Thanks to ubiquity of internet, online virtual businesses have become very popular business opportunities. Online retail stores are gradually playing a more important role in our lives than traditional ‘brick-and-mortar’ retail shops. Over last few years, a new concept called ‘Drop Shipping’ has emerged with coming of internet. Drop Shippers are basically wholesalers who are willing to ship their products directly to your customers. This article aims to provide readers with an introduction to current state of E-commerce industry, Drop Shipping and its benefits, and promise it holds for online retail community.
Online Drop Ship businesses are now very popular home-based business opportunities. According to a Forrester Inc. report, online retail sales will grow at a 25% annual growth rate over next five years. Online retail sales will reach nearly $230 billion and account for 10% of total US retail sales by 2008. On Ebay, more than 430,000 people are making a full- or part-time living from auction site. Many of them use Drop Shippers to auction their products. Hence, with such strong statistics, internet entrepreneur can hope to start a retail business now and still claim a portion of ever-growing market share.
The Drop Ship model offers many unique advantages over Wholesale model:
1) You do not have to spend a fortune on huge inventory of wholesale stocks before you start a retail business. This translates into a very low business startup cost. There is no risk of purchasing large quantities of stock, and finding that you cannot sell off your goods because they have become obsolete among consumers. Therefore, with variety of products offered by your Drop Shipper, it becomes feasible to test which products have a strong demand over internet without losing a fortune on each test.
2) Another prime advantage of a Drop Ship business is that there is no need to worry about shipping your products to your customers. You do not have to provide storage space for your goods, nor do you have to incur warehouse costs. Your Drop Shipper will take care of all logistics and shipping of your Drop Ship business. In fact, most Drop Shippers are willing to label their products with your company name on it, so it will appear as if you are one who shipped products to your customers. The shipping cost for each product is also reduced, because your Drop Shipper can ship your products directly to your customers. A higher profit margin is achieved because of reduction in unnecessary shipping costs.
3) Drop Shipping is also unique in that it allows you to ‘sell high, then buy low’, instead of ‘buy low, then sell high’. Your risk involved in your retail business is dramatically lowered as you get paid up front for your products, making a profit on each sale.
4) There is no minimum quantity restriction on your orders. From your website catalogue, you can sell as much of your products as you want, and you can leave indenting of stocks to your Drop Shipper. The quantity of products which you can sell over your website is only limited to your market demand, and your marketing efforts.
The process of setting up a Drop Ship business can be distilled into a few simple steps. First, you do some research over internet over niche market that you would like to target. Once, a strong demand for your products has been established, you contact Drop Shipper of your choice and set up your business as retailer of products you want to sell. Next, you design a website complete with product catalogue and credit-card-accepting functions. The product descriptions and images can be obtained from Drop Shipper, in most cases. After which, you need to drive large volumes of traffic to your website through internet marketing. Some visitors to your website will be converted to customers if they find your offers attractive enough. They place orders at your website and they pay you retail prices, up front. You email orders to your Drop Shipper, who will ship products to your customers directly. Of course, retail price will have to be marked up to include shipping costs as well. Since Drop Shipper charges you wholesale price for their products, profit margin you earn is simply difference between retail and wholesale price. Internet businesses, in general, have also many strong advantages over ‘brick-and-mortar’ businesses. Startup costs are generally very low, and this is well suited for those aspiring entrepreneurs working on a shoestring budget. The costs for conducting a Drop Ship business will be mainly software for setting up and marketing your business. Some examples will include shopping cart software, email marketing software, search engine promotion software, and so on. Other costs would include web-hosting fee and also wholesale costs of products. In most cases, Drop Shipper will require you to pay them a small deposit to signify your commitment and to prevent fraud.