Drop Ship Definition.
Essentially it is the online version of an import / export agency. The main difference being you don’t need to buy a container load of items and wait until they are landed at a wharf, cleared by customs then pay import duties on the whole container load.
You set up a E-Commerce web page, You list on your website products from an organization that either wholesales or manufacturers products or combinations of different suppliers.
You take into consideration the costs of freight, taxes and transaction and overheads, add your mark up and do your best to sell as much product as you can.
Once a sale is made you pay the wholesaler, pass on the details of your buyer. The wholesaler then fulfills your order and mails the product to the buyer using a reliable postal service. Either as a single item, or small quantities, as per the order.
It helps if you have some marketing skills. This will likely be your biggest expense, so you need to be careful where you spend your money.
How Did the Drop Ship Business Become so Big.
It is not new.
People have been doing OK with drop shipping since way before E-Bay became the online go to site for buying things. Full page Ads in newspapers promoting some widget, it still happens (occasionally), It is called Mail Order.
As the internet evolved people started setting up e-commerce web stores to sell stuff. Mostly on E-Bay. Many very successfully.
About 1982? the Chinese had started welcoming foreign businesss to set up shop in China.
Car Plants, tool makers, heavy machinery, industrial processing and many other manufacturing companies departed their home bases and set up plants in China.
Cheap labor costs, proximity to resources, made China the go place to make literally anything. Free Trade agreements, the continual evolution of the internet, and basically anything we could do they, could do better and cheaper.
Wholesale Drop Shipping Companies.
There was nothing original in any of this. For years Hong Kong made nearly all the cheap toy’s, (and many other things ) for the world. The Communist government on Mainland China had long despised the free market economy of Hong Kong and its success.
So they decided to follow Hong Kong, but do everything on a grander scale. ( however, mainland China is still a single party government ).
And basically, that is the world we live in today. With companies like Alibaba and its offshoot Ali express being two of the biggest exporters of goods to the West.
Alibaba is also a big importer of goods into China and some other Asian countries. Bangood is probably the third one, however it mostly wholesales products from Hong Kong, Malaysia and India.
Drop shipping is not confined to the importation of goods from China. Many business’s throughout the world utilize this system to grow their business. So there is a ready market for anyone who wishes to set up a drop ship business.
Not only that, but the variety of goods that can be sold via drop shipping can vary in price from a couple of dollars to many thousands of dollars.
Setting Up a Drop Shipping Store.
It began with E-Bay, others followed suit, Amazon, Bonanza and others. The web developers became involved, now you are able to set up an e-commerce store on all most any platform, Word Press has Woo Commerce, Wix, hostgator, Go Daddy, Shopify, Selz, Crazy Domains, Big E-Commerce, Magneto, etc. etc., Plus the social sites, Wanelo, Wish, Fancy, and hundreds of others.
Add the crafts and home made stores such as Etsy and Artfire, basically any web page provider relies on e-commerce. It is big business, and very competitive.
Many E- Commerce platforms utilize Apps to populate your store with products. Select the type of product your interested in, then browse through their listings and click import, if you like it.
The downside is, 99% of the time you will have to rewrite the product description, reset the price and shipping values, maybe edit the photos. But you would probably do that anyway.
Once done the full filling process can be automated by the app. Setting up your store to include payment portals and security, an about me page, Logo, policies, and entering your listings so they are niche specific, downloading photos, all need to be done well and will take time.
Costs of setting up a Drop Shipping Store.
They vary, but not by much. The cost of adding apps that promise all sorts of things needs to be carefully considered. Not only the cost, but too many apps will slow down the load times for your site, try keeping apps to a minimum.
A good auto res ponder is necessary, ( to stay in touch with your customers). There may be a learning curve involved here.
A couple of hundred dollars is usually sufficient to get started. It is the external costs that will either make or break the store. If you are sourcing products from overseas, then, unless you do proper due diligence, the last thing you want is to be refunding purchases due to poor quality or even failure to post.
The Two Ways to earn Income From Drop Shipping
The most common way people use drop shipping is by buying off a wholesaler and adding in your mark up, covering your running costs, time and effort and some profit. If it is a highly competitive product, then you need to check out sites like Amazon and E-Bay to see what the average selling price is.
It maybe that it is uneconomical for you to sell that product. Particularly if your wholesaler is not a genuine wholesaler. Visited E-Bay lately? Have you noticed the products and prices from China?
The other way to drop ship products, is to source a manufacturer, and sell their product at their recommended price, from which they pay you a percentage. It might be 60% for them 40% for you, or 70% – 30%. Whatever you’ve agreed to.
The product sells off your web site. You pay the 60% or 70% to the product owner, along with the details of the buyer. The manufacturer then packs and sends out the item.
Most wholesalers or manufacturers will send an item “Blind”, that is it does not have their business details included. The really good ones will include a card with your details.
Often these will be higher priced items and just selling a few makes them worthwhile. Example Here I had over 200 variations of these varying in price from $30 to $400.00, it was nothing to sell 5 or 6 a day. Postage and Insurance became a bit of a problem with these when I changed web platforms, so I am no longer active with them.
I found this to be a very stable way to do business. There was no need to check Amazon or E-Bay to see what they were selling for, and trying to price match.
This is a more reliable way to sell than say, Ali express. If the wholesaler you are importing from had a sale price when you listed their item, and has since increased their price, then you may find yourself selling at break even, or worse, if you are not being given updates on the products.
Who Offers the best Platform for Drop Shipping.
It is hard to differentiate. The costs for Domain names and hosting have little between them. Some may offer something free, but pick it up on the other side. With one or two exceptions most of the e-commerce platforms are only there to up sell you their apps and services.
To give you an idea, here is a partial list of Shopify’s charges.
A quick look tells you that the store would need to be very profitable to use any of these services.
Shopify has its own app, Oblero as an importing tool. it is free for the first 50 sales.
Oblero includes drop shippers from Europe the USA as well as Ali Express.
One issue I have is, often it is importing products to your store from Importers. So you are actually selling a product as a second maybe even a third generation seller.
There are other apps out there that import from sites like Etsy. Similar issue again. You are not necessarily buying at a wholesale price. And it is impossible to know sometimes. Unless you research prices.
So far as I have seen there is only one model that gives you a research tool, to gauge what you should be selling, as well as a dedicated structure on the steps you need to take to set up a fully functioning Drop Ship store with potentially profitable niches.
Shopify and Obelro have regular blogs, which is fine, they give some research on which products are trending on google, but there is very little that is unique in their systems. The blogs deal with time management, some generic facebook advertising tips etc. The success stories are usually about people who have their own product. ( much like Etsy or Artfire ).
A check on E-bay and often you will see Ali Express suppliers selling their wares on there at the same price you are looking to buy them at.
In my upcoming posts I will be taking a look at Sale Hoo and doing a review of it. For anyone interested in drop shipping this looks to be a good model. It pricing is fair and competitive, plus it seems dedicated to helping people avoid the pitfalls with Drop shipping. Which is the reason the company was founded.
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