How To Make Money With Drop-shipping – Tips
How To Make Money With Drop-shipping Globally.
The following tips for making money with a drop-shipping company is not a complete roadmap to riches. However, the guidelines are solid pieces of business strategies to help you find cash jobs and, make money online with a business model that is profitable, reliable and, also provides exciting opportunities for you to be your own boss.
Traditional Product Distribution
Traditionally the product distribution model is set-up where the seller or re-seller purchase their niche inventory of products from manufacturers, wholesalers or distributors.
The retailer frequently approaches the three entities below to ensure their business is adequately stocked to meet the demand of their customers.
- Manufacturer – Creator of the product.
- Wholesaler – Provides products to distributors; may also sell directly to retail buyers.
- Distributor – Distribute products as widely as possible plus make purchases from manufacturers and wholesalers
Usually, when you make a purchase for your business from a manufacturer, the manufacturer’s wholesale price is added to the transaction.
Additionally, by buying products from a wholesaler or distributor, you will pay the Manufacturer Suggest Retail Price (MSRP) and, the percentage of the markup charged by anyone you make a purchase from in the distribution chain.
As you can imagine this takes a lot of time, product research, monetary investment and, the risk of having to personally deal with bad customer experiences due to any number of reasons.
Drop Shipping Business
Drop-shipping companies use a business model which provides the opportunity for you to sell any product offered by selected manufacturers, wholesalers and/or distributors without having to purchase or stock any inventory.
Instead of purchasing merchandise to display to consumers, you promote your niche products using images and, information provided by the supplier and/or showing sample products.
When customers order products you may collect payment, transfer the order and payment to the supplier who will then package and, ship the product directly to the customer. The transaction is often completed with your shipping label or another form of branding through the drop shipping wholesalers you work with.
In this drop-shipping model, the benefits include:
- Transfer of shipping cost to the customer.
- Reduction of your overhead costs because you don’t have the need to purchase in bulk, provide storage or handle the merchandise.
- Offer better prices to customers and, remain competitive in your niche.
- Increase profit by selling at a higher price per unit.
As you’re most likely imagining at this point, it’s becoming obvious that a drop shipping business can be a profitable way to build or expand your current business. Of course, like any other business, there are some drawbacks to be considered.
Take a look at the advantages and disadvantages of operating a drop-shipping business below:
Advantages of A Drop-Shipping Business
A drop-shipping business provides attainable opportunities for new and small businesses by removing the need to purchase and, manage inventory.
In a traditional business, the inventory costs can be quite large even if you’re an established business. It can often be difficult to afford expansion into a new line of products or purchase seasonal stock in anticipation of the holiday buying season.
- You don’t need to store inventory or handle products — Storage or handling fees are one less overhead cost and, that instantly creates flexibility in your pricing.
- You don’t have to deal with unsold stock if demand decreases — Product sitting on your shelves that you need to sell in order to break even or simply free up cash for the business is no longer an issue.
- You can add any available product line to your business website with minimum or zero investment.
- Product shipment is done for you by the drop-shipping companies — There is no longer any need to hire the manpower to do the picking plus packing for shipment or manage relationships with postal and, shipping firms.
- Customers receive their products with your branding and, shipping label on the merchandise.
Disadvantages of A Drop-Shipping Business
The catch or disadvantage of a drop shipping business includes the following challenges:
- Suppliers will often mark up products to cover the costs of drop shipping making the MSRP price higher. However, the savings in your overhead costs usually cover the amount of the markup.
- Building a unique customer experience relationship is not in your control. If your drop shipping companies consistently make mistakes, these errors can create a negative image of your business.
- You cannot personally identify quality issues until your customer makes a complaint. Handling and shipping your own product gives you the ability to ensure only the best quality product is shipped to the customer.
- You can lose business and, customers if a manufacturer decides to start selling retail because they have the contact information for your consumers. Manufacturers can encourage them to replenish supplies by reordering on their website although this is unlikely to happen due to a breach of contract with re-sellers.
Is a drop-shipping business a good way for you to make money?
Every business idea has a different answer to this question but there are some general considerations which apply across the board when considering a partnership with drop-shipping companies:
- Drop shipping is an excellent way to get into business right away because it permits you to start making money with zero or very little capital investment. Also, there is a very small amount of risk. If you are looking for ideas to start a business, drop-shipping may be a great way for you to test the market.
- If your established product demand is apt to change quickly or follow fast-moving trends, you benefit from the drop-shipping wholesalers managing the ups and downs of the marketplace by keeping stock of the inventory.
- Your business focus now depends on your ability to promote products and, manage strong customer relationships through third parties.
As you can clearly see, a drop-shipping business has the ability to create lucrative cash jobs plus offers many obvious advantages such as low entry cost, risk reduction and, the complete removal of many overhead costs and, inventory management.
Now that you understand the process of making money with drop-shipping companies, it can become a profitable business solution for you to earn money online by promoting products in niches such as beauty products, office furniture, or any other interest which can be drop shipped.