ship the goods out to my
customers (freight-out)."
Seventh: "If I expand and hire employees, how will I control the inventory?
How will I know if my employees are stealing from me?"
Eighth: "How much time and money am I going to spend packaging and fulfilling
orders?"
These problems can be reduced or eliminated by drop shipping.
2. Drop Shipping to the Rescue
Drop shipping is a method of selling products without stocking inventory
yourself. You don`t need to stock inventory, because you only order an item when
a customer requests it.
With drop shipping, when you make a sale you contact the manufacturer or
authorized distributor and make arrangements to pay for the order at your
wholesale cost. Your distributor then ships the product to the customer with
your invoice and shipping label.
For example, let`s assume that you have just sold a product to a customer for
$100.00 plus shipping charges of $15.00. Having received the customer`s payment,
you now need to fax or otherwise send your order to your drop ship supplier. You
will need to pay your supplier, by credit card or other means, your cost of
$50.00 plus $15.00 shipping. This leaves you a $50.00 gross profit. Your
supplier will now ship the product to your customer.
With this arrangement of not having to stock inventory yourself, there are
many advantages.
You eliminate the high costs of holding inventory. There is no need for you
to rent expensive storage space, finance high minimum orders, get stuck with
goods that don`t sell, or pay other expenses associated with maintaining
inventory.
Indirectly, you do pay inventory costs. Your drop ship supplier must maintain
his inventory and pay all associated costs, including freight-in, storage space,
insurance, accounting, shrinkage, and so on. To make a profit, he must pass
these costs on to you.
The real advantage to this drop shipping arrangement lies in keeping your
costs variable. Instead of being stuck with these expenses up front, whether you
sell or not, you pay only when you make a sale.
3. Profit From Drop Shipping
Many legitimate drop ship suppliers may not require you to have a retail
location, but they will want to see evidence that you are in business. They may
require you to produce a resale license or retail sales tax permit.
To be sure, there are pitfalls to watch out for in drop shipping. For
example, some suppliers claim to sell at wholesale prices but are actually
selling closer to retail. Also, margins are very slim in some competitive areas,
such as electronics. However, with proper research and information, you should
be able to avoid these problems.
Whether from your home, retail store, directly from your website or through
an online auction, you can arrange to sell an item before you purchase it. That
way you have nothing invested in inventory and won`t get stuck with stock that
won`t sell.
Rather than financing and stocking inventory yourself, consider drop shipping
your way to wealth.
For more information about drop shipping, visit http://www.yenommarketinginc.com/dropship.html
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