Depends on the supplier & how they're willing to work with you. In some cases you'll make a sale & the customer pays you. You place the order with the supplier & give them the customer's shipping address. Buying advance in bulk wouldn't be drop shipping. That would be you reselling stuff.

huron,

you're absolutely correct in your second assumption "..customer just visit your website, place an order and pay you, and then you later receive a bill from the supplier at the end of the month"

except that when you first go into business the supplier will expect to receive payment from you BEFORE they ship out to your customers. This is usually done by placing your business debit/credit Visa/Mastercard on file with them. This is because you (your business) will have no credit history and the supplier will not offer you a line of credit.

So, if you have little or no funds in your bank (and you accept credit/debit card payments or PayPal) simply 'capture' payment from your payment gateway (funds usually transfered to your bank account in 24 hours) or withdraw customer payment from PayPal to your linked business account (funds usally deposited to your bank in 3 to 5 business days) BEFORE you forward the order on to your supplier.

That way you'll be covered.

Later, when you build up funds you can capture payment when goods are shipped out or when customer receives goods.

Robert

With drop shippers basically you fill out all the info to become a dealer. They give you a wholesale price sheet, and pictures. Once the product is on your site and someone places an order you then contact the drop shipper (manufacturer) and they will then ship the product out to your customer and charge you the wholesale amount for the product(s) you sale.

Some companies do net 30's, you will need to clear a credit check, most charge you per order. I wrote a book on all this haven't released it yet but yea the beauty of drop shipping is you don't have to buy everything up front.

huron,

I'm sorry I didn't make myself clear.

I drop ship. I have signed contracts with various suppliers to retail their products on a drop ship basis.

I DO NOT BUY ANY PRODUCTS FROM THEM AND SELL THEM ON TO MY CUSTOMERS.

Instead, I've signed a drop ship agreement with suppliers so I can then list their products and product images on my website.

I then get traffic.

People come to my website and make a purchase and pay me using wither debit/credit (using authorize.net) or PayPal.

I now have my customers' money.

I then forward on the order to my supplier. I pay the supplier for that 1 item the customer has ordered.

The supplier then send the item direct to my customer.

I never buy items directly from my suppliers and store them and then sell them on.

I drop ship.

I sell items that are not in my possession and then place the order with the supplier who then ships them direct to my customer.

The diffierence between what the customer pays me and what I pay my supplier is my profit.

That, in simple terms, in what drop shipping means.

Because you don't have to ever purchase stock upfront it is a very cheap way of setting up a retail business.

Robert

Great info, Robert. Thanks.

I drop ship my items in other people's stores. Here's what happens:

with smaller stores:
I send the company a list of pricing for drop shipping - that includes my shipping costs (Y) and a drop ship fee (DS) and my wholesale pricing (X).

They list my product for sale at regular retail pricing.

They sell a product. They email me the product and customer information.

With a small store I send them a paypal invoice for X+Y+DS they pay it, I ship directly to the customer.


With a larger online retailer like amazon, they have a percentage cut that they take off each sale not counting shipping and send me a check or direct deposit or whatever once a month (or every 2 weeks) depending on their terms. I ship directly to the customer.


in that regard it's nice because you don't have to put any money into product - it's like having virtual items on consignment. You only pay for it if it sells and you don't have to ship it yourself.

If you were buying my product in advance you would pay a little less for it (wholesale prices) and then you would store and ship it yourself - in which it would be
wholesale and not drop shipping. with Drop Shipping There's no monetary investment into inventory.
The drop shipping fee that I charge covers my cost of warehousing the product and shipping it out myself (order fulfillment). On small/cheap items the DS fee is usually around $1. On large or big ticket items the DS fee can be 10-30% (rarely more).

with some of the larger stores it can be a 60/40 split (I get 60% for my product) or even a 70/30 split. It can depend on what the margins are of the items. Most retail items have keystone margins - for example wholesale is 50% of the retail price. that isn't always the case, but it's a general rule with most consumer products so keep that in mind.

with drop shipping, you're just taking a cut off of a sale of a product that you haven't invested in other than listing it on your website and promoting it.

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ok, I think drop shipping service is a very good way to the retailer who don't want to invest more money to import the items firstly but want to earn good money on these products.
You should firstly ask the supplier for the details about the drop shipping service. The better way is you made a agreement with the supplier and when you list the items and some one order and pay you.,After you confirm it then,you can place the the order with the supplier.Of course, you should fill the customer's address in the shipping address box on the suppiler's site,after you pay for the items, the supplier will ship the items to your customers directly.
If the shipping is fast enough.I think the customers couldn't find out you are the middle person. Of course, if you get a large order,you can cut donw the price with the supplier, thus, you will even earn more.
Sometimes, drop shipping service is considered as a affiliate marketing method to use.In fact.I have met there are a lot of people who are making money online by this way.It is no risk if you could find a trustworthy supplier.

I would just like to add that a retailer who uses drop ship is totally different from an affiliate.

Here are just some of the many reasons why they differ.

1. as an affiliate you never receive payment from the buyer. The seller does and then they send you a payment for the percentage of the sale.

2. as an affiliate you can operate as an individual. as a retailer who drop ships you need to operate through a company as you need to get an EIN or reseller's licence in order to get an retail agreement between you and the wholesaler: no legitimate wholesaler (or company that sells to you at wholesale prices) will consider you if you don't operate through a company.

2. because you accept payment as a drop shipper you will also need to get a business bank account, merchant account and payment gateway provider. As an affiliate you can simply be paid by the seller straight to you personal bank account.

3. as a retailer who drop ships you will also have the hassle of dealing with customers when things go awry; if the shipment doesn't arrive or arrives damaged, the customer will contact you first and not the wholesaler. As an affiliate you never need to worry about customer service.

4. as a retailer who drop ships you will also have to deal with fraud; people using credit cards and paypal accounts that they have no right to - typically they purchase the goods from you using a stolen CC and then sell them on for cash. No worries about fraud if you are an affiliate.

5. the list of differences goes on but the above are the main ones.

The advantage of being a retailer rather than an affiliate (as I see it) is that you typically have larger profits and that you have a REAL business that you can sell in the future should you wish (I know many affiliates will also claim that they have a real business) but most affiliates don't have things such as a business and merchant account, EIN, toll-free number, etc.

Robert

I see most people get into selling the wrong product with this.


Before you get into drop shipping remember the most important thing.

1) Pick a niche that is very popular and already has massive crazy ass buyers.

2) Do not be afraid of competitors...it means there is money to be made.

3) Make sure you go and learn from the top guys, and even pay them to tell you their secrets.

You do these three things well and you will be well on your way to making some good profits.

Robert,

Is privacy policy is different since you have to disclose your customer's info with 3rd party?
Any sales tax need to take in to consideration?
Thx.