Drop Shipping Pros and Cons
Whilst trying to establish my 2 websites (please visit either Ideas For Home Working or Living With A Border Terrier - links available when clicking View Profile on my picture - and feel free to leave a comment), I am also considering starting a bit of good old Del Boy style 'wheelin n dealin'.
Before throwing myself in the deep end of things, I wanted to make sure that I understood as much as possible about drop shipping, and the difference and the risks against the good old wholesale buying and selling.
The most striking advantage to drop shipping is that you do not have to hold a stock, nor do you have to buy in bulk from a wholesaler. You strike a deal with a drop shipping company for a selection of items they sell, you sell individual items on internet e-commerce sites, and get the drop shipping company you purchased from to deliver the goods to the buyer directly.
In theory, this type of deal sounds most appealing as it decreases noticeably the risk of having unsold stock that you cannot get rid of, which in turn would impact on your overall profit margins.
However, on researching on quite a few drop shipping available online, I found that for starters they all require that you join on a membership basis, which entails paying a monthly or more often a yearly fee. This would necessarily commit you for at least a year, at the risk that you may not necessarily secure as many sales to recover the cost of the membership itself.
And this brings me nicely to my other concern: commissions. On comparison, it appears that drop shippers do not offer as high percentage commissions as other internet ventures, i.e. affiliate business. If on the other end you have some stock, new or second hand, that you may want to advertise on eBay or Gumtree, you remain in charge of how much or how little profit you want to make out of the deal.
I found a lot of training available here at WA most informative, such as the following:
https://my.wealthyaffiliate.com/training/passive-i... by ClaudiaHB, or
https://my.wealthyaffiliate.com/training/make-more... by JasonGB
I am not necessarily discarding the idea of giving drop shipping a go, but I may try it as a side line venture for lower income avenue.
If you have tried drop shipping and found it successful and worth the membership, or if you have more advice, but all means do drop us a line below.
Wish you fair wind and calm seas. Bon voyage!
Giulia
Recent Comments
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Thank you Giulia. I have not used drop shipping yet, but appreciate the reference for when I need it.
Hi Giulia, loved your Border Terrier site. Nicely developed! And so many comments - congrats! I added another.
If you have time, I'm a bit behind you at about 30 days in. I could use a comment on one of my posts that doesn't have one yet - if you have time.
All the best, Ted
Thanks for the comment Ted, much appreciated. And I've just left you mine too - most interesting website.
Giulia :)
Hi Giulia,
I have worked with dropshipping before. The advantage is that you don't carry product. The biggest disadvantage is finding products that will sell for enough of margin that makes your efforts worthwhile. Suppliers usually charge dropshipping fees per item, which adds to your cost. Also, if you are bundling products from different suppliers, you would have to consider shipping on each.
You also have to deal with returns and angry customers, while you have no control of the manufacturer's process. Personally, these constraints were too much for me to make this a viable business model for me.
An alternative is to reach out to distributors and make deals to have them ship to Amazon warehouses. They have a program called Amazon FBA. You ship to their warehouses along with shipping materials and they take care of all the rest, selling, shipping, returns, order processing, etc.
Of course a third alternative is to use the affiliate model as taught here. The vendor takes care of all details, you just send them the traffic.
Best Regards,
Jim
Thanks for your further insight Jim. Yes, the more I hear about it, the more I am inclined to steer clear of the whole concept, the more I favour the idea of affiliate marketing.
I shall definitely look in to Amazon FBA as an alternative option though.
Thank you. Giulia
hey Giulia :) you are right you should not be paying a company to sell there products and there are programs out there such as eSource I think they are called, that charge a membership to give you a list of companies that offer dropshipping also, but I would advise you to steer clear, you are better off researching your own companies to work with, a reputable company will not charge you to sign up with them, also you could contact a company direct and inquire if they would be willing to dropship.
Also bear in mind that if there is a problem with a product that you will be the one who your customers turn to so you need to make sure whoever you work with can be trusted not to screw up as this will damage your reputation as a trusted seller.
You will also need to look at their data feeds and how you will import their products into your site and also up to date stock quantities.
If you can find a reputable company with low enough margins to make a profit then it can work, you just need to do your homework first and stay on top of it. Hope you find this useful and good luck with whatever you decide :) Cheers Tracy
Actually Tracy, you reminded me of another valid point to support my caution about it all: the fact that you remain responsible for missed deliveries or damage, and not your supplier. This is it, the more I hear about it, the less it appeals to me. I am rubbish at selling at best of times - drop shipping presents too many risky factors for me to embrace wholeheartedly.
We'll see. I'll let you know Tracy, if and when I embark on the journey!
Thank you :)
Let me know how you get on Irv. I am slightly cautious, but also as I am absolutely rubbish at selling merchandise anyway. I have tried eBay on a couple of occasions, and it was a disaster - whereas my teenage son could sell his own mother!!
So yes, I'll be interested to know what you think about it.
Thanks Irv. Giulia
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I have investigated the drop-shipping arena. I have found that the US based drop shipping companies are the most expensive. You really have to do a decent volume (100-200 sales/mo) to make it profitable. This is because the items offered in these US drop-shipping sites only offer mid-line priced goods ($20-$30 and higher items). Many of these US based drop-shippers not only charge you a subscription fee, but also a handling fee per item.
Now there are some drop-shipping companies that are Chinese based to where you can find niche items that you can offer at a cheaper cost, netting you roughly a dollar or less per item drop-shipped sold, but they are smaller items (example: cell phone cases at $4.99/each). The good thing here is the Chinese sites only charge you on items sold. You don't have to subscribe; and when you increase in volume, they expand more inventory to you.
It's worth taking a look.
Oh I'll definitely look into that then. Thanks for the info :)
Instead of going through these 3rd parties, contact the suppliers directly. That way you have no monthly costs and you probably can source the products much cheaper and have a relationship with the supplier too.