Drop Shipping Myths

The drop shipping industry's most common myths discussed and dispelled.

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drop ship tips, drop shipping myths, business drop shipping, dropship, dropshippers

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by Stuart Lisonbee

For a lot of people, drop shipping can seem like a perfect solution to start an internet business. While drop shipping has its place in the world, there have been many myths associated with it.

Myths are propagated by people who think they understand something, but don't. You may have heard many things, both good and bad, about drop shipping. But if you want to know the truth about something, you should go to somebody that actually works in the business, rather than someone who has little more than rumors and conjecture.

Having run a business using drop shippers as my product source, as well as having worked in the drop shipping industry, I have nearly 10 years of personal experience with drop shipping. Here are some of the common myths that I have often heard associated with drop shipping and drop shippers.

Myth #1: Drop shipping means big money for little work

Running a business is a lot of work! Sure drop shipping saves you from warehousing, inventorying, and packaging and shipping items. But in the end, you've still got a retail business to run. Furthermore, profit margins are thinner because the drop ship supplier takes on much of the risk involved with warehousing the products.

Myth #2: All drop shippers will be happy and willing to work with me

Some drop shippers will work with anybody. Those drop shippers will typically have a fee associated with them, or else their wholesale price is not as good. Other drop shippers have minimum requirements. For example, you may be expected to have several thousand orders per month.

Some drop shippers will even charge you a non-refundable application fee. If they decide you're not big enough to work with them, you lose your application fee.

Of the more than 50 suppliers Doba works with, several have application fees, a few have monthly fees, and several more only agreed to drop ship for us because we promised them high volume, something we can do thanks to the combined purchasing power of our membership. Fortunately, Doba does not pass along any application or monthly fees, and you never have minimum requirements.

Myth #3: It's impossible to make money with drop shippers

It is true that your profit margins will be thinner, but some of the internet's largest retailers use drop shippers exclusively as their product suppliers. If they weren't making money, then they wouldn't be some of the largest retailers on the internet.

Something that new entrepreneurs often fail to understand is that pricing is only one small part of business. If your focus is exclusively on price, then your business will never succeed because you'll be completely ignoring the many other parts of business that are required to succeed.

I once sold a product in a very competitive market. The product had an average 10-15% return rate, and the mean price was $19.95. I sold my product for $33 and had a return rate of 5%. My website also had a conversion rate about 2-3 times that of my competitors.

Why was I able to sell my product for 65% more than my competitors, maintain a higher conversion rate, and yet still experience far fewer returns? Very simply, I chose to focus on all aspects of my business, rather than just one or two like so many of my competitors were doing.

Myth #4: Drop shipping is the magic solution

Drop shipping is a specific service that fills a specific need. It is not a cure-all solution for business. Before jumping in, you should be sure that your business will benefit from drop shipping, and you should have a well laid out plan for making that happen.

Like all things, there are pros and cons to drop shipping. Make sure you understand how drop shipping will affect your business so your business doesn't end up a myth itself.

Drop Shipping Increases Profits

You would like to increase your income by selling other peoples` products but you just don`t have the money to stock inventory.

On the other hand, perhaps you have lots of your own product and would like to increase your sales, but you don`t have a lot of money for advertising.

The solution to both problems may lie in drop shipping.

1. Sell Products You Don`t Own

You would like to sell a variety of products but you don`t have very much money. Don`t worry! Your cus...

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DROP SHIP, DROP SHIPPING, PROFITS

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You would like to increase your income by selling other peoples` products but you just don`t have the money to stock inventory.

On the other hand, perhaps you have lots of your own product and would like to increase your sales, but you don`t have a lot of money for advertising.

The solution to both problems may lie in drop shipping.

1. Sell Products You Don`t Own

You would like to sell a variety of products but you don`t have very much money. Don`t worry! Your customers will supply you with the necessary capital. You don`t have to stock inventory. You can drop ship orders.

For example, you receive a credit card order for a product retailing for one hundred dollars plus five dollars shipping. You now turn around and fax (or e-mail or phone) your order to your dropship supplier. You pay the fifty dollar wholesale product cost plus five dollars shipping using your own credit card.

Your dropship supplier now ships the order to your customer. With no investment in inventory, your gross profit equals fifty dollars.

2. Sell Products You Do Own

Would you like more sales of your own products? Consider drop shipping your products for other dealers.

As an example, you may have a product that sells for one hundred dollars plus shipping. Every time you sell that product yourself, you will have a sale of one hundred dollars. However, how many one hundred dollar sales can you make personally?

Now consider the situation where you offer your dealers a wholesale price of fifty dollars. You could have hundreds or thousands of persons selling for you.

It is true that each product sale now only brings you only fifty dollars in sales. However, these are sales that you wouldn`t otherwise have. What would it cost you to obtain these sales through traditional advertising channels? Would your advertising even bring you the desired results?

Keep in mind that with this drop shipping arrangement, you pay only for results. When a dealer retails your product for one hundred dollars, he is really receiving a fifty dollar profit for selling your product; you could view it as a sales commission. You receive only fifty dollars per product sale but sell way more than without drop shipping. You ship directly to the customer for your dealer.

So, whether you sell other peoples` products or your own, drop shipping can increase your sales, preserve capital, and maximize business profits.

Drop Shipping Made Easy

Drop shipping can be a very effective and simple way to get involved in ecommerce. Many established online merchants are now turning to drop shipping as a method for minimizing stock on hand, decreasing overall shipping costs and reducing delivery times to customers.

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dropshippers, wholesale products, doba.com, doba free trial, drop shippers, wholesale, drop shipping, internet marketing, sell

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What is Drop Shipping?

Drop shipping can be a very effective and simple way to get involved in ecommerce. Many established online merchants are now turning to drop shipping as a method for minimizing stock on hand, decreasing overall shipping costs.

Drop shipping allows web site owners to send single/low quantity unit orders gathered on their web sites to manufacturers, or major warehouses, who in turn "drop ship" the items directly to the customers..

What are the Advantages of Drop Shipping?

- Because a warehousing company can buy in huge volumes, they will also be able to offer you the best prices on products and shipping, which will return a greater profit to you.

- There's no capital investment and no need to invest in inventory.

- Using drop shipping allows you great flexibility in terms of product range - promote a dozen items or promote a thousand!

- Instead of worrying about inventory and delivery, you get to focus on listening to the market and discovering the products your visitors you want.

What Do I Need to Know to Select a Drop Shipper?

Many companies will have an interest in teaming up with you in a drop shipping arrangement as it's an easy way for them to generate extra revenue, but there's a number of points to consider and things to look out for:

Pricing Points

Don't accept that the first drop shipper you come across unless they are willing to provide you a "Best Price Guarantee."

Drop Ship Fees and Charges

Some companies will have a handling fee over and above freight costs - it's important to know all the costs involved so you can calculate your profit margins accurately.

Shipping

Are they using small private shipping companies or UPS? Will they ship internationally? You'll want to be sure that their shipping methods will ensure your clients recieve their orders in one piece.

Also, keep in mind that you may need a specific type of shopping cart in order to handle drop shipping. Many shopping carts only allow for one "ship from" zip code in the configuration for freight calculations. If you are dealing with a number of drop-shippers you may have dozens of point-of-origin zip codes - and this can be a real headache if freight is based on distance.

Accounts

Will the drop shipping company automatically debit your credit card on each order you submit, or can you get monthly payment terms? When you are starting out with a company, they are unlikely to offer credit, but it's good to check if this will be possible once you've established credibility.

Support, Returns, and Refunds

The last thing you'll want is to be caught up in a nasty situation where you have a number of returns - and have to cover the bill. Ask the drop shipping company about their return policy, what kind of support they'll offer you for their products and about any guarantees associated with their products - and get it in writing.

Credibility

How long has the company been around for? Do they respond to your requests for information rapidly and professionally? Young companies have the habit of going belly up quickly, or growing too rapidly and as a consequence basic good customer service suffers.

How Do I Get Started in Drop Shipping?

It's fairly simple:

- Set up a web site that includes a Shopping Cart and credit card processing facilities, or setup an eBay or other auction account.

- Find suppliers of products you wish to sell that incorporate drop shipping as a business method.

- Open an account with them.

- Gather content and images relating to the products you've chosen, incorporate them on your site and shopping cart.

- Collect the order and payment from your site.

- Provide the supplier with the customer details.

- The supplier then bills you at the special price you have agreed upon; fulfills the order and sends it to your client - in most cases with labels referring to your business/web site instead of the company.

To Your Drop Shipping Success!

Freight and Shipping

Freight is transporting goods by water, air or sea, and shipping is the most commonly used mode of transport for carrying freight from one place to another. The shipping industry forms 90% of world trade; nearly 50,000 ships that make up the international trading fleet are technically sophisticated. The cost of a new ship varies between US $100 million to nearly $200 million.

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Freights, Freight and Shipping, Freight Forwarding, Freight Brokers

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Freight is transporting goods by water, air or sea, and shipping is the most commonly used mode of transport for carrying freight from one place to another. The shipping industry forms 90% of world trade; nearly 50,000 ships that make up the international trading fleet are technically sophisticated. The cost of a new ship varies between US $100 million to nearly $200 million.

Freight is classified as incoming freight and outgoing freight. In most cases, in regards to incoming freight, the international goods arrive by water or air. Domestic shipments find en route either by roads or by air. In case of the outgoing freights service providers basically send the goods either by sea or by road. Only fragile and perishable items are transported by air.

Freights is often moved by ship. Most of the imports and exports of a nation are solely dependent on the shipping industry. For an economy to flourish, the shipping industry plays a vital role in not only transporting produce to international markets but also bringing raw materials back into the nation. The industry is classified as intrinsically global. The shipping industry has a unique business set-up: a ship can be owned by someone, managed by another, registered by a third country and manned by people of an entirely different nation. Because of its international characteristics, its safe operation is regulated by United Nations agencies. Officers in the ships from different nations are trained in accordance to the global standards.

It is imperative that an individual makes the effort to identify the best service provider while shipping goods from one place to another. Documents such as bill of landing, signature on the receipt document, proper addresses in the papers, and contracts should be made before getting into a deal with the company, so that the goods reach their destination intact.