Chances are, if you have an online business, you have heard the term – drop shipping or dropshipping. So what is drop shipping and what can it do for you. Drop Shipping is a quite simple process of selling products without the hassle of carrying inventory or shipping the items yourself. It can be mistaken for an affiliate program, but is quite different. This article will tell you all about Drop Shipping.
In a nutshell, affiliate marketing is a referral service in which you use specialized made banners, buttons and website links to attract customers to a specific site. Affiliate programs will then pay you commission for either someone clicking on your specialized link or by a customer making a purchase. You are simple a referral service.
Dropshipping is very different. Dropshipping is for those with their own website and are looking for products to sell on their site. Drop ship programs allow you to sell as little or as many products as you would like without the worry of carrying inventory, hiring help, physically shipping out products or warehouse storage.
Here is a basic guide to starting your own business using drop ship programs.
Starting with your own website, you should begin be deciding what and how much you want to sell. After you have those details worked out, you should begin to search for drop ship partners that carry the inventory you would like to sell. This can be a little hard, but well worth it.
Drop ship programs may charge a monthly or yearly free and some offer their services for free. Free does not always mean better. Weigh the cons and pros before completely dismissing them. Do your homework whether it is a free service or not. Read the contract agreement BEFORE you sign up with a program. All drop ship programs are different and you don’t want to get involved in something that does not suit your needs.
There are certain things you should look for when choosing drop ship programs.
• How long the drop ship program has been around? – be sure they are a reputable company and they are experienced in drop shipping.
• Fees – Make sure to you know exactly what the fees are if any. – You don’t want to get hit with hidden fees later.
• Do they allow you to set your own prices? – This definitely helps, especially when it comes to shipping rates. (We will talk more about shipping later on)
• Do they give you professional product pictures and descriptions to use on your own site? This is extremely important to your business. If you can not supply great pictures for customers to see, they will not want to buy from you. Professionalism is key.
• Do they add your company name when shipping out to customers? This is key in getting return business and more reputable. If they item is being to a person other than the person who bought the item, than seeing YOUR company name is a great way to get a new customer.
• Do they display inventory so that you know what is available for your customers? Nothing will upset a customer more than picking the perfect item to then find out, it is out stock after they have paid for it.
• Provide tracking information to pass along to your customers
Other great benefits that a dropship company may offer, but not mandatory are:
• Allow you to start an affiliate program with their products
• Will add your business cards or other goodies into your shipped packages
• Have special sales for its drop shippers
• They provide thumbnails AND large pictures
Now that you know what drop shipping is, its time to move on to getting it working for you.
You have now established a product line, drop ship partnerships and a website. Let’s put it all together.
You should already have a website built; now let’s add your products. As we established earlier, a good DS company should provide you with professional pictures and descriptions. If you would like to use your own, be sure that grammar, punctuation and spelling is correct. But most importantly be descriptive AND informative. Also be sure that the DS company allows you to write your own description.
Navigating your site should be easy, so group similar products together. Try not to add too many items with large pictures on one page. It can make the page load slowly.
If you were lucky enough to find a program that gives you both thumbnail and large pictures, it’s an advantage. That makes your product pages easier to build and looks more professional. If they do not offer thumbnails AND large pictures, don’t worry. There are plenty of services that can create thumbnails for you. Look into photo gallery software.
Now let’s set the price. If strict pricing doesn’t allow you to set your own pricing, then go ahead and use the prices DS program has already established. If they do allow price changes, this can be beneficial, especially when it comes to shipping.
Cynthia Recommends – I recommend using either one program that already has established pricing OR using ones that allow you to set your own prices, NOT BOTH. It can get very confusing for you.
If the DS program doesn’t allow you to change prices, than chances are they do not allow you to change shipping rates either. As I said before, that is completely OK. However, this is best for those who wish to use this one and only particular DS program. If you choose to use several programs, shipping rates can differ and can become an issue. It’s best to use programs that allow you to set your own prices for this very reason.
Cynthia Recommends – I recommend setting flat shipping rates and adjusting your retail cost based on the shipping rates.
Adjusting pricing is a great way to set flat rates for shipping instead of having a different shipping price for item. If you site allows you to set a different shipping price for every item with minimal effort than go for it. For those who do not have that luxury, here is your solution.
Set flat rates and adjust your retail cost based on shipping fee. For example, you have a bicycle you want sell. Here is how it would break down:
Drop ship/Wholesale Cost – $35.00 (That is the price you would pay for the bike)
Drop Ship Shipping Price is $20.00 (What the drop ship companies charges you to ship the bike to your customer)
MSRP – $50.00 (Manufactured Suggested Retail Price – how much they think YOU should sell the bike for)
If you have a flat fee of $10 shipping for every item shipped through ground shipping, you would then adjust the retail price to $60 (instead of the MSRP of $50) and the shipping can remain at $10. You are still making the same amount of profit with the shipping price at a flat rate.
Why is this beneficial? Customers like when shipping costs are lower.
You do not have to have a different shipping price for EVERY item. Every item that you ship out ground shipping can cost $10, no matter what the drop ship company charges.
Of course you can make the flat shipping rates whatever you choose. You can make it free and add the shipping charge to the retail price. So in the bike example, the bike would cost $70 and free shipping.
Customer Service is another big difference between affiliate programs and using dropshipping services. With affiliate programs, once the customer clicks on your specialized link as is taken to the designated website, your job is done. You do not need to do anything else. Drop shipping requires that you handle your own customer service and payments.
Once a customer orders and makes a payment on your site, it is your responbility to then visit the site of your drop ship supplier to purchase and have the item shipped to the CORRECT address. Here is a diagram explaining the process.
What you offer is what brings them in. Your customer service is what keeps them coming back. So you will be responsible for whatever happens, whether it is your fault or not. That can be the downside to the drop ship business. If they drop the ball, you still need to clean up the mess. That is why it is super important to know who you are dealing with and they are experienced with dropshipping.
So you have the site, the products, the price and the shipping! You are all ready to start making a profit. Here are few extra tips to being the best drop shipper you can be.
Drop ship supply companies are behind the scenes and should not have direct contact with your customer.
There are several reasons for this:
• Your customer may begin to deal directly with the drop shipper (if they retail as well) as opposed to you. This results in lost sales
• Drop ship companies should not represent your company. You should be responsible for your company’s reputation and customer service. A customer will not become a repeat customer if they do not receive proper customer service. Drop ship can assure the customer service you can.
• Customers may feel cheated if they deal with someone other than your company’s employees. Most consumers do not understand online business or drop shipping. DO NOT make the mistake of assuming that customers know the behind the scenes of online businesses. ESPECIALLY drop ship programs.
Offer a variety of products at various price points. This can come from using multiple drop ship programs.
Keep track of which items come from which drop ship company by using their sku codes or items #s. Make a spreadsheet that tells you what item #s and sku numbers belong to each drop ship company.
Keep invoices from your customers and invoices paid to your suppliers. This helps with taxes.
Read up on tax laws. Laws vary upon the state you live in.
99% of legitimate drop shippers require that you have a resale license and will require one in order to sign up. They are required to gather this information, because they are LEGAL drop shippers.
If you would like to see what you are selling, order an item for yourself to see the quality of the product you are putting your name on.
Keep track of the DS inventory to be sure you are not selling what is not available.