Drop Shipping FAQs
The electronic revolution has opened some new and exciting possibilities for making money online. Drop shipping is one of those that that have caught the attention of many.
This is a relatively new concept, though, and a beginner needs to understand certain basics before plunging into online retailing.
The following are answers to some key questions that should help a beginner understand what drop shipping is all about.
What Is Drop Shipping?
Drop shipping is an arrangement where an online merchant accepts orders from a customer for certain products and then places an order to the manufacturer to supply these directly to the purchaser. Like in any retail trade, the online purchaser makes a profit that equals the difference between the manufacturers' price and retail price. In other words, an online merchant is the retailer and the manufacturer is the supplier. This kind of an online retailing solution creates a close relationship between the retailer and the supplier.
How Does Drop Shipping Work?
You create an Internet-shopping site with a shopping cart that accepts credit cards.
You identify a wholesaler or a merchant who is willing to drop ship the products for you.
You open an account with the drop-shipping merchant. This is called activated retailer account.
You promote the product(s) on your website with descriptions and images.
The customer buys from your online store and pays via credit card. The price will include shipping charges.
You email the order to the supplier and also provide the address of the customer.
The drop shipper dispatches the merchandise to the customer with your business name.
How Do You Benefit?
You do not stock the goods, pay for shipping charges, or take the bother to dispatch the merchandise. The distributor or the manufacturer does this for you.
How The Retailer Does Get To See The Supplier's Wholesale Price?
If you are an online retailer, you need to create an activated retailer account first. If that is done, the suppliers allow you access to the wholesale drop-shipping prices.
Can You Get An Idea Of The Suppliers' Prices Before Opening A Retailer Account?
As a rule, wholesale prices are confidential. You have access to prices only after you make a business agreement with the wholesaler.
What Are The Pros?
Firstly The Benefits
The most significant benefit is you do not need to stock merchandise. This way, you save on cost of inventory. Simply put, online retailing is home business for you and so the start-up cost is low.
You have a decisive cash flow cycle. The buyer pays you the full amount while placing order, while there is a time lag before you pay to the supplier. This way you have positive cash.
No need to reconcile product inventory as you are not holding any.
You can link up with multiple drop shippers selling an array of different productsa wonderful way to make your retail website a veritable shopping mall.
What Are The Cons?
Back-ordering is one notable risk of retail trading. The drop shipper may place an order with the wholesaler only to find out the stock is sold out. Back order means that a portion or whole of the order cannot be supplied on schedule for various reasons.
Drop-ship fees and charges can be a cause of concern. If you have agreed to pay the wholesaler a regular participation fee, you may be in for trouble. To avoid this trap pay the drop ship company only on specific orders.
The drop shipper may not take the services of a reputable shipping company. This will affect the delivery schedule.
Credibility of the drop ship company's can be a casualty. Many drop ship companies hop in with a great deal of clatter only to sink into oblivion without a warning.
If the drop ship company does not honor the warranty for refund, replace or repairs you can be in trouble. You need to do proper homework to convince yourself that the drop ship company is dependable on issues of warranty and guarantee.
What Is The Final Decision?
The final word is caution. There are dependable drop shippers, but there are fraud artists out there, too. Make certain that the e-vendor is genuine and dependable. If properly done, starting online retailing with drop shipping is an exciting home-based business venture.
Drop Shipping FAQs
By: Jane M Dawson