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Start a Business with Drop Shipping, Part 3

Written by Russell Cragun on October 9, 2014 in How to Sell Products Online
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Many people who are considering either a full-time or part-time career in the drop ship industry may have questions about this business platform. After all, many people wonder if it can be as lucrative as the hype suggests. Although there is little up-front risk with a drop shipping business, this business endeavor, like any other, has its challenges. It's important for people to learn the basics about this business model to see if it is right for them.

 

Drop Shipping: A Basic Overview

Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead offers a third-party supplier's... Upon customer order, the retailer transfers that order and shipment details back to the product supplier, which then ships the goods directly to the customer. For the drop shipper, this is a low-risk model because there is no paying for merchandise up front and stocking it. This means, if it does not sell, the drop shipper is not out any investment and does not have to contend with the overstocked merchandise.

Instead, the drop ship business maintains their website, their virtual storefront, selects products to market (after establishing an agreement with the supplier or manufacturer of the products), and handles customer service. The arrangement has led to considerable success for many ecommerce sites. Even so, the business will not be profitable of the drop shipper cannot effectively market and sell the items. In essence, while the drop shipper doesn't have to risk investing in products that may not sell, there is also no guarantee that the drop shipper will sell successfully nevertheless. Drop shippers that are successful work diligently to build their storefront's brand and to market their products.

 

The Drop Shipper's To-Do List

While the drop shipping model seems simple enough, it involves complexities that require a lot of attention on the part of the business operator. First, it's essential to realize that drop shipping is not a 'get-rich-quick' scheme. The operator still has to work hard to sell merchandise. The only difference is that the drop shipper doesn't have to house the merchandise or ship it. They still have to insure that their partner (the supplier) has the stated inventory in stock and ships it on time. They still have to deal with the same headaches that other retailers deal with--the item was broken when it arrived, it is not the item described, it never arrived to the buyer's address, and so forth. For any retail business, customer service is a cornerstone of the operation.

Before going into drop shipping, decide if you are comfortable with the notion that you are not in total control of the supply chain. You have to rely on your supplier. Also, you'll need to take time to choose product lines to promote and establish relationships with suppliers. Not every supplier will be willing to take on a newbie. Your best option is to join a drop shipping network that will support you as you grow and help connect you to suppliers that are right for you.

Drop shipping isn't a scheme or a fail-proof business model. Yet it is a viable business model as many people have discovered. Is it right for you? Consider its pros and cons. It might be just the business you're looking to launch.

This is the final part in a three part series on starting a business with drop shipping.

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