Use dropshipping to build a successful online store

Drop Shipping Guide

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You are in good company!

 

And you have a lot of decisions to make (Again.  It’s never ending…hehe)

 

But these decisions are a little bit more fun than some of the others.

The first decision is, if you have your wish what would you sell?

 

Would you sell:

 

     1)      A “Real” product? (By that I mean, a product that has mass, or one that you might find in a retail store-like a widget, whatever that is….)

 

     2)      A service. (Legal service, mortgage brokering, web site design, etc….)

 

     3)      An INFORMATION based product. (Intellectual property, like a marketing system, a How-To manual, or a Guide to Successful Financial Investing, etc….)

 

You must examine the pros and Con’s of all of them. And believe me when I say that there are MANY MANY reasons to choose one over the other.  Lucky for us, that decision depends mainly on what you are comfortable with, how much time you have to devote to the product and how educated you want to become about your particular industry.

 

However, try to keep one thing in mind:

 

The Key to ANY on-line business is targeted customer traffic.  You need to find customers that want what you have to buy.  That’s why once you have decided to sell a particular product or service, whatever it is, you will invariably end up using a MARKETING SYSTEM to get it off and running. 

 

Because 80% of folks out there looking to start a business don’t have a product, their work is just a little harder because they now need to identify the product or service that they wish to sell.  There are some advantages, though.  Since your selling a product or service that has already been developed, chances are that the product that you are selling already has sales materials created for it.  That means no prototyping, no manufacturing, usually no inventory problems, and a ton of other advantages.  Just remember that marketing is the key.

 

If your thinking, “Eureka, I’ll just sell this product, buy a list of emails and email my web store address to the list”. Okay, Fine.

 

Remember the last time you went to the Mall?  Did you go into EVERY STORE?

 

No.

 

You went only to the stores that had products that interested you or that you needed.  You “Self-Qualified” yourself for the storeowners.  You were, by the nature of your choice to be present in that store, a Qualified Lead.  You do not go into Home Depot to get Cheese.  You do not go to the Acme to get Exercise Equipment.

 

So, you were sending your web site address to a few thousand e-mail addresses that didn’t self-qualify, right? Congratulations!

 

You are now a SPAMMER!

 

Now, I know that you have all heard the rumors about how ISP’s will ban you if they detect large amounts of non-specific emails sent by you.

 

This is no longer a Rumor.

 

It will happen so fast your head will spin and your business…. Well, lets just say that if the mall that you have a brick and mortar store in decided to close your front gate - you’d be in trouble.

 

True Story

Some chucklehead got a hold of my companies mail server IP and used our specific IP address to BOUNCE their Spam e-mails off of.  The Spam e-mails arrived at their address with OUR IP address attached to their origin.  We were banned within 48 hours.  Our ISP was sympathetic, but the receiving domains were not.  We couldn’t send email reliably for 3 weeks.  AOL Banned us, Verizon, Comcast, MSN, AT&T, Earthlink.

 

Hey, we do business with a lot of small companies that use AOL as their ISP.  When AOL got a bunch of Spam emails from OUR IP address, they pulled the plug on any e-mail that were sent from our server.  How would you like to have 33% of your customer base cut off from you?  It’s simply not worth it - Don’t Spam.

 

 

I chose to sell something that I had some knowledge about.  This a key concept.  It wasn’t because it was a matter of convenience. Heck NO!  If anything, if you go to Ebay and type in “Sword” in the search engine there, you have about 1000 different ones to choose from.  So there was already a ton of competition.

 

But I have become quite the collector over the years and have learned what makes one sword different from the other. 

 

 So before I put a single Item up on my website for sale, I wrote and wrote and typed and typed all about the different kinds of swords one might encounter in the marketplace. So when a potential customer comes looking for a sword, and they want to educate themselves about the different type, brands, metals, etc., I am there for them, ready with all the information that they need.

 

So when it comes time to buy a sword, I hope they choose me over the dude who is selling swords along with the AB-Roller and decorative soap.

 

It’s about being the expert in your field. Short of that, it’s having killer customer service, great prices and knowing how to reach your audience.

 

Lets get the most difficult part out of the way.  You need real products to sell, so let me give you a few ways to find them.

 

The Ideal on-line store where you are selling a product is one where you DO NOT HAVE ANY INVENTORY.

 

Most of us don’t have thousands of dollars to shell out on a pallet of products that we are not even sure are in demand.  Even if you do have that kind of money, I would caution you to not start by having a physical inventory of anything. It’s just far too risky. Until you have identified a viable marketplace and a product that the market responds to with regularity and predictability (read: never), tying up your cash by owning inventory is not smart thinking.  There is a better way.

 

DROP SHIPPING! (Cue Musical Flourish)

 

A Drop Shipper is a wholesale company or manufacturer of real products that only sell to real-legitimate business. (I.e. business that is registered with a Tax ID. Cost? About $65 depending on which state you live in).

 

What I mean when I say “ sell to legitimate business" is this:

 

You take an order from your On-line Store for a nice set of wind chimes, or maybe a power drill.  You sell your product for $70.00 plus shipping and handling.  You then contact your Drop Shipper or Drop Shippers (You can have as many as you want covering a wide range of product types).  You buy the product that you just sold On-line for $70.00 from your Drop Shipper for $40.00 and then the real magic happens.

 

The Drop Shipper SENDS THE PRODUCT DIRECTLY TO YOUR CUSTOMER!

 

Magic

 

The Drop Shipper also puts YOUR COMPANY NAME directly on the shipping box that they send to your customer.

 

How about that!

 

Drop Shipping is truly wonderful.  There are literally thousands of Drop Shippers out there with at last count around 500,000 different products.  The products range from Blood Pressure monitors, to Gift Baskets, to DVD players to Oriental Rugs to Patchwork Kitty Statues.  You can find just about any name brand, just about any category at just about any price point.

 

The Specifics

 

First, you need to become a real business in order to work with a Drop Shipper.  That means you go to your local courthouse and register a business name. Then go to your local IRS office and get a Tax ID number.  This whole process can cost as little a $25.00 to as much as $75.00.  This is, of course, for a sole proprietorship or partnership.  If you want to incorporate or form a LLC (Limited liability corporation) check out this site The Company Corporation. There are lots of advantages to being incorporated, including liability and asset protection, but it costs a bit more and takes more time to get started.

 

Once you have the all of the requisite certificates, you then contact a Drop Shipper and create a relationship with them.  They have you fill out an application, sign you up and send you a catalog of their products from which you then sell on your website.  Some Drop Shippers may also have a web site where you can go and download their images and sales material directly and put it right on your website.

 

The Drop Shipper sets the price that you pay....

 

You set the price that your customers pay...

 

The difference is your profit!

 

It’s really a great way to start an on-line business quickly.  You can even do it inside of a week or two if everything slips into place.

 

Having a relationship with a Drop Shipper is FREE! And if you look more than casually you can find some really unique products (meaning less competition for your store)

 

And, when the holidays roll around, your set for BIG DISCOUNT GIFT BUYING for the WHOLE FAMILY!

 

Now, the not so great news.

 

Every silver lining has a cloud and alas, Drop Shipping is no exception.  Don’t let this discourage you, however. Part of having your own business is learning how to strategically position your products and presents them in a unique and compelling manner. It’s not  ALL about the product!  Clever sales copy and educating your customers will go along way to differentiate your business from the riff raff.  Here is why your going to need to do that.

 

Things to be mindful of when it comes to having a Drop Ship supplied business:

 

Competition

There are more than a handful of people who have store on the Internet that use Drop Shippers as the sole supplier of their inventory.  It’s not uncommon to find several on-line retailers using the exact same picture, ad copy and descriptions in their stores.  It’s all because they are using the same Drop Shipper and infusing their business with just about as little creativity as they can manage.  So with all of these stores with similar products competing for the same customer base, what happens?

 

You Guessed it!

 

Price Wars!

 

Price wars are NOT the answer to  becoming a successful on-line business.  They do not increase your sales volume and they are about the oldest trick in the book.

 

Let me put it into perspective:

 

If cheapest always won, K-Mart or Wal-Mart would be only stores on the planet.

 

They are not.

 

So, you do need to consider your competition, but always remember to rely on your ability to educate your customers better than the other bozo that has the same item up for 12 cents less.  You will win every time.

 

What in blazes do I sell?

 

The $64,000 question. When I first evaluated the vast amount of products available for me to Drop Ship, I was overwhelmed.  Visions of Huge Virtual Shopping Malls with my name on the marquee swirled around in my head. And me, swaying in my hammock counting my money with MS Calculator…

 

WRONG!

 

Even though you will be tempted to sell absolutely everything-DON’T!

Know this now, you cannot compete with www.Amazon.com

 

Maybe you will someday, if the fates have blessed you and you have unlimited cash.  But if you don’t get blessed and have a fixed income - DON’T WORRY! You will not need to compete with Amazon in order to be successful!

 

The key for those of you that want to succeed in online retail is to SPECIALIZE!  Have a boutique mentality. Not Boutique as in Knick-Knack crap. But boutique as in NICHE Market.

 

If you have a personal passion for your Harley - Sell Harley Stuff!

 

Like NASCAR - SELL NASCAR STUFF!

 

Why? Not just because you like it, but also because you can TALK ABOUT IT!

 

You can’t win a price war and don’t have to if you can offer something to your potential customers that the other Hoo-Has can’t. VALUE - ADDED INFORMATION about the product you’re selling will set you apart from the noise and your customers will trust you for it!

 

For Example; Let's say your hobby is Astronomy.  You know all about the Heavens and Star Gazing in particular.  USE that knowledge to help your customers make informed buying decisions.  Show them how a Refractor telescope is superior for Astrophotography than a Reflector scope.  Organize a subcategory of your telescopes into a section called “Astrophotography Ready”.

 

Ask yourself, when was the last time you asked a sales clerk for advice?  Did they answer you? Did they answer you knowledgeably? If they did, did you feel more comfortable about the product? About you’re buying decision? About the store?  All of these feeling and emotions apply here in your Online Store!  There are hundreds of examples of e-stores that sell less than 30 products and they are doing really, really well!

 

I can’t say this enough - Specialize!

 

Sell what you know. Especially if it’s a product that you have researched and found it to be  “In-Demand”.  In addition to making your store stand out vs. the competition, it also helps you zero in on your target market!  And remember, the more focused your audience is, the better conversion rate you will have when it comes time for the shopper to become a buyer.

 

Stay with me on this - NICHE MARKETS!

 

Other things to consider

 

Drop Shippers sometimes charge you a drop-shipping fee on top of their normal shipping charges.  Usually, it’s a reasonable fee designed to help the Drop Shipper cover the cost of making the product-shipping box specific to your company.  Sometimes the fee is not reasonable.  Some Drop Shippers want to “encourage” their customer base to buy from them in bulk, so they charge unusually high Drop Ship fees in the hope that their customers will buy quantities and avoid the per item charge.  The truth is, they really don’t like being in the Drop Shipping business, but they hope that their customers will eventually be successful enough to convert.

 

Yeah Right!  Avoid these folks.

 

As far as a legitimate Drop Shipper fee goes, you just need to be aware of it when you factor in your own shipping costs.  You can either:

 

     A)     Absorb it out of your profits or

     B)     Pass it along to your customer

 

      Remember, Internet shoppers are used to paying for shipping.  As long as you are not ripping them off, there shouldn’t be a problem. But sometimes a product will sell regularly with a respectable margin but that item or wholesaler in particular charges a hefty Drop Ship fee.  It's high, but its not unreasonable.  Keep in mind that once you have that precious commodity, the paying customer, you need to do everything in your power to keep them happy and coming back.  Do that by offering them fair shipping even if it means you make less on one sale.  The goal is to have MULTIPLE sales from each customer.

 

Be Aware!

Some, and I use the term - Quote -“Drop Shippers”; will try to charge you a fee for the privilege of buying from them.  I will say this once- A REAL DROP SHIPPER will NOT charge you a fee to do business with them. Okay Fine. Does this mean that there are no real Drop Shippers that DO charge a fee?

 

No.

 

The reason I said that was to keep you from falling into the “SubWholsaler” trap. A Sub Wholesaler is simply a middleman who is offering products from a real wholesaler or Drop Shipper with small markups and then Drop shipping the real wholesale products to your customers while standing in the middle of it all.  3 problems with this

 

     1)      Your margins become super tight because of his mark-up.  You will be less competitive when it comes to your price point.

 

     2)      Chances are that the Sub Wholesaler is ALSO capturing your customer information and then marketing to him or her for their own business.

 

     3)      They most likely will want a fee from you to start to do business with them.

 

Use your judgment here.  At first, the Sub Wholesaler may appear to have a bunch of unique products that you can’t seem to find anywhere else.  Guess what?  Unless they have an exclusive arrangement with a manufacturer, you can almost certainly find the item from a REAL wholesaler.  There are some companies out there that have arrangements to get specific name brand or licensed products and they may charge a fee.  Just make sure to absolutely exhaust every single method of research before you decide that this wholesaler is the only game in town. Otherwise, if you want a home based business that generates full time cash, you probably want to avoid these folks until you have a good customer base and some cash coming in.