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Drop Shipping - Can you make money with Drop Shipping So what exactly is Drop Shipping? With the ever rising competition to online markets, many people shy away from selling online. Drop shipping is often claimed as the easiest way to sell products online - especially when using eBay and Amazon as a selling platform. Let's see why this is the case! By definition, drop shipping is a supply chain management strategy in which goods or stocks are not kept by the retailer. Instead, the customers' orders and shipment details are transferred to the manufacturer or wholesaler, who then sends the goods to the customer directly. Many retailers earn the difference between the wholesale and retail price as profit. However, some retailers may earn an agreed percentage in commission for sales paid by the wholesaler. Often, drop shipping retailers display items, which they can easily order from the wholesaler, in their stores. As such, sometimes they may provide only a catalog or a website of their products. A lot of products sold on eBay and Amazon are good examples of this. There are various methods to keep the wholesale source unknown such as “blind shipping”, where the product is shipped without a return address. Another method is called “private label shipping”. In this case, the product is shipped from the wholesaler with a return address that is customized to the retailer. Advantages: Let’s look at some of the advantages of drop shipping. One of the obvious benefits of drop shipping is that there is no need for an upfront inventory to store the products. Furthermore, drop shipping creates a positive cash-flow cycle, because the seller is paid when the purchase is made. This is because generally, the seller pays the wholesaler by credit card or credit terms. Hence, there is a lag interval during which the seller accepts the customer’s money, but has not yet paid the wholesaler. An additional advantage of drop shipping is the elimination of duplicated efforts in regards to warehouse storage, packaging and shipping. Thus, the reduction of total inventory management needs and shipping costs mean that the products can be made available at a reduced price to the customer. Disadvantages: All businesses involve some risks and this, of course, also includes drop shipping. One example is “back ordering”, where an order might be placed with a wholesaler even though the product is temporarily out of stock. This in turn can prolong waiting times for a product to arrive and this often reflects badly on the retailer. For this reason, it is important to select a trustworthy and reliable wholesaler – ideally, one that makes an effort to update the retailer on the number of products available. Having that said, the ultimate responsibility rests with the business owner to follow up on the quantities available from the wholesaler. Finally, when searching for a wholesaler, it is important to do thorough research of the current market prices of the different products. This is because we want to have a profit margin that is significant enough to make the drop shipping business worthwhile while at the same time staying competitive. As you can see, drop shipping can indeed be a profitable business, if you have done all the necessary research before hand. Currently, drop shipping is not a widely exploited business, because not many people know much about it. If you are interested in drop shipping and want to find out more, I recommend you watch the video HERE. This free video will talk about drop shipping in relation to the two biggest power houses that everyone knows about: Amazon and Ebay! |
Re: Drop Shipping - Can you make money with Drop Shipping As per my drop shipping management software provider experience, the given advantages and disadvantages are indeed useful for newbies of this field. You can definitely. |
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