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Wholesale Clearance as a Dropshipping Strategy

Most dropshippers concentrate on driving the sales of their chosen e-commerce products, because narrow profit margins necessitate that they sell more than the brick and mortar retailers. Successful dropshippers have already worked out which products sell best in their chosen niche, and they've established stable relationships with their regular suppliers.

Take these two sets of facts together and you have a recipe for a great idea to make money: wholesale clearance sales. Wait a minute…cleara—what? Okay, technically as a dropshipper, you don't have any old stocks to clear out to make way for the new…but your suppliers do.

Periodically, all wholesalers endeavor to get rid of slow-moving items in order to make way for more popular items, and they're usually glad to work with dropshippers to do it. All it takes is for the two of you to work out favorable terms so that you can offer your online retail customers a chance to make a killing on whatever you're regularly selling…for a limited time only!

Why would you want to offer your retail customers substantial discounts on items they already buy from you? The answer is simple: buyer psychology. It's something you need to beef up on if you want to make a serious go at your dropshipping business.

The Why of the Buy

People—including you and me, in all probability--find sales and discounts irresistible. Nothing beats the level of satisfaction you feel after you have snagged a great buy. In fact, people spend more than 45 percent of their online shopping time browsing for sales, deals, and coupons. That's more than they do on any other shopping activity.

Perhaps most interestingly, sale shoppers actually spend more money than non-sale shoppers. There are several reasons behind this behavior.

Afraid to Miss Out

If you're not familiar with the expression "dog in the manger," it just so happens to be one of the basic components of sale-buying behavior. Essentially, when an online item is heavily discounted for a limited period, you're sure that it will be snapped up by someone else if you don't make a move, so you buy it. You're afraid that you will regret not buying it when you had a chance… even if you have no actual use or desire for that item.

Perceived Worth

When we know that a bead necklace is regularly priced at $10 and it is offered at $1, you don't stop to think about what the necklace is actually worth to you. After all, sellers are bound to jack up the price to make a profit, so that the retail price is way above the market value of the item.

It may actually be just $1, but what really sticks to the mind is that it's worth $10 because that's the retail price. And because the sale price seems to be so low, you will buy the item even if you don't really need it.

Perceived Savings

Sales redirect the focus on perceived savings rather than on the actual cash that goes out. For example, with the bead necklace that was marked down from $10 to $1, the focus is on the $9 that was saved rather than the $1 that was spent.

The Profit Potential

As a dropshipper, price is all-important because it will dictate the money you make at the end of the day. When you offer an item on a wholesale basis, the price of the individual items has to come out lower than the retail price.

If, as we mentioned earlier, your discount wholesalers are clearing out stocks, you can time your sale to coincide. that way you can have your own wholesale clearance offering.

The online market for wholesale clearance sales is significant, and there isn't much competition for it, at least not on eBay, according to wholesaler SaleHoo Market Research Lab.

profit potential

The products being sold by these sellers were from the following categories:

SRL - product categories

With total revenues:

SRL - product performance

This does not mean that you should drop everything and shift to these products. These are merely what were being offered between May 30 and July 1. If you already have a customer base and niche market, you should stick to that and develop it further with the occasional trade clearance.

The Costco Story

A good example of focused wholesaling is that of Costco, which has fine-tuned its pricing strategy to not only encourage customers to buy more things in higher quantities but to earn and retain their loyalty because of their satisfaction in their buying experience.

While Costco is not an online store, it has streamlined its operations to eliminate buyer confusion and to encourage bulk buying. At the same time, it deliberately manipulates buyers by offering high-priced items at huge discounts for a limited period. The strategists behind Costco know how to play that fiddle extremely well, and there is no reason why dropshippers cannot duplicate these strategies.

Rules of Thumb

When considering a wholesale clearance sale offering, keep in mind that you need to be no-frills about it, so don't offer anything that you may have to provide considerable after-sales service for. You will want to wholesale items that your customers may not easily find elsewhere, but which are still small enough to ship easily.

In a previous post we talked about the profit potential of wholesale craft supplies. If the wholesale services you regularly avail of are amenable to accommodating clearance sale prices for one or two of these supplies by making further price reductions, you can be sure that your regular customers will jump at the chance to save even more money even if they don't actually need it.

You will probably make more in one sale than you would in a month; at the very least it's a nearly effortless way to make a quick buck.

There is no harm in trying it out at any rate. The worst thing that can happen is that your clients will not be interested in purchasing and you will not be any worse off. That's the beauty of being a dropshipper.

Want to learn more about buying and selling wholesale? Check out this quick lesson in the SaleHoo Training Center.

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