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Unclear on the concept behind online drop shipping

by fuzzycorleone
15 replies
Hello,

I'm a relatively new internet marketer (started last year) and only have experience in offline marketing. However, recently I've became interested in amazon's associates program and researched (from keyword research to reading success stories) as much as I can about it. Although I haven't tried my hand at affiliate marketing yet I'm a bit discouraged by Amazon's 4% commissions (I do realize that there is some potential for sales to compound but that still isn't appealing to me).

Just recently my ex-girlfriend from India (she lives in Ft. Lauderdale now) introduced me to drop shipping. She told me how she earned on average $4-8,000/month. I believe she would wholesale purchase from a supplier and list the price 5-10% higher on amazon or something (she was vague and didn't explain it clearly).

A. Is dropshipping essentially 'enhanced affiliate marketing'? Where I make a website, list the products, forward all of the customer orders to the supplier (they would then ship directly to the customer), and finally, collect a commision (30-50% perhaps)?

or

B. Does it involve wholesale purchasing from the supplier?

I really hope it's 'A' since it would be a whole lot easier and there wouldn't be any upfront cost (except for domain purchase and monthly web hosting). The only problem I see associated with this system is dealing with customers. But then can I just hire a virtual assistant to handle customer service or forward customer calls to the supplier?

P.S.: From my understanding this sounds way better than affiliate marketing.
#concept #drop #online #shipping #unclear
  • Profile picture of the author fuzzycorleone
    Sorry to do this but......bump
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  • Profile picture of the author jmoore000
    It can be A or B or even a combination of both. A good drop shipping company with quality products that people actually want is hard to find in my opinion.
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  • Profile picture of the author Local Trifecta
    The correct answer is A ... but depending on the product there is little to no chance you would ever make 30-50% margins.

    Truth is its a double edge sword ... like you said there is no capital investment since you just submit the order and it gets shipped from the supplier ... but because your not taking any risk the margins are significantly smaller.

    The other challenge is theres not a lot of tools for comparison pricing. For example you could dropship/whole sale a product for price X but you dont really know how much you can sell it for. You would need to use amazon, eBay, or terapeak to conduct pricing research before investing a TON of time and a little money into create an ecommerce site.

    And, of course, you will need to either use PPC or wait for organic results to drive traffic to your ecommerce site or hope the products you stock are niche enough that its any easy job.

    Truth be told you will probably have any easier time doing affiliate marketing than dropshipping but if your new to the whole internet marketing thing even affiliate marketing is a stretch (and I wouldnt do amazon anyway ... try click bank of commission junction).

    If your just starting the easiest way to learn would be to check the forums ... you need to find a niche and write/find an ebook. Its not that hard and will give you practical experience with ppc and seo. From there you can graduate to affiliate marketing.

    Just a few idea ... take em for what theyre worth ...
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  • Profile picture of the author kindsvater
    What you can is start with drop shipping. Then, if you are able to move certain products buy them wholesale.

    Many sellers have tiered discounts. Your drop shipping price is obviously less than retail.

    Wholesale purchases are typically made at less than drop shipping.

    Ultimately, to get the very best prices it is buying wholesale. Drop shipping is a great way to test a seller, and their products, before laying out money up front for a purchase.

    .
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    • Profile picture of the author fluffythewondercat
      I have a friend who makes his living marketing and drop-shipping a particular product. (And no, I can't say what it is, but it's something I feel certain none of you have ever thought of.)

      You may be able to hire a VA who can do competent customer service but drop-shipping tends to be CS-intensive. Just one example why is this: Since there's an extra layer in the order process, it will take longer for the customer to receive the product than if she'd ordered directly from a company that had it in stock. You will get WISMO emails and phone calls.

      WISMO means Where Is My Order.

      You have also completely glossed over the time and money required to market the website you haven't yet built. It's not trivial. Frankly, I'd recommend anyone wanting to go this route to do the research to find a niche that's not already overrun with drop-shipping, then make sure you have one year's worth of savings to live on while you build, market and rank this beast.

      fLufF
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      • Profile picture of the author kindsvater
        Originally Posted by fluffythewondercat View Post

        Since there's an extra layer in the order process, it will take longer for the customer to receive the product than if she'd ordered directly from a company that had it in stock.
        I have owned drop-shipping sites and this is nonsense.

        This is what happens: The payment and order come in on your website. If you are not setup to automatically forward the customer information to the merchant then you take 90 seconds to login to the merchant's website, input the customer's address, pay for the product if necessary, then logout.

        The whole concept of drop-shipping is the product goes straight from the merchant to the customer. The product is not sent to you for you to mail to the customer.

        If there is a delay in shipping it would be because you are ordering from another middleman and not a true merchant - and they are scrambling to fulfill the order.

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        • Profile picture of the author fluffythewondercat
          Maybe you had well-run drop-shipping sites, Brian.

          I can tell you from my eBay days that people who were drop-shipping often had significant delays in getting product to customers.

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          • Profile picture of the author Daniel Evans
            "B" is simply bulk buying and selling.

            You'd obviously have to handle the goods and send yourself however you can open up huge margins for profit by doing it this way.

            I'm setting up a family member with a business of this nature. There are huge opportunities to be had from cash and carry stores and catalogue returns stores / warehouses.
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  • Profile picture of the author jt808
    With drop shipping you also have the added element of having to handle customer service and fill orders. It's somewhere in the middle of affiliate marketing and having your own products.
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  • Profile picture of the author Randall Magwood
    Option A is the correct answer and way that you will want to go about things. Let's say you were selling jewelry on ebay. You would sign up for a dropshipper jewelry site, sell items on ebay, and then purchase the jewelry item to be dropshipped to the consumer. It's alot of maintenance especially when it comes to an item being sold out on the dropshipper site. Honestly i think affiliate marketing is easier.
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  • Profile picture of the author Taniwha
    YOU do the ordering for them, then simply order it from your supplier and keep the profits.
    You can do great offering a niche dropshipping company as going the electronic way is a hard door to open because someone will always have a cheaper price.

    You can start a dropshipping company on Ebay, which is great because you already have the traffic coming in (assuming people are interested in your niche), so you can focus more on getting the best offers from your supplier.

    Alibaba.com is PERFECT for choosing a niche to dropship because a lot of the sellers are manufactures themselves.
    As kindsvater said, skip the middle man and find a reliable manufacturer. You could even invest in a trip to China (or where ever) to meet up with your soon to be business partner face to face. OR you can hire an agent in that country to do it for you and check it they are fully legit.

    You got to love China.

    Hope this helped
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    • Profile picture of the author hardraysnight
      Originally Posted by Taniwha View Post

      YOU do the ordering for them, then simply order it from your supplier and keep the profits.
      You can do great offering a niche dropshipping company as going the electronic way is a hard door to open because someone will always have a cheaper price.

      You can start a dropshipping company on Ebay, which is great because you already have the traffic coming in (assuming people are interested in your niche), so you can focus more on getting the best offers from your supplier.

      Alibaba.com is PERFECT for choosing a niche to dropship because a lot of the sellers are manufactures themselves.
      As kindsvater said, skip the middle man and find a reliable manufacturer. You could even invest in a trip to China (or where ever) to meet up with your soon to be business partner face to face. OR you can hire an agent in that country to do it for you and check it they are fully legit.

      You got to love China.

      Hope this helped
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  • Profile picture of the author Robert Mangan
    Nobody seems to have mentioned this point but if you are going to deal with companies who will supply your customers on a drop ship basis and charge you wholesale prices you are going to have to incorporate a company and get a reseller's licence (or EIN).

    legitimate wholesalers will only deal with companies with reseller's licences (EIN).

    You are then also going to need a business checking account and, if you intend to receive credit card payment, you'll also need a merchant account. Even if decide to use PayPal you're probably going to have a business PayPal account that is linked to your business checking account.

    With affiliate selling you don't need any of this. All commissions can just go straight to your personal account.

    So, there's a lot more 'hassle' in being an online retailer (whether you're drop shipping or buying in bulk and then selling your products) but, in my opinion, the rewards far outweigh the 'hassle' of running a business.

    And, complete novices can be just as successful in operating an online store as they would be in promoting physical products as an affiliate.

    Robert
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    • Profile picture of the author Taniwha
      [QUOTE= the rewards far outweigh the 'hassle' of running a business.[/QUOTE]

      Such as one of you biggest long term assets, your brand.
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  • Profile picture of the author aardanyul
    Dropshipping is essentially this:

    Customer X pays you $50 for a product

    You pay company X $30 for the same product

    Company X ships to Customer X directly in your name, and you've walked away with $20 profit.

    The advatanges are that you never have to hold any inventory and keep stock up. You're just a middle man who makes easy money
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