How To Make Money By Drop Shipping

For many people who are trying to figure out how to make money, drop shipping can appear to be the perfect solution. Drop shipping involves finding a buyer for a product which is sold by another company, collecting the money from the sale of the product, and paying the company to ship the product directly to your end buyer, making it appear that the product actually came from your business. 

However, while drop shipping can a  feasible method to make money, you must proceed with caution. Often times so-called drop shipping companies will attempt to lure you in to paying their membership fee with promises of big profits via drop shipping. What I have seen in many instances is that the retail price is inflated, and the wholesale price (ie. the price which you would pay) is about the same as the actual retail price.

Nonetheless, it really comes down to the product which you are drop shipping. Certain products, such as dietary supplements, are produced directly by the manufacturer, who themselves offer a drop shipping program.

Here are some of the common myths that I have often heard associated with drop shipping and drop shippers.

 

Myth No. 1: Drop shipping will result in huge profits with minimal work.

 

Running any business successfully requires a lot of work.  While it is true that drop shipping saves you from warehousing, inventorying, and packaging and shipping items, you still have a retail business to run. You have to make efforts to make your retail business known to the public.  Furthermore, profit margins are thinner because the drop ship supplier takes on much of the risk involved with warehousing the products.

 

Myth No. 2: All drop shippers will be more than happy to work with you.

 

Some drop shippers will work with anybody because they make a lot of  their money from the membership fees which they charge you. Furthermore, these drop shippers often do not offer a very good wholesale price. However, other drop shippers have minimum requirements. For example, you may be expected to have several thousand orders per month.

To eliminate tire kickers, some drop shippers charge a non-refundable application fee. After reviewing your application, they can decide that you will not be profitable enough to work with them, and keep your application fee.

 

Myth No. 3: It is not possible to make money with drop shipping.

 

While it is true that you will not realize as large a profit margin, some of the largest internet retailers use drop shippers exclusively to supply their products. If they were was not any money to be made, they would have abandoned this method.

One thing which many new entrepreneurs often fail to comprehend is that pricing is only a small part of business. If you merely focus on price, your business will never lift off since you will be completely ignoring the many facets of business which are required to success. Just think of a time at which you were willing to spend more money on something because of the customer service.

 

I once sold a product in a very competitive market. The product had an average 10-15% refund rate, and the average price was $29.95. I sold my product for $45 and had a refund 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 66.5% 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 No. 4: Drop shipping provides the magic solution.

 

Drop shipping is a specific service which fills a specific need. It is not an all in one solution for business. Before jumping in with both feet, you need to determine if your business will benefit from drop shipping, and put forth a well thought your plan to make it happen.

 

Like all avenues of how to make money, there are pros and cons to drop shipping. Make sure you understand how drop shipping will affect your business so that your business does not become mythical itself.

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