Amazon and eBay started years ago and they have been doing “no inventory retailing” for years. Meanwhile, Tapiture—the biggest rival to Pinterest which allows you to share and buy items you like—does not have any inventory on-hand at any of its locations. They operate virtually through a retail fulfillment method called drop shipping!
John Ellis, the CEO of Tapiture, acknowledges that they are big believers in the drop shipping business model and they think it’s the way of the future.
In a traditional e-commerce, online store owners can only sell what is available, or in stock, at the moment. However, drop shipping has created a hassle-free shortcut in e-commerce where Internet retailers don’t worry about fulfillment and focus solely on marketing instead.
If you can bring customers into your online store, you can offer them an unlimited variety of products and make a decent profit without having to pay too much up-front and without the headaches of overstocking with unsold inventory.
An Inside Look at Drop Shipping
Michael Main, the founder of Main Performance PC, said he tried to implement the drop shipping business model, but found that the competition is so high for his range of products. Many retailers sell the same items from the same suppliers.
Currently, Michael mostly sells gaming PCs and related items manufactured by his company, though he drop ships some other items from select manufacturers and suppliers as well.
Andrew Youderian, the co-author of “The Ultimate Guide to Dropshipping,” built an online store in 2008 based on the drop shipping model and started selling radio equipment for vehicles, although he wasn’t extremely interested in the industry itself.
Youderian does caution that drop shipping is harder than selling your own product. When you’re drop shipping you have to add your own value to the products you sell, which are created by other vendors. The type of value that can be added starts with becoming an expert in a specific niche and providing people with helpful content, tutorials, tips and so on.
Entrepreneur Jesse Craven, founded HydroGalaxy.com back in 2010 and sells garden equipment. Although he wasn’t have much interest in the niche, much like Youderian, he discovered an opportunity and built his site around it. He invests primarily in marketing activities including advertisements, search engine optimization and content marketing.
Craven saw an emerging marketplace where the companies that were involved in the business were not web savvy. He realized that it’s better to apply proven business concepts, create an online store and then benefit from what drop shipping has to offer.
Now Craven not only drop ships his entire store catalog, almost 35% of his sales are generated from items shipped directly from his warehouse in Burbank, California.
According to Craven, the main reason he started to sell from his own warehouse was the fact that drop shipping cuts a percentage from his profit margins. In general, drop shipping charges an average fee of $5 per sold item, which is relatively high if you sell on a large scale. Despite this fact, Craven recommends the drop shipping model for new online stores. “It has lots of advantages especial for those with limited funds,” he notes.
Starting a Drop Shipping Business
These days it is not complicated to launch into the drop shipping business. Once you know what products you want to sell and which shopping cart platform you want to use (e.g., whether you want to drop ship via Amazon, eBay or on your own store) you can begin your venture.
Finding a drop shipper can easily be done via a quick Google search or direct contact with manufactures. If you are willing to pay a bit extra, you can benefit from wholesale supplier directories, like Salehoo, and source low-cost products to sell. This is a recommended strategy given supplier directories generally list legitimate suppliers and preclude unnecessary dealings with scammers.
Finally, there are many successful drop shipping stories from entrepreneurs who wanted to launch an e-commerce store without having to invest thousands of dollars in inventory up-front. Despite the disadvantages of drop shipping it is a proven e-commerce business model with staying power for many years to come.
This article has been edited and condensed.
Amin Saleh is the founder of 2DropShipping.com, a blog focused on drop shipping business. Amin is computer educated and his main interest is e-commerce. Connect with @2drop_shipping on Twitter.
© YFS Magazine. All Rights Reserved. Copying prohibited. All material is protected by U.S. and international copyright laws. Unauthorized reproduction or distribution of this material is prohibited. Sharing of this material under Attribution-NonCommercial-NoDerivatives 4.0 International terms, listed here, is permitted.