Wholesale drop shipping is a very popular form of product sourcing among online sellers. This is mainly because drop shipping allows you to pay only for the items you sell. Sounds like just what you need right?

Let's find out more about drop shippers so that you can decide...

What Makes Drop Shipping So Great, and So Different From Other Supplier Types?

The biggest difference is that you don't buy one large wholesale lot from them, and then sell it on to buyers. Instead, you just advertise one or several of their items, and wait for a buyer to purchase. When they do, you buy the item from the drop ship supplier and they send it to your customer. This might sound a little confusing, (and even a little bit unbelievable!) so let me walk you through a typical drop-ship transaction.

How Drop Shipping Works

You, the retailer, create an account with a drop ship supplier. You then list one, or as many of their items as you wish on your website or an auction site such as eBay. Most drop shippers will give you all the product information you need and even product photos to complement your listing.

Once a buyer purchases one of the items you have listed, you log on to your drop shipper's website and purchase the item. You pay the wholesale cost of the item using some of the money the buyer paid you (keeping the profit for yourself, of course!) and check out.

And that's all you need to do. Your drop-ship supplier will package and post the item to your buyer on your behalf.

The Pros of Using a Drop Shipper

• It virtually eliminates many of the risks of online retail! There is no investing hundreds or thousands of dollars in products that you aren't positive will sell.
• There are very few start-up costs. Because you only pay for items that you sell, and after the buyer has paid you, you don't really need any money to start up. Whereas using other supplier types can cost you anywhere from $100 to $2000+.
• You can offer a very deep product range. For example, you can offer your buyers 100 different pairs of shoes, and in every different size and color. This would be a very expensive feat (no pun intended) if you had to purchase all the stock upfront, but when you use a drop shipper, it's free! However, keep in mind that if you are using eBay, or another auction site, you need to pay a listing fee, regardless of whether or not you sell the item.
• You don't need to rent a storage unit or warehouse to store your items. More savings!

The Cons of Using a Drop Shipper

• Drop shipping has it's own extra costs. When you deal with a drop shipper, you are likely to be paying from $2-$5 more per item than you would if you were dealing with a light or bulk wholesaler. Some drop shippers will charge even more than this. These extra costs are necessary for the drop shipper to charge because they cover the cost of storing, handling and shipping the items out on your behalf. The drop shipper is also taking a big risk in holding large amounts of stock which may or may not sell.

Keep in mind, however, that while you are paying for the drop shipper to carry these costs, they are costs that you would need to cover yourself if you were using another supplier type. For example, if you were to use a wholesaler, you would need to rent a storage unit, pay for packaging supplies and carry the risk of the items not selling. Plus there is the cost of all your time involved in carrying out those tasks. Therefore, the $2-$5 drop-ship surcharge is really just basic business-running costs which you would otherwise incur anyway.

• Backorders. A backorder is a dirty-little word in the drop shipping business. A backorder occurs when you have a drop shipper's item listed for sale, a buyer purchases it, but your supplier unexpectedly runs out of stock and isn't able to fulfil the order! This can be a bit of a nightmare. You then need to explain to your buyer that there will be a delay in getting the item to them, and give them the time frame of the new delivery. It's likely that the buyer will not be impressed by this, and they may even pull out of the transaction altogether. It could even lead to negative feedback.

Most drop shippers will do all that they can to avoid backorders. They often have processes in place to help prevent them, such as notifications when stock levels for a particular item are getting low. Ask your drop shipper  what they can do for you in the event of a backorder. You can also buy a few items yourself and keep them on hand for emergencies.

• Bad customer service. This won't be an issue with most drop shippers out there, but sometimes they do stuff up by forgetting to ship items, or sending the wrong item to the wrong buyer (this results in two unsatisfied buyers!). Unfortunately, when your supplier stuffs up, buyers will blame you and you might have a customer-service nightmare on your hands. Although drop shipping frees up a lot of your time, it also takes some of the control out of your hands, which can be frustrating.

Make Drop Shipping Work For You

To get the most out of your drop shipper, avoid oversaturated markets such as designer jeans and mp3 players. While these are highly sought-after products, they are also very competitive. If you use a drop shipper to try and sell these items, you are very likely to struggle as, seeing you are essentially buying in single quantities, you won't be getting any bulk discounts. Unfortunately, buyers won't even look at your lisitings when they see your prices!

Instead of trying to sell these competitive products, go for a niche item. A niche item is an item that appeals to a much smaller market and has low competition. While you might not make 50 sales per day, your profit margins will be a lot higher, and you can gradually build up a long-term and (hopefully) more stable flow of buyers.

We have talked about niches a little already, but in case you need a reminder, a niche item could be anything from organic, fragrance- free hand creams, clothing for premature babies, or scrapbook-making kits.

If you find the right niche, you might just find yourself with a monopoly on the eBay market when you are the only one selling the item. This way, you won't have to worry about competing with big-time sellers who can afford to buy 1000+ items at a time, and therefore, get items super cheap.

What To Look For In a Drop Shipper

There are plenty of drop shippers out there, so finding one that stocks items you want to sell isn't usually an issue. Finding one who meets your needs and gives you everything you need to succeed in a drop shipping business, however, can be a bit tricky. When you are on your big hunt for a drop shipper to work with, make sure you ask the following questions:

1. What happens if my buyer receives a faulty or damaged item? Find out who pays for the return shipping, if the buyer should return the item directly to the supplier, or if they should send it to you first.
2. Are your products covered by a guarantee? What are the details of that guarantee?
3. How long does it take you to ship to my buyers after you receive my payment? 1 to 3 days is optimal. Ensure that you advise your buyers of the estimated shipping time before they buy from you.
4. Do you ship internationally? Find out if you can sell to buyers located in a different country to the drop shipper.
5. Do you offer tracking numbers on items shipped? Buyers really appreciate these. If you can get the drop shipper to email you a tracking number, you can then pass it on to your buyer.
6. How do I place orders? Most drop shippers will do this online via their website. This is the most efficient way for them and you to place and receive orders. It means you can process the payment quickly, and you can access their website 24/7.
7. I live outside of your country. Will you deal with international retailers? Some drop shippers will only accept retailers in their home country. This is because it can be complicated shipping items out to other countries. It takes longer and sometimes delays at customs can cause problems. However, if you are based in the US and are selling US buyers products from a Chinese drop shipper, you can be in for some excellent profits.
8. Do you offer product pictures, product descriptions, measurements and information? Most larger drop shippers will provide you with all of these, simply because they only make sales when you do, so they are more than happy to help.

These little extras can save you a lot of time in photographing items and writing descriptions for products. However, it's best to rewrite these a bit so you don't look exactly the same as other sellers also stocking the drop shipper's products.  

So, Is Drop Shipping Right For You?

A drop shipper is best suited to:

• New sellers with little money to invest in product sourcing
• Sellers with no storage space available
• Sellers who have pinpointed a niche market
• Sellers who want to offer a deep product range
• Seller who are happy to set up checks and balances to ensure their drop shipper is working hard!

Quick Recap:

1. Drop shippers are the solution for many newbie sellers who have no money to invest.
2. They stock, package and ship the item to your buyer on your behalf
3. When you use a drop shipper, you only need to pay for items that sell - meaning there is no risk in buying and storing items.
4. There are some drawbacks to drop shipping, including having to deal with backorders, paying a surcharge of around $2-$5 per item and missing out on bulk discounts.
5. The best way to use a drop shipper is to sell niche items. Avoid super popular items which might be tough to make money on.

Next week's newsletter does a 180-degree turn and looks at the supplier at the end of the product supply chain: Liquidators. Using liquidation suppliers is one of the best ways to source brand-name items for pennies on the dollar so this newsletter is essential reading for any savvy eBay seller.

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