Wholesale drop shipping is the latest way to make money online, and there are a lot of advantages to this method. This method is easy to follow and understand, and there are not many costs involved. A wholesaler makes an agreement with an online store to allow certain merchandise to be advertised for sale even though the store does not have any inventory of these items. The wholesale company keeps all the inventory and takes care of all the customer shipping. All the online store owner has to do is to advertise products from the wholesale company of their choosing to complement their online store.
The risks involved in wholesale drop shipping are very minimal, and even these can be managed if you know the wholesale company you are dealing with. One small risk is that your customers are not happy because the merchandise is cheap, or not as advertised. By dealing with wholesale companies who have been in business a while, you can be assured that the products are quality products and your customers will be satisfied. Happy customers become repeat customers, and this means more profit for your online store.
Wholesale drop shipping makes your store money because you get the products at a discount price and sell them in your online store at a retail price. The difference is the amount of your profit. The discount received depends upon your agreement with the wholesale company, and these amounts can be a set amount for a product or a percentage that is marked up.
This method has many advantages, and one of these is no touch inventory. There is no need to have large amounts of space available for storage, and there is no need to keep track of inventory and reorder products. All you do is advertise the products that you choose, send the buyer information to the wholesale company, and collect your fee. What could be easier that that?
Wholesale drop shipping is no fraud. It is one of the most innovative ideas in the online store industry, and there are advantages for both the store owner and the wholesale company. The store owner can sell a larger variety of quality items without worrying about storage or inventory, and the wholesale company sells more products and saves on advertising costs. Both parties win, and the customer receives a quality product, so there is no loser. Wholesale drop shipping has completely revolutionalized the online shopping industry, and it is a great way to make money online.
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Drop shipping differs from traditional wholesale trading in that it is a form of ‘just in time’ shipping. Basically, drop shipping means that the online seller will order the product from the wholesaler as and when customer orders are received. The seller simply receives the order and passes on delivery information to the wholesaler for delivery. The customer pays the seller, the seller pays the wholesaler and the seller earns the profit from the difference between the sale price and the cost price. So, the product does not pass through the hands of the seller at any time, and goes directly from the wholesaler to the customer in the drop shipping model.
The traditional wholesale trading method implies that the seller orders a stock of the product from the wholesaler and maintains this stock to service customer demand. The physical possession of the product is the differentiating element. This clearly has a cost associated with it. Firstly, there are storage costs, which can be daunting if the product occupies a large amount of space. Secondly, there will be shipping costs from the wholesaler to the seller. Additionally, there is the cost of carrying unsold stock for a long period of time that eats into profits from sold goods.
So suddenly, drop shipping seems like a great idea. But drop shipping has its drawbacks too. In most cases, especially if you are a small business, you will pay the full MSRP, which will squeeze your profit margins. Additionally, you may have little or no information on the status of your order from the wholesaler, affecting customer service levels. Since you are essentially passing on the cost of carrying inventory on to the wholesaler, you will be charged for it. But, on the upside, you will only need to pay when you receive customer orders.
Reliability is an issue when drop shipping – as a seller, you will be able to control and track your product’s delivery much better if you hold inventory. In case of drop shipping orders, the seller relies on the wholesaler’s delivery system, which may be surprisingly lax. Finding a reliable wholesaler is a critical task on its own.
If you are worried about the label on the box that is shipped to the customer, you may be pleasantly surprised to find that many wholesalers will include your packing slips and labels when they ship to your customers.
A couple of hybrids exist that are useful to know about: Buying from local wholesalers and hiring fulfillment houses. An alternative to carrying inventory and drop shipping is to buy from nearby wholesalers when you receive an order and ship it out immediately. Amazon started this way, but it works best for small start up businesses. The other option is to make a deal with a fulfillment house. This is an intermediary service that offers to maintain small amounts of inventory, assemble, order fresh stock, pick, pull, pack and ship out your product in accordance with your instructions and using your packing materials. A fulfillment house may provide a shopping cart online and customer call center, depending on the scale of operations. They will charge a fee based on various factors – amount of storage capacity etc, and may charge a small percentage of commission on sales. This model may work best if you are a seller of high margin items.
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