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What is dropshipping?
Drop shipping is a method of trading whereby you, the retailer, do not keep products in stock. Instead, you partner with a wholesaler who is holding stock, you transfer customer orders and delivery details to them and they ship the goods directly to the customer.
Two significant benefits of drop shipping are a positive cash-flow cycle and the elimination of upfront inventory. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer's money, but has not yet paid the wholesaler.
Drop shipment can also be an advantage in some transactions since it (can) obscure the actual shipper from the final receiver, thus preserving a middleman's role by preventing direct communication/awareness between the original seller and final buyer, without requiring a middleman to bear the costs/. delay in physically taking in the goods, repackaging, relabeling, etc.
Apparently, drop shipping business have numerous advantages, but this one is great. Normally, if you want to start a business, it can be costly to acquire large inventory. Drop shipping offers an inexpensive way to acquire inventory which is not possible otherwise. This can be less risky than spending large amounts on acquiring inventory.
The drop shipping business saves your time and money in a great way because you need not to maintain a warehouse and care about the shipping. This will be taken care of the suppliers. You just need to promote products and derive sales to obtain your profit. Moreover, there is no need to manage your stock and inspect the stock levels. This all makes your job quite easily. Due to these benefits of drop shipping, it is being considered highly relevant for those who are looking for home based business.
Drop shipping offers you diversity which is not possible in having your own store. Suppose, you have spent your money buying products of a particular niche, unfortunately, it is not bringing desired results even though, you have to continue with that niche or products until it gets sold out. This can bring losses to you in many cases. On the other hand, if you are into drop shipping, you have diverse options to choose products from and in case, if a particular product is not deriving you optimum sales, you can easily switch to other items.
Drop shipping allows you to sell products from anywhere. Suppose, if you want to sell toys from particular suppliers who are based in any other city or country, you can sell it easily. All you need to do is contact the supplier and fix the deal with him and you are all set to go. Thus, drop shipping provides you to work from anywhere without any headache.
If you are good at selling and if you have chosen the right product which converts well, then the sky is the limit. Moreover, this is the only business model available that does not require any investment and bring profit if the strategy is executed properly.
If you are looking for the passive income sources online, but not getting any valid source, then go for drop shipping. This business requires near to no investment. You just need to have a website and good writing and selling skills that is all about selling products online. Apart from the website, you can also run a promotion on various platforms such as Google Adwords, Facebook, Email marketing and Bing ads to derive traffic from website and sales.
Some risks such as back ordering may occur when a seller places a shipment request with a wholesaler, but the product is sold out. Back orders may be accompanied by a long wait for a shipment while the wholesaler waits for new products, which may reflect badly on the retailer. A good wholesaler will keep retailers updated, but it is the business owner's job to be aware of the quantities that the wholesaler has available.
Knock off name brand products being sold by drop shipping wholesalers is another thing to watch out for. While some of these products may look genuine, generally you will know by the extremely high-profit margins available on them. If you find yourself questioning whether a product is a knock off or not look up the product on the manufacturer's website and visually compare it if you notice colors, styles or other physical characteristics that don't match those of the manufacturer it is probably a knockoff. You can take this one step further by contacting the manufacturer and asking if the supplier you are considering purchasing from is authorized to sell their products. Selling knock-off products could destroy your eCommerce reputation and possibly ruin your drop shipping business, it could also cause quite a bit of legal problems.