When you're just starting out, or you are established but want to test new product lines, you don't want to spend your own money up front for those products, just in case they don't sell. In this situation, you want a Drop Shipper.
In Product Sourcing, you need to decide whether you're going to spend money buying bulk quantities of products from Wholesalers, storing them at your house, and shipping them to your customers yourself. The deciding factor is usually how well you think the products will sell.
Using Drop Shippers allows you to sell brand new, brand name products to your customers without paying for those products before you sell them. In other words, your customer pays you for the products before you pay your Wholesale Supplier for them. Pretty cool, huh? :o) Keep in mind that selling products using Drop Shipping costs you a little more, because the Drop Shipper does a lot of the work for you and has to charge you a slightly higher wholesale price. It's a great way to test a product market, though, and many people use Drop Shippers as a regular and continuing part of their Product Sourcing Methods.
Here's how drop shipping works:
1. You open an Internet Store, or start an account on an Auction site, like eBay.
2. You find a Wholesale Supplier who is willing to Drop Ship the products you want to sell.
3. You establish an account with the Drop Ship Supplier(s) you choose.
4. You receive images and descriptions of the products you want to sell from the Supplier, and place them on your Internet Store or Auction.
5. A customer finds your Store or Auction, and falls in love with a product that you have priced at, say, $80. They purchase the item with their credit card. Your Store or Auction charges their credit card $80 plus shipping.
6. You email the order to your Drop Ship Supplier, along with the customer's name and address.
7. The Drop Ship Supplier sends the product directly to your customer from the warehouse. Some drop shippers will even place your business name on the package.
8. The Supplier charges you the wholesale price of, say, $52.00, plus shipping (you've already passed the shipping charge on to your customer, so the shipping costs you nothing).
9. Your customer gets a great name brand product from your store or auction shipped to their door, and they tell all their friends about you, and you make even more money.
There you have it. You just made a $28.00 profit on one product. You never even touched the product, and you didn't have to pay for it up front.
Be careful! There are a LOT of people out there who want you to believe that they are real Drop Ship Suppliers, when they are not. We'll talk more about them a little later. These people are no better than the scam artists who want to fool you into buying a useless web site. You need to find REPUTABLE Wholesale Suppliers. A good rule to go by: a REAL Wholesale Drop Ship Supplier does NOT charge you an "Account Setup Fee" OR "Monthly Fee" just to open or maintain an account with them. (We'll talk about different fees that can be associated with drop shipping in a following Chapter).
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The distributors we list are all genuine Wholesale Suppliers. They will NOT charge you a fee just to open an account with them. They will NOT force you to buy a minimum number of products. They WILL ship any of the MILLIONS of products the Directory represents straight to your customers from their warehouses, one at a time.
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Now, back to business. :o)
Some Drop Shippers charge a small "Drop Ship Fee" per order.
It's important to understand exactly what a "Drop Ship Fee" is, and how it works.
Remember, Drop Shipping has been around for DECADES; it's not something new just since ECommerce came along. There are standard practices in Drop Shipping that have been tested and proven over a period of MANY years, and the Drop Ship Fee is one of them.
What is a Drop Ship Fee?
It's simple. A Drop Ship Fee is the "Handling" part of "Shipping & Handling".
When a customer buys a product from your Online Store or Auction, you're going to charge them your Retail Price, plus "Shipping & Handling".
You know you've seen it before! "Shipping & Handling" is attached to just about everything you've ever ordered from a catalog, a TV ad, or the Internet. Just what is that ever-mysterious "Handling" charge?
Consider this: Wholesale Suppliers usually sell products in bulk quantities. A case here, 30 cases there, a whole truckload somewhere else. They do not have to individually pack and ship each item. They just throw some cases of products on a truck and off they go. That's what they do most often.
When a Wholesale Supplier Drop Ships one single item for you, they are doing a lot of extra work for you. They call that work "Handling".
They are storing the product for you, in THEIR warehouse. You don't have to clean out your garage, or rent that extra space somewhere.
They are packing the product for you. You don't have to buy shipping boxes, envelopes, labels, etc. You don't have to spend the time packing the product. Your time is a very real expense to your business.
They are using THEIR UPS or FedEx Account to ship the product directly to your customer.
They will handle all returns and damaged goods replacements for you.
This extra work costs them money, and they have to cover their expenses somehow.
That's a lot of work that YOU don't have to do. That translates into money you SAVE. You not only have to consider your expenses for everything listed above, you have to learn that your time costs your business money, too. When you can get someone to warehouse, package and ship your products for you, you not only save all those expenses, you save time. Use that time to promote your business, instead of standing in your garage packing boxes!
So, the Drop Ship Fee is the "Handling" part of "Shipping and Handling". It's all the work done by the Drop Ship Distributor to prepare your single-item order to go out the door. And...this fee is typically very small!
Some Drop Ship Distributors charge a Drop Ship Fee when they fill an order. As I said, it's been a normal part of the Drop Shipping business method for decades.
You pass that fee along to your Customer as a part of your "Shipping & Handling". However, you may choose to simply include it in the price of each item you sell, to make your Customer's shipping cost appear lower.
Here's an example:
Your customer, Twee T. Bird, orders one set of Cat Handcuffs from your Online Store.
· Your Store's Retail price for the Cat Handcuffs: 29.95
· Your Store calculates Shipping to Mr. Bird's door at: 5.62
· Your Distributor charges a Drop Ship Fee of: 2.00
· If you're charging the Drop Ship Fee as "Handling", Mr. Bird's Total will be 29.95 plus 7.62 Shipping & Handling (5.62 Shipping plus 2.00 "Handling" [Drop Ship Fee]).
· If you're charging the Drop Ship Fee as part of your PRICE, then your Store's PRICE for the Cat Handcuffs will be 31.95, and Mr. Bird will only pay 5.62 in Shipping & Handling.
Internet customers are perfectly comfortable with paying Shipping & Handling charges. Some of the biggest Online Stores on the planet use Drop Shipping exclusively, and charge the Drop Ship Fees that THEY pay, right back to the customer, as a "Handling" charge.
Different Types of Drop Ship Fees:
Drop Ship Fees are almost always charged on a "Per Address" basis.
That means that if your distributor's Drop Ship Fee is 2.00, and your customer orders ONE item from your store, the drop ship fee that you charge them as "Handling" will be 2.00. It ALSO means that if your customer orders SEVERAL items, and they all come from the same distributor, the Drop Ship Fee for the ENTIRE order is STILL just 2.00, since it's all shipped from the distributor at the same time to the same address.
SOME Drop Shippers charge Drop Ship Fees on a "per box" basis. It's rare, but does happen sometimes. Now, that does NOT mean that there is a separate Drop Ship Fee for each ITEM; it's for each BOX. Most of the time, with multiple-item orders, the distributor can put several items into the SAME shipping box, and you STILL only pay the Drop Ship Fee ONCE.
In conclusion, there are several legitimate ways to Source Products for your Home-based Internet Business. Using Drop Shippers is one of them, and should be a part of your Product Sourcing effort, but NOT all of it.