What is Drop Shipping?
Drop shipping is the process of having a product distributor maintain a product inventory and handling the shipping while you, their associate, handles the marketing and selling the product as well as some other customer relationship functions.
This relieves you from having to order products in bulk and trying to find space for them in your house or renting a storage space. As their agent, you don’t see or own the products. In fact you have to pay them before they ship to the customer. Your responsibility is finding the right way to market them and take orders. Once an order comes in you contact the drop shipper with the order information and payment. They then package the order and ship it to the customer directly. Most of these companies will put your company mailing label on the package so that it looks like the order came from your company, not the drop shipper.
What are Drop Shipping’s Good Points?
Drop shipping takes a lot of the drudgery out of online selling. It allows you to avoid the trap of getting bogged down in the day-to-day operations. You no longer have to keep up with inventory or handle the purchase of new and replacement inventory. You don’t have to worry about packaging and shipping. You can concentrate entirely on marketing, selling, and other customer relationship building.
If you have limited space available in your home and want to avoid renting storage space but you want to sell online, drop shipping is an option.
If you have limited space in your home and don’t want to go to the extra expense of renting a storage garage or office space, drop shipping can eliminate this expense and aggravation. It is quite easy to let your home get overrun by shipping materials. I’ve had that happen myself. Also, you won’t have the expense of buying packaging materials.
What are Drop Shipping’s Bad Points
Unlike you where you can enlist your spouse and kids to help for free, a drop shipper has to pay a decent wage to their staff. Plus they have considerable overhead maintaining a warehouse. Of course, these costs are passed on to you and this eats into your profit margin. You’ll find that you need to either pass these costs on to your customers or lose money on every sale. This can make you non-competitive in tight markets like electronics.
Also, they can screw up an order and leave you holding the customer service bag. You are responsible for handling irate or disappointed customers even if the problem isn’t really yours. Back orders are a common problem and explaining to a buyer on eBay that you can’t send them their product for 8-12 weeks will probably get you negative feedback.
There are also several disreputable drop shippers out there or ones that charge very high fees. Look for ones with good reputations that have good prices and no or very low cost membership fees. Be very wary of those that charge a monthly fee for access to their system. They’re selling you a subscription, not an opportunity.
The final bad point is that there is a lot of saturation on common items both on eBay and individual or eBay alternative sites. Just do a search for things like iPods, eagle statues or cat knick-knacks and you’ll see 100’s of people selling the exact same item at the exact same price. For drop shipping to work well you have to find a niche that has low competition. You’ll never make it selling what everybody else is selling.
That’s all for this introduction to dropshipping. What are your thoughts? Have you had experiences with drop shipping, good or bad, that you would like to share?