The basic idea behind an online drop shipping business is that, as a small business owner, you don’t have to maintain a large inventory of products or handle any delivery to your customers. That eliminates the financial cost and risk of having a warehouse full of stuff you might not sell, and the hassle of arranging to send orders all over the country or the world. In fact, you don't have to manufacture or store any products at all.
Instead, you work with a company that specializes in drop shipping. Here’s how it works:
1. You list products for sale on your website or a platform like Amazon, eBay, or Etsy.
2. When one of your customers makes a purchase, you purchase the product from a third-party company (the drop shipper, usually a manufacturer or wholesaler) for a lower price. This process is as simple as forwarding the order from your customer, a process that can actually be completely automated.
3. Your drop shipper then sends the product to the customer.
Easy enough, right? With drop shipping, you can offer a wide range of products, so the operating expenses for your business are super low.
As you can see there is no risk on your part because you don't even purchase the product (at cost) until the actual sale is made!
What are downsides to the drop shipping business model? You have to find a reputable drop shipper you can count on to deliver to your customers. If an order is late or doesn’t go out-or a product is poor quality-you get blamed.
Also, because this market is so competitive, the margins-that is, the difference between the wholesale price and how much you can sell a product for-are lower. But still, it is a worthwhile low or no-cost startup option.
One way to stand out from the competition with a drop shipping business is to private label your products. That way you're not selling the same product brand and just competing on price; rather you can use your own brand and face less competition. Consider these important factors when looking for a good drop shipping product.
Anyone considering a drop shipping business should seriously consider leveraging Amazon.com to grow their business and learn more about becoming a profitable Amazon seller.