Drop shipping is a method of product fulfillment where the seller never takes ownership or physical possession of the product they are selling, and thus does not have deal with the expense and headaches of purchasing and storing inventory, or having to package and ship the goods to customers when the product is sold.
When a person buys product from your website or your online store and sends you money for the product, the seller (you) places an order for the product with the manufacturer or distributor and they ship the product to your customer.
This allows you to focus your attention and investment on marketing your eCommerce store and finding new products to sell to grow sales.
Here is how drop shipping works. The price you show on your website or online store for the product is the marked-up price, which is basically the price you are buying the product for from the seller, plus your profit margin. Shipping may be included in the sales price or my be added to the sales price.
Once the buyer purchases the product from your ecommerce store, you send the seller the money they are selling the product to you for, and you keep the difference from the selling price minus any fees as your profit.
How much you make on the sale is determined by your mark up. Your mark up is the percentage of profit you can charge. The average mark up depends on the type of product you are selling.
The mark up can be as little as 2% or as large as 40% or more. Before you decide what to charge, talk to the seller to see if they have a recommended MSRP (manufactures suggested retail price), or see what other online sellers are charging for the same product.
How to Find Drop Ship Suppliers?
There are several drop shipping suppliers and wholesalers that offer drop ship programs to internet marketers and small business owners. Search “drop ship suppliers” in Google, and you will find many product suppliers and wholesalers that offer drop ship programs in almost every product category.
Once you sign up with the drop ship company they will send you a list of products available for drop shipping.
Shopify provides their store owners a marketplace of sellers in most categories, and store owners simply choose and market the products on their online stores.
If you, however, find a product that you like and want to sell, but the seller doesn’t have a drop ship program and only sells bulk, you can request if they would be willing to sell and ship the product to the end buyer for you.
This method is generally recommended for experienced drop shippers who can show the seller their sales, and how this could be a lucrative arrangement for them.
Popular Drop Ship Sellers
There are several popular drop shipping merchants you can partner with. Most will simply provide products or offer a marketplace for you to source products to sell. You have to set up your ecommerce store yourself.
Popular Drop Shipping Merchants you can partner with:
- Worldwide Brands
Shopify and Doba are two popular drop shipping platforms that aim to be the one-stop shop for drop shippers, offering thousands of products ready to be sold on your ecommerce site. Shopify has been in business since 2006, and is the leading drop ship merchant.
Shopify distinguishes itself from the competition by also offering the following services and products:
- a free training course to learn how to make money dropshipping.
- free and premium paid themes and storefronts.
- you can purchase a domain name for your commerce store.
- you can even purchase web hosting.
What if you are new to Drop Shipping?
If you are new to drop shipping, there are online programs and many websites that offer free content on what drop shipping is, how this online fulfillment method works and how you make money with drop shipping.
Shopify is one of the best resources for people wanting to learn about drop shipping, and aims to be a one-stop shop.
They offer online training materials and videos so you can learn what drop shipping is and how it works. They offer three platforms for individuals and small businesses to set up and run a drop shipping business.
You can purchase an eCommerce storefront, software, purchase a domain name for your web store and even purchase web hosting.
Benefits of Running a Drop Shipping Ecommerce Site?
Owning a brick and mortar store can cost several thousands of dollars or more in initial investment to rent a store, set up shelving, buy inventory and hire employees.
Running a drop shipping store requires a fraction of these start up costs. The initial investment is generally $29 to $69 per month to get started for an individual or small business.
Owning a physical business requires thousands of dollars in inventory, while a drop shipping ecommerce store can require zero cost for inventory, since the wholesaler owns the inventory and you are buying it only after your customer buys the product from your webstore.
With a regular store, you have to spend money to carry inventory, monitor and count your inventory to determine if you need to reorder or determine if employees are stealing from you.
With an ecommerce store you have none of these worries, since you only buy individual product from the wholesaler when a customer buys from you, and the wholesaler packs and ships the product to the end user for you.
You may have to deal with returns and refunds if the customer returns the product.
This frees your time and money for investing in marketing your business to grow sales.
Most drop shipping companies provide inventory software, so you can monitor sales, profit and profit margins (sale price minus cost and fees) and returns in an efficient and real-time manner.
14-day Free Trial
Before you decide if drop shipping is for you, or which drop shipping company you should partner with, Shopify and Doba offer a 14-day free trial so you take the program on test drive, to see if the products they offer are the ones you want to sell, offer services and training that helps you really learn how to make money drop shipping, and allow you to partner with other drop shippers who may offer the products you want to sell.