Cut Business Start-Up Costs By Using Dropshipping
Q: I'm starting an online specialty shop that sells gifts
and home accessories. I want to be able to have items drop shipped to customers through my site.
I already have a Web site and a domain reserved, but I don't have a lot of money to get this
going. Can you offer any insight?
A: Setting up relationships with companies who will ship merchandise directly to your customers
for you-- dropshippers, as they're called --is an excellent way to start your e-business and, if
done properly, doesn't have to be a costly endeavor. There are literally hundreds of companies
out there that will dropship products for you, everything from gifts and house wares to power
tools and furniture.
In a nutshell, here's how dropshipping works. You set up an account with a dropshipper (or
multiple dropshippers who offer different kinds of products) who provides merchandise that you
can sell on your Web site. The dropshipper typically supplies you with images and product
descriptions that you can use to build your online store or feature on static HTML Web pages.
You can locate dropshippers with our new digital directory The 2004 Ultimate Dropship & Wholesale
Company Directory.
When a customer places an order for the product on your site, he or she pays you for the product.
You, in turn, place the order with the dropshipper and pay them for the product. The dropshipper
then ships the item directly to your customer under your company name. To your customer's
knowledge, the product was shipped by you.
Dropshipping offers many advantages to the shoestring online start-up. You don't have to pay for
an item until it sells, and your customer pays you, so your personal cash outlay for the product
is zero. You never have to handle or warehouse the merchandise, as order fulfillment is handled
by the dropshipper. You can also offer a wide variety of items from multiple dropshippers, and
your end customer is none the wiser.
Dropshipping does have its downsides. Since you do not actually stock the products featured on
your site, you have no control over inventory management, product availability, order
fulfillment, shipping processes and so on. Still, if you do your homework and establish a good
relationship with a reputable dropshipper, the problems you experience should be few.
Your goal should be to find a dropshipper that will ship items one at a time instead of requiring
that you purchase a fixed minimum number of items each time (single-unit purchases vs.
minimum-order purchases). With this arrangement, you don't have to invest your limited cash
reserves in inventory that might not sell (and that sits in your garage for months).
Thanks to the stiff competition the Web has created, many dropshippers will now do business with
you without requiring that you pay a setup fee or have a tax ID number. You simply set up a
reseller account (you're the reseller) and start marketing the products on your site. Account
registration can often be done online at the drop shipper's Web site. With this process, you can
literally be selling products within minutes of setting up your reseller account.
Be warned, however, that some dropshippers are not as reliable as others. Also, be aware that
some companies who claim to be dropshippers are really middlemen who have positioned themselves
between the online merchant (that's you) and the real wholesale merchandise distributor. These
middlemen will eat into your profits and usually don't offer much in the way of customer support
and service. They can actually hurt your business more than help it, so make it a point to do
business only with--and directly with--established, reputable dropship companies.
Spend the time to research the dropshippers doing business in your particular product category,
and try to get feedback from their current customers. Remember that your customer doesn't know
(or care) that the product they are purchasing from you really comes from a dropshipper. If there
is a problem, your customer will come back to you for resolution, not the dropshipper, so make
sure that the dropshipper you use has a policy for resolving problems quickly.
Setting up an online store that offers merchandise from dropshippers doesn't have to be expensive
or time-consuming. However, this brings up the age-old question: If I build it, will they come?
The age-old answer is: Only if you let them know you are there, but that's another column.
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This article has been written by well know businessman and veteran
entrepreneur Tim Knox. Learn more about Tim and how to profit using Ebay and insider wholesale drop shipping
techniques by visiting Drop Ship Secrets
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