If you've ever shipped anything heavier than a small book in the past, then you know how expensive it can be to mail something within a country, let alone to other corners of the world. Shipping costs money, sometimes a lot of money, so finding ways to keep the costs of shipping down is an important part of running any company which mails goods to consumers. Drop shipping is a good way to reduce both the costs associated with shipping goods and the amount of time it takes you to see something shipped successfully from point A to point B.
There are a few things you need to do right before you can take full advantage of the benefits which are part of drop shipping.
Not only do you lose a degree of control over your inventory when acceding to your goods being handled by a shipping company, but you also lose control of the shipping process itself. Make sure your drop shipper offers:
A large inventory of items which are in stock - limited backorders are acceptable
This is something every business is looking to do, pretty much all the time. To cover their costs, a wholesaler needs to charge you a great amount for each item drop shipped than for the items you purchase in bulk quantities. Netting margins close to 100% is possible but highly improbable, a rare occurrence.
Looking at margins as dollar amounts rather than percentages is the way to come out on top here. As long as you're making money, you're coming out ahead. However, a smaller percentage does not necessarily relate to a smaller overall profit. For example, consider something you've purchased, let's say for $10. If you turn that around and sell it for $20, you've made a quick $10; that's a 100 percent profit margin. Turning a $400 item around for $440 gives only a 10 percent profit margin, but you have in fact made 300 percent more money with the weaker margin.
Keep in mind that when you are drop shipping items, whether they are high or low cost goods, the amount of risk remains the same. There is no greater risk associated with higher priced items, so drop ship with confidence if you've already found a good company.
This is a short but crucial step. Keep your eyes ever open for products you know you can market and sell at big gains for your business. Buying low and selling high is the way to win. This step does require a steady commitment of your time and resources but it's also the one place where you can't fail to keep up. If you aren't watching for the best deals on new products and potentially profitable goods, someone else is going to snatch up those orders for you.
How can you be sure you're actually getting a good deal when you think you've found something profitable? Using the following criteria, you can root out bad investments before you lose your money and tend to invest in better options more often.