Another unfortunate aspect is that people who do not understand drop shipping thoroughly see it a s get rich quick means of doing business. That leaves some people open to being scammed.

Here are some of the things that you need to consider before going ahead with a drop ship business.

1. Carry out plenty of research on your drop ship sources(wholesalers). Don’t just rely on search engines to do this. Call them and get references.
2. Avoid companies that want an upfront fee. Also, avoid a company that offers you everything you need,like a website, etc, for nothing. There has to be a catch somewhere.
3. Ensure that the drop shippers require a valid wholesale license from you. These guys are middlemen who will only take a cut of your profit and send the order on to someone else to drop ship.

Here is the best way to find a legitimate drop shipper:

If you see a product and want to sell, contact the maker directly to see if they have a drop shipping program. They might only sell in light bulk which will cost you about a $1,000 minimum. Another thing you can do is look up directories that deal with legitimate drop shippers only. Some companies like that are Doba and Worldwide Brands. These directories offer you extensive lists of products and who supplies them. These types of directories are the best way to go if you want to drop ship.

1. Once you have found a company that will drop ship for you, you must get a wholesaler/reseller license. Requirements for this license varies from state to state.
2. Next you have to set up an account with the drop shipper that you wan tot work with. They may require some sort of prepaid account if you have no business references.
3. Do not be fooled by sites that offer a list of directories for a fee. They will sell you a copy of a free directory to take advantage of your lack of knowledge.

Now that you have the basics of drop shipping, you are ready to strike out on your own.

Drop ship basics

Drop shipping is offered by some wholesalers so that you can offer items for sale on your website without carrying an inventory. The drop shipper does all of the shipping and handling and you collect a profit for processing the actual order.

The Pros

1. Low overhead…you do not have to bear the costs of warehousing and inventory hassles. These costs can be quite high.

2. No inventory…you do not have to spend a lot of money to initial start your business. New products do not have to be bought. You can list a hundred things and see what sells, cheaply.

3. Time recovered…you don’t spend time finding things in the warehouse, organizing the warehouse, receiving product, etc.

4. Minimum orders…are rare. Usually you can buy just one item at a time.

5. Selection…because you don’t have to buy a minimum and there is no inventory, you can offer a wider selection of products.

The Cons

1. Smaller profit…you don’t take any risks so you make less money per sale. It’s only fair to the drop shipper.

2. Delivery issues…if the drop shipper messes up , the customer is going to call you. Be prepared and able to answer their questions before you return their call or email.

There are a few problems with drop shipping, but the pros outweigh the cons. This is a good method of starting an e-commerce business.

Here are three things you need to know before dealing with a drop shipper from China:

1.Are the product shipped plain so that the customer doesn’t know the original source of the product?
2.Is there a monthly fee for drop shipping?
3.Is there a minimum quantity of products that you have to buy?

You should ask the following questions before you work with a drop shipper from China:

What shipping method do you use?

Look for a shipper that uses a known carrier like DHL or FedEx.  Items shipped this way will have a tacking number that you can use to know where the product is.  That will reassure your customers.  You will also need to know how long it will take to arrive so that you can give an estimate to your customers.

How is your quality control?

Make sure there is double quality control.  That means the product is checked when it leaves the factory and again after it arrives before shipping to the customer.

Do you get to use their promotional materials?

This includes product images and descriptions. You don’t want to have to buy something form them to get this information.

What about customer service?

You must be able to count on customer service.  If a drop shipper doesn’t offer good customer service they probably aren’t going to be a good supplier for you.  You need immediate response to questions and problems.

How do you handle refunds and customer issues?

The supplier must stand behind the products.  You should never eat the cost of a broken product.

Does the supplier update inventory levels regularly?

You have to know this to know if you can fill an order.  Levels should be updates once a week at the least.

Ask these questions and you will know if you are dealing with a reputable supplier.

What shipping method?

It doesn’t matter where the drop shipper is based they have to use a reputable delivery carrier like UPS or FedEx. This is your reputation on the line, not theirs. Be sure you know the average delivery time so you can let your buyers know.

How good is quality control?

Always ask about quality control methods. A good supplier will have double quality control levels in place. Products will be inspected at the factory and upon arrival at the warehouse. This will prevent shoddy products from reaching your customers.

Do I get to use your promotional materials?

The answer had better be yes or you should look for some other company. This includes images and product descriptions for your website. Otherwise you will have to buy one of everything for pictures and to write your own descriptions.

How do you handle refunds and customer complaints?

A good drop shipper will stand behind their products and refund money for broken items.

What kind of customer service do you provide?

No business is better than its customer service. Drop shippers are the exact personification of that rule. Do a test run. Order something from them ans see what happens. Email a question and see how long it takes to get an answer.

Do you update inventory levels regularly?

You will need to be kept abreast of inventory levels in order to process orders as quickly as possible.

What is your marketing policy?

Many of the top suppliers offer an affiliate marketing program that will allow you to supplement you income by referring new customers to them.

If you ask these 7 questions you will be able to find a top drop shipper and build a good reputation online.

Product drop shippers will pair themselves with the wholesaler who carries the largest volume of these items.  It is better to work with bulk for better discounts and higher profit margin.  You might even find a local wholesaler that you can buy direct from and have even lower costs.  Networking opportunities may lead you to the best drop shipper for you.

Adult drop shippers and lists of drop ship companies are full of scamming middlemen.  Middlemen who act like wholesalers, but are raising the price to profit while adding a layer to the purchase.  You may be paying another markup of up to 50%.  You will get the product you want, but not at the best price.  The best way to find a good wholesaler is to contact them by phone and ask about their company.

Dealing with drop ship wholesalers is not as easy as it may sound.  You may find yourself dealing with a middleman who will raise your prices and cut into your profit margin.  Do as much research as possible to get to the first layer of the sale.  Concentrate on one market at a time and you will find success in drop shipping.

Filling orders through drop shipping meant that a website owner could send their orders to wholesalers and have them shipped to customers.  For e-commerce owners this did away with the expense of an inventory and the risk of it not selling.

Some thought that carrying an inventory would become a thing of the past except for drop ship companies, but there were service issues…all kinds of service issues.  Some wholesalers never shipped orders or the wrong product was sent.

Quite a few of these problems were caused by slow or inefficient communications.  Orders were entered manually and were prone to human error.

Even if companies sent their orders by xml or EDI had many obstacles.  Many businesses tend to do things their own way.  Because of that, drop shipping caused as many problems as it solved.

The problems were mostly the suppliers fault.  The early companies did not have the knowledge or technology to excel at this type of selling.  They were used to selling pallets of product instead of one piece at a time and shipping it directly to a customer.

As e-commerce rocketed the demand for more and more drop shippers took off.  This lead to some shady characters getting into the business and stealing money from retailers.  By 2000 drop shipping was looked on with disdain.

Data Translation

Luckily, the technology for handling drop shipping has improved.   Commerce Hub, a leader in the industry can handle 10 million orders per year and offers an interactive dashboard so that retailers can see inventory levels.

Commerce Hub has grown large enough that they charge an initial fee of $500 to $150,000 and you must have at  least 2000 transactions per month for it to make sense for you to use them.

Doba handles transactions for small to mid-sized e-tailers.  They offer over 250,000 products and act more as a data translator than anything else.  Their main function is to connect retailers and wholesalers.

They allow you to monitor wholesalers inventory levels  so that your site offers in stock products each day.

Tight Margins

Drop shipping is a very cheap way to go into business.  Doba charges a monthly subscription fee and Commerce Hub charges a one time fee.  Working with a drop shipper is not necessarily a path to easy riches.  Each transaction carries a smaller profit margin.
The nature of drop shipping causes these tighter profit margins.  The supplier is the one actually taking all of the risks, expenses, and handling the inventory.  Doba uses its size to negotiate better prices because of their bulk purchasing power.

Margins differ by product.  There is no one set profit percentage that you should expect.  Electronics actually have the slimmest profit margin.  Some companies can get a 90 percent margin while other only get 10%.  It all depends on the product.

Fraud Detection

Fraud is sort of hush hush in the drop ship game, but it exists.  All of the transaction are between tow people who never meet.  Credit card fraud can constitute up to 3% of sales.  It is even worse when you add a third party into the equation.

Doba has launched a fraud protection program to cover their retailers.   If you followed their “best practices” protocol and get defrauded, they will cover the loss.

The Secret Of Drop Shipping Success

Starting an online store is easy and cheap.  Drop shipping takes most of the headaches out of the equation.  All you have to do is hire a website designer, post some photos and product descriptions, and work with your wholesaler. The next thing you know you are processing orders.

Building the store is the easy part.  Making it a success is another.  You have to offer value of some sort for your customers and you have to market the site.  You must have inlinks and back links.  You have to do press releases and article marketing.  It is best to hire a freelance expert for this aspect of the game.

Good luck with your e-commerce site.

This arrangement is beneficial on several levels.  The main one being that you do not have to maintain any stock levels.  This frees you from the headache of having a warehouse, buying inventory, hiring staff, or worrying about the shipping and routing of work.

All of the things in the last paragraph will raise your cost tremendously and then you have to worry about stock not moving.  It is also a great benefit that you do not have to do the shipping.  Some drop shippers will even put your logo on their boxes.

This makes the customer think that you actually shipped the product.  Hopefully, you have a reliable drop shipper and they will get product to your customers on time so that your reputation is enhanced.

Some drop shippers will give you credit.  This helps to improve your cash flow to cover immediate expenses.  An efficient drop shipper will send you regular updates on inventory levels so that you are up to date.

If you have common software then you will get immediate notice when their stock levels are updated so the you are always up to date.

Your drop shipper should be able to offer you specials on bulk products.  You can then pass that price on to your customers.

Not only will this increase sales, but you will get a reputation that you offer bargain prices.  Your drop shipper will be able to accept returns and offer some kind of guarantee on those products.

This eliminates you having the headache of returns and broken products.  It also raises your reputation as being an honest e-commerce business owner.

The biggest drawback to drop shipping is the lower profit margins, but this is justified by the small amount of investment of time and and money that you have in your business.  This makes it even more important to be involved with  a reputable drop shipper.  His actions reflect your reputation and profit level.

Drop shipping businesses need to be precise with their research and know their market to stay on top of profit levels.  Good luck!

Drop shipping has its advantages.  You gain savings in inventory taxes, the costs of maintaining a warehouse, and a low cost of going into business.  This is why drop shipping is very popular online.  E-commerce thrives on ease of use, so drop shipping has gained popularity in recent years.  The barriers to start a business and the instant sales that the internet offers have caused a jump in drop shipping.

A successful e-retailer does not just look up a directory and start a website.  You have to plan appropriately.  Do the research necessary to know if there is a market for the product.  To help you learn how to drop ship here are some tips.

Find a reliable drop shipper.  Check references and the Better Business Bureau.

Find out how to use the drop shippers tracking system and track all shipments.  Make sure you know how long it takes to deliver an item.  You want to know this when customers inquire.  Be sure to know this information at holidays.  No one wants to have a Christmas present delivered late.

Communication with your buyer is essential.  If there is a snag with delivery let them know instead of waiting for them to contact you.

Beware of scams.  Start your business slow until you are confident in a drop shipper.

Fit into a niche.  Small under served markets are more apt to pay off for the little retailers.

Use multiple drop shippers.  This will help you get through if one is out of inventory or has better prices.  Try to order enough to get the best discount you can from a drop shipper.

Know the drop shippers return policy so that yours mirrors it.

Test your drop shipper.  Send yourself something and see what happens.

Don’t list an inventory number on your site.  Your drop shipper may have that many on hand, but they ship to more than one customer.

Have plenty of free and useful information on your site that you update as often as possible.

Keep these tips in mind as you go about starting a drop ship business and you will be successful.

Most people setting up a drop shipping business don’t bother doing any worthwhile market research. But, any business decision you make should be based on the facts of the situation you find yourself in. This is especially true where you are going to devote money or time to a project. In the case of drop shipping, you need to decide what kind of products you are going to sell via your website. Choosing the wrong product combination could be disasterous for your foray into online drop shipping. So, you need to invest some time in market and product research. With at least some solid figures to work with you are likely to make better decisions and be more successful in your business.

So, how can we go about doing some basic market research? The rest of this article gives some pointers for you to approach your initial market research for your new drop shipping business.

There are two basic parts to any kind of market research – data collection and data analysis.

Data Collection

Due to the nature of Internet drop shipping as a business, you will find much (perhaps too much) data on the Internet. You can begin by using the Google Keyword Tool to do analysis of kewords that people use to search for products you are considering offering through your website. This alone will give you information regarding actual keywords used, the approximate cost of using a Google Adword campaign using these keywords, search volume per month along with annual/monthly trends, and the approximate location of searchers for these products.

To get more information to work with, you can put some of these keywords into Google and see what comes up. This will give you an idea of who your competitors are. You will also get insight into what products and customer services they offer, how they approach their sales, and their prices and returns policy.

Data Analysis

Well, you now have a lot of raw data to work with. This involves organising and analysing the data to enable you to make sensible decisions about the viability of your proposed drop shippng business and products. You will also be able to get a better idea of the actual costs of running your business after doing this, as you now have shipping, advertising, web hosting and any other cost data you will need.

You begin data analysis by organising the data you have collected, for example, a competitors list, a price list of products from each competitor, the cost of buying the products from a drop shipper and any shipping costs if they are not included in the purchase price. You also have data on how many people search for each product, and the approcimate ad costs.

After going through the data, you can work out if your business is viable, or you may have identified a better product range to sell, with better margins, search volume or lower costs.

Sometimes a smaller specific ‘niche’ market can be better to work with on the Internet. For example instead of trying to compete in a market selling a specific electronic good, e.g. an XBox, you migt sell controllers or batteries or another accessory.

Caveats

All of your data can be used to help your online marketing efforts, to tout for possible investors (e.g. present your marketing data to prove viability), and to keep you focused where you’re likely to make most money!

Whatever you do, remember not to start off any business venture online (or offline) without first checking out your product, suppliers, customers and competition, otherwise you’re probably setting yourself up for failure.

These building are not open to the public. They are for storing whole sale goods that are to be sold to retailers.

These buildings are everywhere and the companies that own them fill drop ship orders. The first step to drop shipping is to find a company that will drop ship for you. Find out what the company’s guidelines are before you agree to do business with them.

After you have decided which company to use and which products you are going to sell, then you are ready to pick the method you are going to use to get customers. Drop sipping is a very easy way to resell.

Most businesses that drop ship are happy with the results. Collect the money and shipping information from your customers then send the wholesale cost and shipping information to the drop shipper. They will take it from there.

Your chosen drop shipper will ship the product directly to the customer. That’s it. The whole thing is a very simple process. Once you have worked within the drop shippers guidelines a few times , you will have no problem processing orders quickly and correctly. It is of the utmost importance to keep accurate records of all transactions.

It is advisable that you keep a copy of all orders. Keep hard copy recored in case your computer goes down. Organize your files by month and year then alphabetically. Keep all records for three years.

Keep all of these files handy. That way if there is a question about a specific order then you can get it out in an instant. Frequently you will get inquiries about orders that have not arrived yet. You should check on the orders status before returning that email.

If a drop shipped order is broken upon arrival, your drop shipper should replace it at no additional cost. After the initial few glitches, drop shipping will be easy. Keep on the look out for more drop ship opportunities.

You may just want to add another drop ship company to increase your business. Keeping on top of the marketplace will help you to know the hot items that are out there. Keep expanding.