping supplier. As soon as they receive the order, they will in turn bill you at the price that you have both agreed upon, and then they will arrange for the item to be dispatched to your customer.
In most cases, the dropshipping supplier will provide labels which refer to the business or website where the order has come from, rather than from their own business. Many drop shippers will charge you a small fee to print your labels, and that really gives a professional look when your customer receives her order. Find suppliers of products you hope to sell that incorporates drop shipping as a business method.
Perhaps, one of the best ways of locating a reliable dropshipping supplier is through contacting the wholesalers direct, and finding out if they operate a dropshipping service. However, the other way you can attain details regarding trustworthy dropshipping suppliers is via the internet, and this is possibly much easier than having to telephone hundreds of different wholesalers.
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How Do I Handle Back Orders? A back order occurs when you unknowingly sell a piece of item that is out of stock. The dropshipper ought to be obliged to order more stock from the manufacturer before the order can be filled. The customer will definitely not be happy should such incident occur.
The best way to handle back orders is to avoid them. Make sure an item is in good supply before you ever place it on your website for sale. The same applies if you happen to be an ebay trader who dropships. If you do run into a situation where there is a back order, it is best to handle the dilemma quickly and professionally.
The first thing to do is to contact your customer and tell her that the item has proved to be so popular that it sold out quicker than you anticipated. It is good business to offer to back order the item, replace it with a similar item, or refund their money without delay. It really is a bad idea to try to wiggle your way out of a refund, if especially the customer asks for one. The seller needs to put things right. Do so quickly, politely and professionally. At all cost, avoid confrontation with your customers, that really is bad business.
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