Some of my blog posts include affiliate links. If you purchase an item from one of my links I may receive a commission. Please read my disclaimer for more details.
Many people want to start an e-commerce drop shipping store so that they can work for themselves. Unfortunately, there are various products to buy online, which makes it difficult for someone to pinpoint what to sell. I see various ads that promote drop shipping which is why I was encouraged to blog about how you can Make Drop Shipping Work for Your E-Commerce Store. My husband and I started our joint company together eight years ago online. We shipped smaller automotive parts we could buy in bulk and drop shipped larger items that were too heavy to reship at a reasonable price.
Today I want to discuss some critical points for those interested in starting an e-commerce drop shipping store.
Drop Shipping Pointers
Make sure what you drop ship is a benefit to you. Don’t forget that when you decide to drop ship items you want to make sure that the item you sell is cost-effective. For instance, my husband and I drop shipped large objects like headers and exhausts to keep shipping costs low. However, sometimes the manufacturers or third-party distributors that you purchase from may incorporate additional drop shipping charges to you as a dealer. Manufacturers want big sales, not onesie-twosie sales.
Don’t drop ship small goods that you can buy in bulk for little to no shipping costs. Numerous companies will offer lower shipping costs for merchandise bought in bulk. Manufacturers will also offer free shipping if you purchase up to a specific dollar amount. Buying products at low cost or free shipping allow you, as a dealer, to ship the item faster and sell the item at a competitive price. Customers like getting their purchases within a week. Instant gratification is what buyers are looking for.
Some manufacturers expect a “buy-in” amount. If you are cutting out the middleman and going straight to the manufacturer for products you may be expected to buy in with the company. The manufacturer will stipulate in their reseller or dealer paperwork that they require a buy-in amount on the first order. For example, if you decide to buy cleaning products for vehicles, your first order may require a $6,000 buy-in amount. The manufacturer is fully aware that you are attempting to resell their product and name; therefore, they expect a large purchase up front. The buy-in tells the manufacturer that you are a serious buyer and you will be back for more products.
Drop Shipping and Profits
Make sure that you are receiving a profit from what you are selling. Working for yourself is all about making money as an entrepreneur. Manufacturers and third-party distributors often have tiers for you as a dealer. Manufacturers and distributors may only offer the dealer a tier 1 discount until the dealer reaches a higher selling status. After so many products are acquired by the distributor, the dealer will be given a tier 2 discount. Some manufacturers and distributors may even offer a wholesale discount if the dealer buys a sizeable amount of their product.
Always – Always calculate your profit on what you are selling. Make sure that you are receiving enough gain for your time and efforts. Drop shipping can be easy, but if you are selling even 20 – 100 items a day that is plenty of work on your end. Some people are happy with a 10% profit. Try to shoot for a 15% – 20% profit that way when you offer sales or discounts on holidays or promotional days you are still clearing enough profit to keep going. As you continue to work with your manufacturers and distributors, the discounts will grow as your business grows.
Manufacturer – a person or company that makes goods for sale.
Distributor – an agent who supplies goods to stores and other businesses that sell to consumers.
Dealer – a person or business that buys and sells goods.
Reseller – a person or company that sells something they have bought to someone else.