We all are in the online business world because we want to make money, work for ourselves, gain additional income, support our families and build passive income.

In most cases people look at 2 models:

Direct product sales...selling items you own or have ìpurchased wholesale to sell retail.

Affiliate sales ...promoting others items for commission

However there is another model that done correctly avoids the risk of spending thousands stockpiling and purchasing stock while seriously increasing profit and commission ...DROP SHIPPING

WHAT IS DROP SHIPPING?

Drop Shipping is in reality a supply chain management technique.

You as the retailer do not keep goods in stock nor do you spend in advance purchasing items wholesale.

As a drop shipper you sell items directly on your website and when a customer orders a product you transfer the order and customers shipment details to your partner manufacturer or another wholesaler who then fulfils and ships the goods directly to your customer.

Drop shipping allows you, legally, to sell products you don’t actually own.

This method is brilliant if you wish to set up your own online store. You can list and sell as many products as you wish for no initial outlay of money.

You control the cost and markup on products meaning a much greater profit margin than affiliate sales. For example if you sell PRODUCT A as an Amazon Affiliate and the cost to the customer is $100 you'll probably get 10% meaning $10. As a dropshipper the wholesaler may list PRODUCT A at $50. You can then sell it for $60 - $100 or more meaning you control the profit margins.

When a customer purchases a product from your store you forward the order to your supplier, minus your profit.

The supplier ships the goods to your customer on behalf of your company.

As with any online models the are advantages and risks. Lets look at some of these




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Nice post, Jason. I especially liked your pointer with the shipping fees, hadn't thought of that yet. The profit margin may be smaller but you also don't have the risk of being stuck with unsellable inventory, so that ay even out a bit.

Is there a special 'lingo' for dropshippers? I can imagine it being so popular that googling 'dropshopping inventory' may not lead to the best results ;-)

Thank you, Wim
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kapalmquist Premium
I work in the IT department ("backoffice" enterprise group) of a fairly large electronics component distributor. I am deeply involved with our dropshipping operations. I would agree wholeheartedly with your analysis of the pros and cons. I recently developed an auto-dropship system that creates Vendor POs from Sales Orders. Even with more than one year to deliver, a large budget and several testers I must say that auto-dropship is one big headache. And it wasn't even considered until the volume of dropship orders exceeded 400-500 lines per day. So your advice to stick to manual fulfillment is spot on.

And now that I have become an "expert" and am looking to enhance my pre-retirement income and develop income streams that I can continue after my official retirement, it looks like Dropshipping could be a winner for me.
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NWHiker Premium
Hi, Thanks for your information on drop shipping. Do you know of any plugins that will calculate a shipping quote for a customer on a site linking into the API from a trucking company, UPS ground or FedEx ground? I saw this capability on a website recently. You could get a UPS ground quote or press another button, fill out a small amount of info and get a LTL truck quote.

John
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DaisyB Premium
Hi Jason, Good information.

Questions: When you are checking out the reputations of various drop shippers, how do you find out whether they actually fulfill their ends properly? Is there somewhere to see any comparison charts of the different drop ship companies?

Is this the same thing as if you find a company that sells and ships it's own physical products which you become a (seller) for. For example, I know a company called Regal that produces it's own stuff and looks for people to market it. They will give you your own site or just the ads. You post these on your site with pictures and your link back to the company site where they process the purchase and order. If this is not drop shipping - what is it?
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JasonGB Premium
Hi Daisy
The best is to find a drop ship listing company . There are many but you need to verify the quality by reading their reviews and recommendations
Dropshippers basically are the suppliers of products. They will form an agreement with you to sell you their products for a certain price. You then list those products on your website and you decide how much to charge your customers. When someone orders a product they pay you. You then order and pay the dropshipper. So if you sell a product for $25 you may only be paying $15 to the dropshipper
You keep the profit and the dropshipper sends the product to your customer.
What you describe is more affiliation where you promote the goods but the order is actually made on the suppliers website and you gain a commison - like Amazon
Hope this helps
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DaisyB Premium
Yes Jason, it helps. Thanks so much. Really great training!
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JasonGB Premium
Great. Thank you
J
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JamesGoolsby Premium
Jason, I would love to hear your recommendations for quality drop shipping suppliers. My wife and I tried to make a go of it a few years ago and by the time we factored in all our costs it just wasn't worth it with the companies were were using. In fact, on more than one occasion we actually lost money on the deal. We still shipped, of course, because the customer expected what they bought, but we soon threw in the towel. :-)
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JasonGB Premium
Wow, one very good example of why finding the right suppliers and planning profit margins remain important prior to any agreement. Thank you for sharing this with us. I know there are some pretty unsavory dropship suppliers out there.
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JasonGB Premium
ps..Ill PM you the company I use
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OldMCSEGuy Premium
I've done this in the past. I think this will be one of the features of my new high in store but it won't be 100% drop ship. at this point I am just at the stage of getting my suppliers. but my goal is a little bit bigger. This does require some work and access to some software to avoid things like promising stuff you no longer have in stock. currently we have 21 employees so after this big Christmas rush I think we're going to tackle it.
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JasonGB Premium
Sounds excellent, you're right it does require work but is a great way to get into larger scale retail. Wishing you much success
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