How to Start a Drop Shipping Business?
Posted on June 23, 2012 by Lola Rotimi-Sosanya
What is Drop Shipping?
Drop shipping is a unique business model that many business owners are not aware of. Essentially, the business owner sells inventory from a manufacturer without being responsible for the product. This is a great way to remove liability as the business owner does not have to worry about the initial costs of purchasing the inventory. Many great businesses utilize drop shipping, including the well-known shipping website, Zappos. With each piece of inventory the business owner sells from the manufacturer, they earn a percentage of the sale.
How Do You Make Money?
There are several drop shipping companies that you can sign up for online to get started. Specifically, www.doba.com is a legitimate and easy way to begin a drop shipping business.
To begin, create a website that you can sell the products from. Only list products from the site of the distributor that have already agreed upon. Upon the sale of the product, you will make a certain percentage of the sale.
How Does Drop Shipping Work?
First, the business owner should find a warehouse or manufacturer that has a product that they would like to sell. These products then can be listed on the businessperson’s website to be sold. When a customer buys a product, the business owner can then send shipping information to the warehouse so that they can transfer the product to the purchaser. After receiving payment from the customer, the business owner can process the payment through the warehouse, usually keeping a certain percentage of the sale or the difference between the retail price and cost of manufacturing.
For example, if you wanted to create a jewelry site, you could find pieces you like from a wholesaler that carries jewelry. You find a great statement piece that retails for $200. The price from the drop shipper would be lower, roughly $125. Additionally, there may be a $5 drop ship fee plus the amount paid for shipping.
Retail price – $200
What you have to pay to the drop shipper – $125
Dropship Fee – $5
Profit – $61
Advantages of Drop Shipping
This is a great way to achieve cash flow flexibility as you do not have to buy the inventory. You only pay for the inventory that you sell. This is a great way to reduce liability. In a traditional setting, the business owner would buy a specific amount of inventory and if it did not sell, they would simply lose the money on the items left or have to sell them at a reduced price. With drop shipping, if the items do not sell, the business owner can simply list another product, without having to take a loss.
Additionally, the business owner does not have to worry about shipping the product to the buyer. The drop shipping site will take care of the hassle.
Disadvantages of Drop Shipping
Be careful when finding a warehouse from which to start your drop shipping business. There are several scams that simply replicate a drop shipping business and can cause the business owner to lose money.
Additionally, you need to be able to trust the warehouse shipping the product. Since you cannot see the product, you cannot be sure of the condition that it is in. Also, you cannot guarantee that it will be shipped promptly. To reduce these risks, find a reputable drop shipping company, such as www.doba.com.
If you found this article helpful or would like to share your personal experiences with drop shipping, please leave a comment below.