Drop Shipping – An Affiliate Marketing Alternative

Drop Shipping – Hassle-Free Retail

I’ve mentioned before that the best ways to make money online involve one of two methods – direct retail, where you actually sell physical products and ship them yourself, or affiliate marketing, where you simply “pre-sell” your customers on a product before sending them to the vendor’s page where they can buy it.  While direct retail certainly has it’s advantages, it can be a hassle to hold inventory, pack merchandise, ship merchandise, and deal with the occasional refund.  That’s why most people who want to work online from home prefer affiliate marketing.  Drop shipping, on the other hand, gives you a little of both, and can make it cost-effective for even the smallest of businesses to compete at retail, without most of the hassles that come with running your own online store.

drop shippingWith drop shipping, someone else deals with most of the problems, including the packing and shipping of products.  All you have to do is sell them, and then make arrangements for the manufacturer or wholesaler to provide the product to your customers on your behalf.  It’s a bit more complicated than that, but drop shipping represents a nice midpoint between affiliate marketing, which is completely hands-off, and direct retail, where you’re the seller and you’re responsible for everything.

Drop Shipping Overview

With traditional wholesaling, you often have to purchase a minimum quantity of a product in order to buy wholesale.  This becomes quite a problem if you want to stock a lot of inventory consisting of a number of different items.  Drop shipping, on the other hand, allows you to maintain a large online store consisting of tens, hundreds, or even thousands of items, without having to keep a single item in stock.  How does drop shipping work?  Unlike most wholesalers, there are a few manufacturers and a number of wholesalers, known as drop shipping companies, who are willing to ship their products in quantities as small as one.  When your customer places an order to buy a widget from your Website, you place the order for that exact item from the drop shipping company, and they ship it directly to your customer.  In most cases, they will even package the item to appear as though it came from your company, rather than from them.

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All you need to do to make money is to list the item for sale on your Website for a price that is sufficiently higher than the price you will pay the drop shipping company, and the difference is your profit.  Most reputable drop shipping companies take pride in using good packaging, maintaining consistent inventory, and shipping promptly.  After all, if they fail to provide good service, they’ll lose customers, so it’s important for them to ensure that the products are delivered promptly and safely.

drop shippingOne of the nice things about drop shipping is that it can carry a larger profit margin on retail goods than being an affiliate for a retailer.  Amazon, for example, has a great affiliate program, but commissions range from 4%-8%.  By selling directly via drop shipping, you should be able to enjoy larger margins than that, making it a potentially lucrative venture.  While drop shipping can be a great way to make money with retail sales without stocking inventory, there can be some drawbacks, and you need to be aware of those.  One of those drawbacks involves price; you are going to pay a higher per-unit cost when purchasing items from a drop shipping company than you will when buying from a traditional wholesaler.  That’s because there are extra costs involved on the company’s end involving the extra packaging and shipping that necessarily comes with shipping units in smaller quantities.

Another drawback comes in the form of inventory management.  Most drop shipping companies are very good about keeping their customers informed about inventory status, but you want to be sure that when your customer orders a product that it’s actually available for shipping and not out of stock.  Keeping up with this, particularly if you have a storefront consisting of hundreds or thousands of items, can be a bit of trouble.  You will also have to deal with the occasional defective product or a return for a refund, as this is just part of being associated with the retail business.

Drop shipping can be a great way to make money online if you are running your own Website, provided that you can draw sufficient traffic to your store.  If you plan to sell via some other outlet, you’ll likely find that drop shipping is not particularly cost-effective.   I’ve seen many ebooks and marketing courses over the years that talk about how you can make “big money” by using drop shipping to sell products on eBay.  This used to work well, but it no longer works at all.  Many of the drop shipping companies, particularly those located in China, now have eBay seller accounts themselves and are selling directly to the public on the eBay site.  It is absolutely impossible for you to compete directly with drop shipping companies on either eBay or Amazon, as their costs are dramatically lower than yours.

competitonInstead, you want to sell products to the public via your own Website, where you can decide what prices to charge and where you won’t face direct competition.   You might be wondering how you can make money this way if these products are still available on eBay and the answer is simple – a lot of people hate buying products on eBay.  There are many reasons; most of them are because they bought something once and it arrived in some condition that was other than described and they had problems with the seller when it came time to return it.  These people are going to be your best customers, provided that you offer a good product and offer decent service and communication to go with it.

Drop Shipping Summary

There are hundreds, if not thousands, of drop shipping companies in the United States, Europe and China, and there are far too many of them to list here.  A simple Web search for “drop shipper” will probably produce enough results to let you find some interesting sources.  Keep in mind that even if you decide to go with drop shipping as a business model, you’ll still need to build a Website and find a way to get visitors to come to your Website.  For that, particularly if you’re new to making money online, I recommend the affiliate marketing training program called Wealthy Affiliate.  You’ll learn the basics in a simple, straightforward fashion.  You can even join Wealthy Affiliate for free.

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