Drop-Shipping

Wikipedia's definition of drop-shipping is "Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to wholesalers, who then ship the goods directly to the customer . The retailers make their profit on the difference between the wholesale and retail price." Drop-shipping is a great option if you don't have either the capital to purchase items or if you are lacking the space to store the items. Drop-shipping entails you listing items on your web site from another company. Upon a customer ordering the item, you receive the money, order the item from the company, provide the buyer's information; the company charges you a wholesale price for the product and ships it directly to the customer. So your profit is the difference in what the customer paid and the wholesale price you were charged. No inventory for you to keep on hand and no dealing with packing and shipping! This is a great option, but there are some things you need to keep in mind and watch out for:

• Choose something that will sell fairly well. Just because a drop-shipper has merchandise to offer, doesn't mean it will sell. Do your research on what items sell well and at what price they are selling for.
• Find a reputable drop-shipper. There are many choices for drop-shippers out there, however keep in mind that you are putting your reputation in this company's hands. If they are unable to fulfill the order, the customer won't be going to them with complaints, they will be coming to YOU as you are the seller! Be aware of people charging hundreds of dollars for drop-shipping lists as well! Do your homework on the Internet and see what others say about the company you are thinking of using! Be aware you will most likely have to deal with backorder and return issues from time to time, so make sure you find out ahead of time from the company how they handle such situations.

Included next is an example of signing up with a drop-shipper and how it works. Again, you can use drop-shipping with your own store as well as one on amazon, yahoo, ebay or any other site you choose. The company in this example is Doba and they offer over 250,000 products and are listed with the Better Business Bureau. They guarantee the lowest prices and many people sell their items on ebay. They currently offer a 7 day free trial, and after that the choices start at $29.95 a month depending on what tools you want to use. They even offer a tool that will push the information to sites such as ebay, so you can sell their items in your eBay store without having to copy or paste any information! Here is a flow chart of how it works with Doba (and most other drop-shippers):

• Signing up with Doba is easy. First you enter your email address and password on the free trial sign up page, then click Next.
• You then enter in your address and contact information and click Next.

• You then need to enter your credit card information and click on "start membership". Even though this is a free 7 day trial, you must enter your credit card information so they can bill you monthly if you choose to continue your membership (just as with most other trial sites/memberships). If you don't wish to continue with their membership, make sure to cancel it before the 7 days is through.

• You will then be taken to your account page, where there is a "Get Started" button that you will click on to start browsing the products.

• The next step gives you the option to get more information or to start browsing. It is recommended that you read through their information, even if you have sold online before, so click on "New Seller".

• Once you are done learning about how it works, click on "start finding products to sell"

• You will then be taken to a list of categories to choose from.

• In this example, we will choose "Gift, Craft & Hobby" which happens to be where pet accessories are. You can also choose to do a search by keyword using the search box

• We chose the Luxere Pet Pastel Crate Beds for this example

• So, using this example, you will see below that the price you will pay varies between $9.26 - $43.64 (depending on size and material), and that the price you can reasonably charge the consumer for this product is between $19.99-$99.99. You will also note that the Shipping cost is $19.99 (which you will usually include as the shipping cost to your customer), and the fee for them drop-shipping it is $2.

• Since there is more than one choice for this item, you will see below the different choices for this item:

• Below that, the more detailed information is listed starting with the description:

• You can then click on the other tabs to get more information. Clicking on the "Process" tab shows you how long the time from your order to processing/shipping is, and in this case, you can see the processing time is 2-3 days

• So, now you would save the image, and copy and paste the information into your online store. You would not include the drop-ship price, fees and such information; just what is relevant to the customer. You will see the drop-ship product actually being added into an online store later in this document. This portion is just to give you an idea of how it works. Once someone purchases the item from your website, you would go back to doba's web site and purchase the item and to do that, you would just add it to your cart, just as you would when shopping for anything else. So in this example, you will see the bed cost $9.26, the shipping is $19.99 and the drop fee is $2, making the total $30.88. The suggested retail price for this item was $19.99, so if you charged your customer $19.99 for the item and $19.99 for shipping, your profit here would be $8.73. The best part about this is that you didn't have to have any inventory, all you had to do was post the information, and place the order with the drop-shipper. After you place your order, you will provide the customer's information and the item will be shipped DIRECTLY TO THEM!!! And you can add as many products to your site as you would like, it's completely up to you!!

A detailed example of using drop-shipping in an online store is included in the "An Online Storefront With Big Sites Such as Yahoo" chapter