What You Should Know About Dropshipping

Dropshipping is a business model where a retailer does not keep goods in stock but instead transfer customer orders and shipment details to wholesaler, who then delivers the goods directly to the customer. The retailer makes profit on the difference between the wholesale and retail price.


The Pros

1. No hassle of holding stocks
Retailers can forget about the headache of holding stock, all they need to do is to promote the products, bring in sales and collect the payment. Then send the order details to the dropshipper (be it manufacturer, or wholesaler who operates a dropshipping program), who in turn deliver the goods to the buyers directly.

2. Low wholesale price
Dropshippers are usually the manufacturers or wholesalers themselves. They normally purchase in bulk quantities at very low price. So, they will be able to offer a good wholesale price for the products as well as the shipping fee.

3. Low investment
This model of business involves very minimal investment. You don't have to invest in stock and it minimizes the risk of having huge quantity of stock that you are not able to sell.

4. Wider product range
Dropshipping gives you the flexibility to offer wider range of products on your websites without the restriction of holding stock for each of the products. You can always work on numerous websites promoting different products.

5. Forget about the shipping / delivery
Dropshippers will take care the shipping and delivery of the goods to your customers. The shipping fee are to be borne by your customers, so you can forget about the shipping issue and just focus on the marketing strategies.

The Cons

1. Quality of the product
Since the products / goods are shipped to your customers directly by the dropshipper, you must make sure the quality of the product is up to par. It is always a good practice to evaluate dropshipper that you deal with the first time by ordering an item for yourself. Examine the packaging and the quality of the item.

2. Support, returns and refunds
Check with the dropshipper on the refund and return policy. Make sure they provide good support for their products and shipping.

3. Credibility and reputation
Do some research before you engage with a dropshipper. How long have they been in business, do they respond to your enquiry promptly and professionally? Check out their reputation with the Better Business Bureau in their area.

4. Compare and compare
Don't stop at the first dropshipper that you've come across. Always find a few and compare their offers and the supports given.

5. Shipping
Check with the dropshipper about the shipping company that they are using. Are they reputable, where do they ship to, how long does the delivery takes, do they provide any tracking of the shipment?

It's fairly easy to start dropshipping, the barrier to entry is low and you don't have to invest much up front.

Considering the above pros and cons, anyone who is considering dropshipping, should take times to gather as much information as possible to be successful in drop[shipping industry.

As successful as the industry has become, there are concerns that arise from this method of selling. Below is a list of 10 tips that compiled by Mark Kenny that shares those concerns and helpful information for dropshipping success.

Tip #1: Check out the dropshipper’s reputation with the Better Business Bureau in their area. How long have they been in business? Has anyone ever filed a consumer complaint against the company? If so, has the complaint been resolved? This information can be found at http://www.BBB.org.

Tip #2: Ask the dropshipper how quickly they will be able to fulfill and ship the order. Be sure to inquire about whether or not a tracking number will be available. The tracking number will be very important because, if an item doesn’t arrive, you will need to have some means to track the purchase and to make sure that it was shipped. If a customer doesn’t receive a product, they will look to you for answers.

Tip #3: If you are dropshipping, this means that the item you are selling is not in your possession. It’s very important to let your customers know this. Sellers should indicate that the item will ship directly from your supplier.

Tip #4: An important factor to consider is the delivery time. It’s pertinent to let buyers know that, because the item is shipping directly from your supplier, they may need to allow extra time for delivery. Make sure to ask your dropshipper how long delivery takes so that you may pass this information on to your buyers.

Tip #5: If a problem should arise during the course of shipment, or if a shipment is delayed, promptly address the issue with your buyer. It’s important to have good communication and to let your customers know that you are always there to answer their questions.

Tip #6: Be cautious of a dropshipper who requires that you pay a fee to access their product line. A legitimate dropshipper should not charge to set up an account.

Tip #7: When ordering from a dropshipping company, there should not be a minimum order. It’s normal to get discounts on larger quantities, but the dropshipper should be able to accommodate any order size from 1 to 100.

Tip #8: Consider doing business with more than one dropshipping company. It’s always a good idea to shop around for a larger variety of better deals. Don’t put all of your eggs in one basket, so to speak.

Tip #9: When you begin doing business with a new dropshipping company, order a few test products for yourself. Afterall, you are the one who will be selling the products and you will want to make sure the company offers quality products, reliability and accuracy in filling orders.

Tip #10: The whole idea behind dropshipping is wholesale. You are buying a product at such a low price that you should be able to sell it for a profit. The dropshipper is the wholesaler and you become the retailer. It’s easy to forget that some things really are too good to be true. Just like everything else, there are scams out there so be careful. The bottom line is that regardless of how wonderful the deals may seem, start slow and build up to larger orders as you become more comfortable with the process.

Selling Online: Physical Products vs. Digital Products

I have attempted to sell physical product online once. I found that it's too much of hassle as compared to selling digital products.

For physical products, on top of the market research / keyword research ground work, you have to also concern about inventory and shipping / delivery stuff, as compared to digital products, where it is normally delivered digitally and instantly in downloadable format. No issue with inventory and shipping / delivery for digital products.

No doubt there is always an alternative to sell physical products without the hassle of handling inventory and shipping -- dropshipping. But again, finding a good and genuine dropshipper is not easy. Most of the dropshippers restrict their dropshipping service to certain countries only, some even worst that they dropship to continents in USA only. This becomes challenging when you want to offer your products to the world wide market.

Besides that, most of the dropshippers would require you to pay a fee in order to access their product line. How ridiculous is this ! You are helping them to promote their products, they shouldn't be charging you to access their product line but instead welcome all sellers to help promote the products by charging only the dropshipping fees per item. What do they have to lose by letting potential partners to view their product lines before making up their mind to work with the dropshippper. I just couldn't figure out why they must charge a fee upfront before you make any money from selling their products.

Sometimes I wonder, are these so-called dropshippers making money out of the account set-up fees instead of from the dropshipping service for their products?

When dropshipping is out of question here, you will now have to crack your head on dealing with the inventory and shipping issues. In order to have good profit margin and being competitive in your niche, you have to minimize the product cost, to get a minimal cost per product item, you have to purchase at least a light bulk to get a reasonable discount. This again go back to the same issue, whereby you need to spend a considerable sum to buy the products in bulk before you make your first sale and before you know that your product is saleable. This of course is not ideal, what if the products don't sell or it goes slow. Huh, another challenging issue to handle.

The second headache that you are going to deal with soon after having the inventory issue solved is the shipping / delivery of the goods. Sending goods via registered air mail or courier service is not cheap and it would be a big challenge if you want to remain competitive in your market.

These are the challenges that I discovered when I am trying to sell physical products online. My experience tells me that selling physical products online is only workable when you are able to source for a good and reputable dropshipper with quality products that can take care of the inventory and shipping / delivery matters for you, PLUS giving you competitive price and good profit margin. Congrats if you can find one.

On the other hand, I would say selling digital products is still the easiest and simplest e-commerce model. You don't have to worry about inventory, shipping / delivery. It all done instantly in downloadable format once the payment is confirmed. And the best part is that you can automate the process. Whenever a purchase is confirmed and the payment is received, the product download link is sent to the buyer instantly and automatically. The buyer can then download the product into his / her computer or have it printed if it is an ebook or e-report. It doesn't involve any inventory cost and you can have almost 100% profit minus out the hosting fee of your website and any third-party credit card payment processing fee. Once it is set up properly, all you need to do is just to drive traffic to your sales page. You can forget about managing your product inventory, payment verification and the delivery of the goods. This gives you ample time to focus on marketing your products which in turn to bring you more sales. Don't you think that this should be the ideal way of doing business. Once set up, forget about the administration but focus on the marketing part and let it run on autopilot. Then set up the second website, do the same things again and let it run on autopilot. This business model allows you to set up unlimited websites and have them run on autopilot, which bring you multiple source of income.