You may not immediately look at that term and say to yourself, “Drop ship! Now that’s something I must read more about.” To me, it sounds more like maritime jargon than an online business tool. Fortunately, I have a close friend whose enterprising personality constantly drives her to learn about new ways to make money as a stay-at-home-mom and whose past life as a teacher also prompts her to share her ideas – with me! So the concept of dropshipping did not pass me and my initial assumptions by.
Is it New?
Dropshipping is by no means a new concept, but it is a newly actionable concept for many people who are seriously considering an online business. Maybe you’ve heard about this increasingly popular way to earn money online and are looking for some structured advice to get started. Or perhaps you’re hearing the term for the first time. You are in good company. Merriam Webster gives you a definition for drop-ship only if you hyphenate it. I will refer to it here as they hyphen-less compound word dropship, as it’s commonly used online, though my version of Microsoft Office spellcheck still doesn’t recognize it.
So the punctuation (or lack thereof) is uncertain. But I do know two important things about dropshipping that you should take away from this, even if you are just beginning to consider online business and are merely generating ideas you’ll act on at a later date.
- Dropshipping can turn anyone into a retailer in a very short time.
- Dropshipping enables you to start a business with little risk.
If you are the budding retailer in question, dropshipping is essentially the practice of offering goods for sale through some kind of online store or medium, which when purchased are shipped directly from the manufacturer or wholesaler to the customer and do not go through you. You market and take orders for the product, but you do not actually handle it.
Very Quickly, the More Obvious Benefits of Dropshipping:
- You don’t have to pay for inventory in advance, so if a product you offer doesn’t sell; you won’t be stuck with a dud collection of stuff on your hands.
- You don’t have to mess with inventory, period. Nothing to store, handle, make, or put together.
- You don’t need to set up your own packaging and mailing operation and can avoid purchasing all the supplies that typically go into that.
- You get wholesale pricing on the product and should know exactly what other fees and shipping costs will be charged back to you, and therefore can safely predict your potential for profit.
First Things First.
If you decide to pursue dropshipping, here’s snapshot of your initial to-do list.
- Make it legal! This means getting a business license and taxpayer ID. Read the top reasons to consider a tax ID and how to pursue licensure in the USA, Canada, or Australia. Do not let the legalese intimidate you and prevent you from realizing a dream – consult a CPA or tax advisor if you’re at all unclear about this. It’s really not much of a hurdle.
- Secure a storefront. No, you don’t need to scout out empty commercial real estate in your neighborhood. Busy moms need only a website, shopping cart software, and merchant account to set up shop. Some dropshippers use eBay or Amazon as a store as opposed to creating their own website – but even there, you’ll want to design your individualized space and selling policies.
- You may want a business checking account to keep personal and business expenses separate come tax time.
Now, the Fun Part.
Pick a product or group of related products to sell. Put a lot of thought into this! What do you have passion for, or expertise in? What type of customers do you want to attract and deal with (remember, you may not handle the product, but you will have a role to play in customer service and returns) and what kind of product entices that kind of customer? Once you have products in mind, go to popular online sales sites and study your competition and pricing, jotting down a price range for the products you are considering.
Once you have narrowed down your product choices, you can consider choosing an online directory to select your products. Make sure to evaluate ten key parameters including balance and uniqueness of products, how you search for them, price, and customer service in choosing a directory.
You may end up working directly with wholesalers or using a dropshipping supplier, a company which has done the groundwork to establish relationships with a variety of wholesale suppliers and manufacturers and eliminates the individual work of setting up accounts with wholesalers, making sure you meet their requirements, and figuring out the different ordering process of each supplier. Weigh the costs of using a supplier with the time you anticipate saving by taking advantage of their services.
What’s in a Name?
If you don’t use an existing online forum to sell your products, you’ll need to purchase a domain name. Do some research on keywords related to your products using tools like Google AdWords (free) or WordTracker (better, but at a price) to find out what customers are searching for online.
There are also plenty of sites that let you take that name and create a full-fledged website and online store. If you really want to get started quickly, InstantEstore is a good bet that will still give your store a professional look, help with search engine optimization, and create custom logos if you need them.
Dropshipping Isn’t Perfect.
OF COURSE, this easy-to-start and generally low-stress approach to online retailing has disadvantages.
Control freak? Many entrepreneurs are eager to be in charge. Dropshipping requires you to hand over some control in terms shipping times and how items are packaged.
Fee averse? Dropshipping fees are usually charged per shipped order and will slim your profit margin more than buying in bulk and selling items yourself will do. (Note: while dropship fees are customary, sites that charge a membership fee –an upfront cost of any kind – should be avoided. Fees should only be associated with actual purchases).
Riding an amazing product? Your provider may decide to stop offering it, and there’s nothing you can do about it.
Don’t Jump Ship, Dropship.
Despite those drawbacks, if you’re looking to venture out into the sea of online business and want to drop your anchor somewhere without much risk, consider dropshipping. It is an easy way to get started and low maintenance enough to keep you from jumping ship too early in the process!
Need Some Examples?
Look at these websites. They are all considered successful dropshippers.
What experience do you have with this type of business? Please share with other women here.