Discover the Advantages and Pitfalls of Drop Shipping
by Melanie Burns
Published on this site: July 19th, 2005 - See
more articles from this month...
Drop shipping can be a great way to get started with your
online venture. Just be careful to make sure that you know
the quality of the product your supplier offers, what their
shipping policies are, and their reliability. Your reputation
is on the line with your customers, not the drop shippers
reputation. You must be able to stand behind your product
and service not matter what the source for them.
Make sure to order at least one of each of the items you
would receive from the drop shipper. This gives you several
things:
- It will show you the quality of the products. This is
very important. You don't want to offer a product and have
your customer receive something that is low quality, falling
apart, or obviously not worth the money.
- It will show you what the packaging is like. How well
is the product protected during the shipping process? Is
it likely to break or arrive damaged due to inferior shipping
or packaging.
- You can see first hand who they shipped through and how
long it took for the item(s) to arrive.
There are many advantages to drop shipping, for example when
you are first starting out, capital may be an issue. With
drop shipping you can get around that by selling the product
first, collecting the money from your customer, buying from
the drop shipper, and keeping the profit. Although you profit
may not be as high as it would if you had purchased the products
in bulk beforehand, it is still a profit that can get you
started.
Another advantage is you don't have to have products stored
around your house.
You don't have to worry about being stuck with inventory
that you cannot sell. If a product doesn't sell, you can simply
drop it from your offering and go on to other more sell-able
products.
You can find and sell more items since you don't have the
limitations of on-hand inventory.
If you are considering going into drop shipping to get
yourself started, established, or as an ongoing business model,
take the following potential pitfalls into account:
- You will get a price break from a drop shipper, but it
is often not as low as you could get from other avenues.
Be careful to make sure that you have a product that is
quality and the price point for you is one that will ensure
a profit for you if sold. This is especially important if
you will be selling via auctions. Auctions tend to sell
new products for 25-30%below retail. If your price is not
good enough, you could loose money on an auction.
- Make sure that the drop shipper gives you a good shipping
and handling fee. They have lots of shipping and get a very
good price on it themselves. If shipping and handling is
high, something is wrong.
- Don't pay a fee to do business with anyone. You are giving
them business by buying product from them. If they want
more money for you having the privilege of doing business
with them, you know this is not a company that you want
to even consider.
- Find out how the drop shipper handles problems. If you
have a customer return, how will they handle it. What kind
of support will they give you.
- Get references for the drop shipper. How long have they
been in business and what is their financial standing? Check
the Better Business Bureau. Google their company name to
see if there are any complaints or problems you might need
to know about before making the decision to do business
with them.
If you are ready to make the drop shipping model your own,
jump right in. Take these points into consideration, but don't
let anything stop you. Be as informed as you can though, continue
to learn and find out all you can about those you do business
with. The road to success is not always a smooth one, but
if you can avoid the pot holes, it makes the ride much more
enjoyable.
Melanie Burns, Subscribe to the iBusiness How2 Newsletter
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