Dropshipping

Make THOUSANDS $$ every month with source whole­sale prod­ucts to sell through your own site or at online auctions.

To learn how drop­ship­ping works in detail, read the fol­low­ing arti­cle by my friend, Tim Knox, an absolute expert in the drop­ship­ping area.

Cheers

*******************************************

Drop­ship Your Way To eBay Success

Tim Knox
Copy­right © 2005

Drop­ship­ping is a topic that I first addressed in my col­umn way back in April, 2003, which is decades ago in Inter­net years. But with the con­tin­u­ing growth of eBay and it’s posi­tion­ing of itself as a viable way for any­one look­ing to launch an ebusi­ness, the topic of drop­ship­ping is now hot­ter than ever. It is also now more mis­un­der­stood than ever.

Drop­ship­ping has been around since Sears first started sell­ing goods from its mail order cat­a­logs over a hun­dred years ago. How­ever, the idea of drop­ship­ping still con­fuses many peo­ple who don’t under­stand exactly how the process works.

By def­i­n­i­tion, drop­ship­ping is a method of sell­ing and dis­trib­ut­ing goods wherein the dis­trib­u­tor or sup­plier of the prod­uct (the drop­ship­per) ships the prod­uct directly to the end user (your cus­tomer) on the retailer’s behalf (that’s you).

The process of drop­ship­ping involves three par­ties who take a prod­uct from man­u­fac­tur­ing to mar­ket. They are a man­u­fac­turer, a dis­trib­u­tor, and a reseller.

Let’s use a blue wid­get as a sam­ple prod­uct to demon­strate the process:

Blue Wid­get Man­u­fac­tur­ing (man­u­fac­turer): This is the com­pany that man­u­fac­tures blue wid­gets. Blue Wid­get Man­u­fac­tur­ing does not sell directly to the pub­lic or sup­ply the retail­ers who ulti­mately sell the blue wid­gets to the end user. They pre­fer to use dis­trib­u­tors to han­dle the task of tak­ing their blue wid­gets to mar­ket. Blue Wid­gets sells blue wid­gets by the truck­load to dis­trib­u­tors who pay $5 per blue widget.

A1 Dis­trib­ut­ing (distributor/dropshipper): A1 Dis­trib­ut­ing is the com­pany that pur­chases blue wid­gets in bulk from the man­u­fac­turer and sup­plies them to resellers at a cost of $7 each. The dis­trib­u­tor does not ship blue wid­gets to the reseller, but ships orders directly to the reseller’s cus­tomers as the wid­gets are sold.

Big Bob’s eBay Wid­get Store: Big Bob sells blue wid­gets to the pub­lic from his eBay store. Bob orders the blue wid­gets from A1 Dis­trib­ut­ing as he sells them (usu­ally one at a time) and has A1 ship the blue wid­get directly to his cus­tomer. Bob sells blue wid­gets to the pub­lic for $10 each, which means that for every blue wid­get sold he nets $3.

How The Process of Drop­ship­ping Works

Here are the seven steps involved in start­ing a drop­ship ebusiness:

STEP 1: Choose A Prod­uct To Sell

The very first step in any sales process is decid­ing what prod­uct to sell. There are many fac­tors that should be con­sid­ered before decid­ing on a prod­uct to sell, but for now let’s say that you decide to sell CD play­ers on eBay.

STEP 2: Locate A Sup­plier Who Will Drop­ship For You

Using a research tool like Google, Thomas Reg­is­ter, or an industry-specific resource like The Ulti­mate eBay Drop­ship Power Pak (see Resources at that back of this book), you search for and find a com­pany who will drop­ship CD play­ers for you. The com­pany offers you a 35% mark up over cost, which means that they will sup­ply the CD play­ers to you for $100 each and you should be able to retail them for $135. You make sure that the drop­ship­per has a good stock of CD play­ers on hand so you don’t end up sell­ing a prod­uct that must be back-ordered.

STEP 3: Set Up An Account With The Dropshipper

You con­tact the com­pany that can sup­ply the CD play­ers and set up a reseller account with them. This can often be done online or by phone, but some com­pa­nies will require that you com­plete and return a reseller appli­ca­tion to open an account. Some com­pa­nies may also require a tax ID and busi­ness license.

STEP 4: Adver­tise The Prod­uct For Sale On eBay

Now that you have your sup­plier lined up and know that the prod­uct is in stock, it’s time to make a sale. You adver­tise the prod­uct using an eBay auc­tion. Since you know what you must pay the drop­ship­per for the prod­uct, you know what the min­i­mum amount you will take for the prod­uct. In this case you start your auc­tion at $100 since that is your cost. If you are con­fi­dent that you can get more than $100 for the prod­uct you can start with a lower price, but remem­ber that if the prod­uct goes for less than what it costs you to fill the order, you will lose money. Also remem­ber that the drop­ship­per will charge ship­ping, so you should fig­ure that into your sale.

STEP 5: The Prod­uct Sells

Great news: your CD player sells for $135 and your cus­tomer pays you with a Pay­Pal instant pay­ment. I highly rec­om­mend that if you are sell­ing on eBay you use Pay­Pal or some other online proces­sor to accept instant pay­ments. This allows the cus­tomer to pay you faster, which lets you place the order with the drop­ship­per faster, which gets the prod­uct to your cus­tomer faster.

STEP 6: Place The Order With The Dropshipper

After your cus­tomer pays you, you should con­tact the drop­ship­per imme­di­ately to order the prod­uct on your customer’s behalf. The drop­ship­per then ships the order to your cus­tomer under your com­pany name and address.

STEP 7: Fol­low Up After The Sale

This is where many new ebusi­ness peo­ple drop the ball. Just because your cus­tomer has paid you and you’ve placed the order with the drop­ship­per does not mean that you are out of the loop. Quite the con­trary, if there are prob­lems with the order you are the one that will be held respon­si­ble in the eyes of your customer.

Be proac­tive in your cus­tomer rela­tions. Fol­low up with your cus­tomer to let them know that the item has been shipped. Offer your­self as the per­sonal con­tact for any

Many peo­ple are afraid to use drop­ship­ping as a method of sales due to the hor­ror sto­ries that fill the Inter­net about unscrupu­lous drop­ship­pers who take the money and don’t fill the orders, mer­chan­dise that is eter­nally back ordered, unscrupu­lous mid­dle men pos­ing as drop­ship­pers, etc. Make no mis­take, the drop­ship­ping indus­try — like most other indus­tries — does have its share of shady char­ac­ters who would rob you blind given the chance, but there are also hun­dreds of hon­est drop­ship­pers who can help you build a prof­itable eBay drop­ship business.

**********************************

Small Busi­ness Q&A is writ­ten by vet­eran entre­pre­neur and syn­di­cated colum­nist, Tim Knox. Tim serves as the pres­i­dent and CEO of three suc­cess­ful tech­nol­ogy com­pa­nies and is the founder of DropshipWholesale.net , an online orga­ni­za­tion ded­i­cated to the suc­cess of online and eBay entrepreneurs.