Today I want to take away two things:
1. It's hard to make a lot of money with drop shipping and;
2. While drop shipping is a great way to get started, for most sellers, it should only be used as a short term stepping stone to eventually selling items bought at wholesale rates.
At a glance, drop shipping offers the perfect solution to making money online: It reduces risk, eliminates the need for start-up capital and reduces your work load. Sounds perfect, right? Well, as with all good things in life, drop shipping has it's drawbacks. The most painful drawback is that products that you drop ship are more expensive than if you bought the same items at wholesale.
Because suppliers need to process orders and ship items on your behalf, they need to add a drop shipping surcharge to cover the time and cost involved. Does this make them scammers? No! As you know yourself, it takes time to process orders and ship items away and just like you, suppliers can't work for free, so the drop shipping surcharge is necessary.
Surcharges can make it hard to make sales, especially on eBay where price is everything to a lot of buyers. For this reason, I believe that drop shipping is a great way to get started but for the most part, it should be seen as a way to earn some cash to buy wholesale lots of items that you can sell for a better profit.
I want to demonstrate the difference between drop ship prices and wholesale prices. I want you to see how much more you can profit when you invest in wholesale buying, rather than just drop shipping. To do so, I got in touch with a few SaleHoo suppliers and asked them the difference in pricing. I've listed a few examples below of products and their wholesale prices and their drop ship prices. Check it out:
From Enroute Global Exchange
Remote controlled helicopter
Drop ship price: $39.41
Wholesale price: $29.97
Additional income from wholesale buying: +$9.44
Drop ship price: $48.91
Wholesale price: $39.97
Additional income from wholesale buying: +$8.94
Radar laser detector
Drop ship price: $45.91
Wholesale price: $32.97
Additional income from wholesale buying: +$12.94
From eFashion Wholesale
Ladies Ralph Lauren polo shirt
Drop ship price: $45.00
Wholesale price: $36.00
Additional income from wholesale buying: +$9
Kenneth Cole New York handbag
Drop ship price: $69.00
Wholesale price: $45.50
Additional income from wholesale buying: +23.50
Calvin Klein travel toiletry bag
Drop ship price: $27
Wholesale price: $12.35
Additional income from wholesale buying: + $14.65
From Computer Gallery
Fallout 3: Game of the Year Edition
Drop ship price: $10.25
Wholesale price: $8.25
Additional income from wholesale buying: +$2
Sim City 4 Deluxe Edition
Drop ship price: 10.25
Wholesale price: $8.50
Additional income from wholesale buying: +$1.75
Civilization V: Game of the Year Edition
Drop ship price: $18.25
Wholesale price: $15.75
Additional income from wholesale buying: +$2.50
As you can see, drop shipping can really eat into your profit margins. That's why I don't recommend the drop shipping method as a long-term approach to eCommerce. If you really want to make big profits, I cannot stress the importance of buying wholesale lots!
Of course, there are scenarios when drop shipping does work. For one, if you sell on your own website such as SaleHoo Stores your prices don't need to be as competitive as when you sell on marketplaces like eBay. Second, when you sell a good range of wholesale products and you want to offer your buyers a little more variety. Drop shipping allows you to offer a wider range of products, without having to take on the risk of buying wholesale lots of items you want to test out first.
Do you source products by drop shipping or buying wholesale? Why?
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