The idea behind drop shipping is that a wholesale dropship supplier gives you the opportunity to sell products without having to buy them first. They also act as a service provider so you don’t have to:
- Store items
- Package and ship items
- And so you don’t risk any money if you are unsure about how they will sell
But most won’t do all of that for free. When you purchase from a wholesaler that offers drop shipping services, they will usually charge a fee. This would normally be anywhere from $2 – $5 per item, so you need to be careful when deciding on what kinds of products you want to drop ship, and since some items are more suitable for drop shipping than others, here are some suggestions:
- Deep niches such as rear brake lights for late model Chevy pick ups
- Low volume sell-through rates and high profit margins – meaning you won’t sell 150 per week but you will make a decent profit on them when they do sell
- Low competition. This is critical when you are drop shipping as you have to take those drop shipping fees into consideration, which makes being able to compete in a very competitive market a bit tough for anyone wanting to sell through drop shipping.
So, here are some guidelines on how to start a drop shipping business, and some best strategies for 2017.
Find A Supplier
You will need to find and research a few different suppliers. Check out some of the wholesale drop ship directories such as SaleHoo which is full of reputable sellers providing a wide range of products from cosmetics to farming equipment.
If it’s local suppliers you are looking for try browsing through your Yellow Pages in the wholesale or suppliers section. Looks for the wholesalers or suppliers who have the most experience with drop shipping, and are able to ship products out in a timely manner.
Now, before negotiating any kind of deal with them ask a few questions:
1) How long will it take for an order to be shipped once the order has been placed?
2) What shipping methods do they use? I.E. overnight courier, for international suppliers, what company/companies do they use and what is their tracking like?
3) What kind of quality control is there? You don’t want to be dealing with products that are poor quality, this can result in lots of returns and many hassles, and quite frankly just wastes a lot of time.
4) Are warranties of any kind available?
5) Can you use product photos? Several of the larger wholesalers will have professionally taken product photos which will greatly enhance the appearance of your listings.
Select And Find The Best Selling Products
Start browsing through your suppliers list of products and pick out a few items that interest you and do some research on them.
Here’s how you can find some of the best selling items:
1) Use a service like SaleHoo Research Lab, which performs market research for you when you type keywords into the search tool, and tells you things like average selling price, average shipping price and sell through rate.
2) Use the old fashioned way by taking a close look at eBay’s completed listings. If you are not familiar with this method here’s what you do:
- Go to eBay.com or your local eBay site
- Click advanced search, located next to eBay’s search bar
- Check the “completed listings” box
- Enter your keywords and category and click on the search button
- Scroll through about 5 pages of listings and count the number of successful listings, these will be in green and compare those to the unsuccessful ones.
- Now, when you find an item that is selling more than 60% of the time you can be pretty sure that you will be able to sell that item as well.
Get Yourself A Tax ID
Not all eBay sellers will need a tax ID ( retail or resellers license, tax ID, resale number, resale certificate or vendors license ) but some wholesalers will require you to have one before they will do business with you.
You will need a sales tax ID if you are doing business inside the U.S. or Canada and running a business and not just selling items from around your house.
Choosing Somewhere To Sell Products
The obvious choice for most would be eBay, that is where I started my drop shipping business, Bonanza.com is another one that I started using alongside eBay, but there are several sites out there that are growing in popularity and generate good traffic on a regular basis.
Check out as many other sites as you can and see if there is a market for the products you want to sell. It’s a really good idea to diversify when it comes to selling on these online sites since each one has a unique set of customers, and with most sites being free to join there really is no reason not to go and give others a try.
For those who are looking to diversify even more, then consider setting up your own Ecommerce site. There are many choices and platforms with which you can do this, so again do some research and find something that fits your needs.
Manage Your Listings
When you are drop shipping you will list products in the same way you would if you had physical stock on hand, but when selling on eBay and many other sites you will need to disclose to your buyers the location of items being sold.
For example, if you have a supplier based in China you must have this displayed in your listings so customers will be aware that longer shipping times may be encountered. I neglected to do this on one occasion and the buyer found out quite easily and was not too happy, but after a quick explanation of what actually happened things did work out just fine in the end.
A drop ship order works a bit differently than a wholesale order would. This is what your typical drop ship order will look like:
1) Once you have chosen your products from your supplier, you will now list them on eBay or your Ecommerce site.
2) When the item sells, you will collect the money from the buyer and pay your supplier ( keeping the profit part for yourself obviously ) by ordering the item you have just sold from the suppliers website.
3) Now, the supplier will ship the item you just sold directly to the buyer. At some point in the near future you will now be able to determine which products have really good sell-through rates and which ones don’t, and you can begin adjusting which products to list.
Remember, research, research and more research will help yield the best and most profitable items to sell, and with time you will also discover which suppliers will be the best fit for your drop ship business.
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