A few years ago, I tried my hand at Drop Shipping. Drop Shipping means you have a supplier deliver a purchased product as if it came from you. This of course eliminates any need to stock inventory. And you as the merchant must make the purchase first before delivery .
So I tried this with eBay and the results were very good. I made a few thousand dollars before losing my eBay account. I must admit, I didn’t manage the account very well. There is more details to this, but I will spare you my failure because it is 100% my fault. This system used correctly can potentially make you a lot of money, and without spending any thing more than $25 to start.
The parts of the income machine
To start drop shipping, you need a few tools and services. One being a supplier/manufacturer. I used MegaGoods.com primarily for this. There are others, probably better. You can also contact wholesalers directly and ask them to drop ship. Some may agree.
The next thing you need is a PayPal Debit Card. The reason this is needed is because most payments will be instantly available on the card. There might be other merchant accounts that will allow a debit card for the account. This piece of the puzzle is critical for optimum cash flow.
You also will need a store. You can leverage eBays marketplace, but be warned, their fees can eat up your profits. Your own website launched on platforms such as WordPress can help you retain more money.
The final part to this income machine is you. You have to fill each order that comes in manually. Some Dropshippers might have a bulk upload system. Eventually you can hire someone to handle this aspect of the business.
So that’s it. The closed loop refers to the fact that most orders are paid for and the cash is available for you to purchase the item from the Dropshipper. What’s left over in the account after the transaction should be all yours.
Tips and best practices for better results
It’s very important that you calculate shipping prices correctly based on the buyers location. You don’t want to get an order, only to realize the shipping puts you in the negative. Your store should allow a shipping calculator based on weight and location. It should also be a shipping company/method that the Dropshipper uses. There might also be drop shippers who will offer a flat delivery fee. This can help you avoid any unexpected costs.
Another calculator is needed to help you with pricing. This can be done in excel. Some factors in this equation is price of product, merchant processing fee, delivery handling fee and your additional overhead. Each product you sell must be priced correctly so you can come away with a profit.
I absolutely don’t guarantee success with this system. This is not a get rich quick scheme, or a lazy man’s ticket to prosperity. This will be hard work to setup. The ease of burden is with cash flow and the absence of inventory. Basically you get what you put in.