How to Begin a Drop Shipping Business
Drop shipping involves ordering goods at wholesale price to supply retailers or end users who place an order for them.
In old-time commerce terms, it is a perfect description of the ‘middle man’ business. By doing this, the drop shipper is able to avoid the cost of inventory and physical location as orders are placed only when customers request them,
The Entrepreneurial Slant
Many people have unique ideas that they consider worthwhile to give them an entrepreneurial landing. However, when faced with demands that are necessary precursors to running a business, they get intimidated.
Starting off a business is possible traditionally when:
There is a product on offer
When you have goods or services to offer that others will agree to pay a price for, then you have a basis to start a business.
Are there willing buyers?
If ever there is someone agreeing to buy what you have to offer, then you are close to starting off a business.
Do you have a contact point?
Nothing gets sold in a vacuum. Most times, you need a place of contact so that people can reach you. When this is possible, it is easier for your stock -in -trade to get sold.
Do You have a process?
A business process is another needed ingredient before you consider going into a business. Whatever you are offering has to be the outcome of a process. Whether it is a service or a product makes no difference here.
A system of record keeping
You need to take records of your business in sales, purchases and allied processes. Having a record enables you to understand how your business is doing and the progress you are making.
Why Drop Shipping Makes Business Easy
When you explore drop shipping, you do not have a need for a physical location as you only need an order to start off. What you need to do after securing an order is to get a source to procure the order from, initiate and conclude the order. The source of procurement will deliver the order for you and you have no further commitment in the transaction.
Depending on the size of orders you process in a month, you might have no need for staffing. It will be advisable to have minimal staff till there is a need to get more. The personnel you need should only be in correspondence with the size of your business.
Starting off with Drop Shipping
It is important to come to grips with the essentials of the business if you must break-even or be able to make money out of it. The following are important;
Know your target market
Drop Shipping should not be an all-comers game and you should only get involved to the extent you are comfortable with and understand. If you are to drop ship cosmetics, for example, you must make an analysis of the cost your customer is willing to pay, the cost of shipping and the ordering cost. You should only go ahead when the cost of shipping and ordering cost in total, exceeds the price the customer is willing to pay. If this is not the case, you might end up running at a loss or barely make even.
Confirm the Wholesale Price
Whilst it might be true that you are getting goods from the wholesaler, you need to confirm that the price that you are given is not the retail price. Many wholesalers will be willing to sell few units at only the retail unit cost as against the wholesale unit cost for people with bulk orders.
It is very important before starting off with drop shipping that you confirm the terms of supply from the wholesalers so you don’t end up competing with orders that have reduced cost advantage. This will put you at a disadvantage and you do not want to start out your business by incurring losses.
A Niche Market is often a Hit for Drop Shipping Business
There are a number of items that will fit the drop shipping bill but commonly or widely sold products might be a hard sell. You need to open up a niche market where there are possibly few competitors and low awareness on how to source for the wholesalers. When this is the case, it will be possible for you to explore the possibilities and enjoy a monopoly for the short to medium term and make a kill.
The truth is that most successful entrepreneurs end up with a basket of products that they offer for sale. They might also be in the services industry ( in what is described as a diversified portfolio). This helps to spread risk and ensure that when an item or product line is affected, you can stay afloat with the others. No single unfolding circumstance might be in a position to crash your entire drop shipping business without an economy-wide effect.