Drop Shipping, Five Rules to Profit By:

What is "drop shipping?" If you've heard anything about drop shipping at all, you might think it is the answer to every internet entrepreneur's dream. In a nutshell, you market and sell a product online at a price you choose. After your customer purchases the item, and you receive payment for it, you place an order for the product you just sold with a "drop-shipper." The drop shipper charges you a wholesale price and ships the product directly to your customer. You pocket the difference between the wholesale (or near wholesale) and retail prices. The best part is that you have no inventory to hold or finance, and no shipping hassles. Wow! Sounds great, doesn't it? Well, it is. But you have to do your homework for it to be profitable.

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  First, you must find a product that will sell in sufficient quantity and at a sufficient mark-up to make it profitable. Just because you know of a drop shipper that sells croaking ceramic frogs at a great price, does not mean that anyone will buy them. Research the market for any product or product line that you are considering. Try to determine the product's demand, how much competition there is, and what the competition is charging. Some lines of business have a lower margin than others.
  Sell only a few products, or at least make sure that the products you sell are related and targeted at the same market. Don't try to sell every drop shipped item you find. This will help you concentrate your marketing efforts and costs where they will make the most impact.
  
  
• Find a reputable supplier. With the popularity of drop shipping, many scams have arisen around the industry. There are sham lists of drop shippers being sold for hundreds of dollars. There are middlemen posing as drop shippers who will charge you more than you need to pay. There are "turnkey" internet businesses that claim to provide a complete package of products, e-commerce, and marketing - but for such a hefty membership fee or monthly cost that you will never make a profit. Don't let this scare you away - just be aware. To get started on the right track, take a look at Chris Malta's Worldwide Brands, a directory of legitimate drop shippers that has an excellent reputation.
  
  
• Be prepared to deal with backorders and returns. Just because some of the hassles of online business are eliminated with drop shipping, not all of them are. You will run into times when the product you've just sold is not available immediately. There will be returns and refunds. Work these matters through with your drop shipper ahead of time, so you will know how to handle them when they arise.
  
  
• Treat this like a real business. Don't SPAM, don't use a personal or free Web page address for your store, register with your County Clerk, get a Tax ID number, and be prepared to file taxes. Proceed with the expectation that you'll make a decent profit, and the chances that you will automatically increase.