Drop Shipping 101: The Basics every business owner should know
January 5, 2011In today’s economy, many entrepreneurs are looking for new ways to generate more income with fewer headaches. One method being used to accomplish this is through the selling of products and fulfilling the order through drop shipping.
How Products are distributed
Savvy individuals have been distributing products since the early days of commerce. Conceptually, the process is really simple. For example, assume a video game manufacturer just created the hottest new game on the market. Although, the buzz has been building around this game for some time and the manufacturer has a good reputation in the marketplace, the manufacturer does not sell their games directly to the public. Instead they sell their games in bulk to distributors at a wholesale price, who then resell the games in order to make a profit.
Once the distributors have purchased the games at a wholesale price, they will generally sell them games at a profit to retail stores in which they have a relationship. Upon selling the bulk of games to the retail stores, the retailers place the games on their shelves in order to be purchased by the end customer.
This is the basic distribution chain that is followed by most product manufacturers. The price of the product is generally “marked-up” several times before it reaches the end user, as it is sold and re-sold from the manufacturer to the distributor, from the distributor to the retailer, and from the retailer to the final customer who will actually play the game.
Drop Shipping allows you to be the retailer and sell products to the end customer. However, one of the greatest benefits to drop shipping is that you are not required to stock the products in your own facility in order to sell them similar to that of a retail store. The Drop shipper will house the products in their warehouses and will ship them to your end customer. This process has been around for quite some time and is often referred to as “second party addressing”.
Drop Shipping Process Explained
1) Create an ecommerce website that you can use to showcase products and take orders from your website visitors.
2) Find a Distributor that drop ship products on behalf of retailers. Lists of drop ship suppliers can be purchased online or you can search for independent distributors online.
3) Upon finding a reputable supplier, open a retailer account with the drop shipping company.
4) Place images and descriptions of the products you wish to sell on your website.
5) Customers visit your website and purchase your products.
6) You forward the order to the Drop Shipper including the name and shipping address of the customer.
7) The product is sent to the customer directly from the Drop Shipper with your Company name on the package, further branding your company in the mind of the customer.
8) You are charged a wholesale price plus shipping cost by the drop shipper and keep your “mark-up” as profit.
Overall, the mechanics of drop shipping products is very simple in nature. Once you find a reputable drop shipping company with an assortment of products, you will be well on your way to generating profits for your new business.
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Inspiration
- Challenges of Dropshipping on Amazon: Pitfalls, Alternatives, and Strategies for Success
- Shoppers Trust Amazon.com, Should You Sell At Amazon?
- The Future For Ebay & Online Shops
- An Online Shop Could Be A Better Alternative To Ebay
- 5 Reasons Why It’s Getting Harder To Be Successful On Ebay
- Why It Can Be Hard To Build A Business With Ebay
- Why Some Sellers Are Leaving Ebay
- Alternatives To Ebay That Could Be Better For Your Business
