Drop Shipping Tutorial
This is a free drop shipping tutorial service provided by the Poland Import Export Chamber of Commerce on Line that is intended to help answer the many questions that we get about drop shipping. As a Chamber of Commerce, we support your business efforts by providing extensive, professionally written, training materials, free.
We hope that if we give you a lot of good information in our tutorials about drop shipping, you will remember us and come back to us when you need good products and get them from Polish companies that do drop shipping.
There are two sections to this drop shipping tutorial page. In the first we give you some quick start links. And in the second you can get some in depth information.
DROP SHIPPING TUTORIAL - Lesson One
Distribution Decisions: Drop Shipping or Inventory or Fulfillment House?
Selling products on the Internet is easy. Hundreds of thousands of people do it every day. The most difficult part of Internet sales is getting the products delivered to the customer, otherwise known as order fulfillment.
You must have an efficient fulfillment system. One of the reasons that brick-and-mortar stores are slow on the uptake when it comes to online business, is that supplying retail stores is done with pallet-size logistical system. But Internet retail requires an entirely different kind of fulfillment system. Internet retail is essentially mail order, with shipments going out in parcel sizes to end users.
Few brick-and-mortar retailers have a humming mail order business to draw from, and are starting from scratch with an entirely different kind of fulfillment system. An inefficient fulfillment system can lose for you the advantages in good customer service that holding the inventory gained for you. And running a fulfillment system is a full time and trying job.
There are three basic systems - fulfillment systems - that you can use to get products to your buyers.
Inventory Model - You buy the inventory, store it in your warehouse (basement, garage, building) and ship it to your customers.
Fulfillment House - You buy the inventory and store it in someone else's warehouse. That someone else also does the shipping for you.
Drop Shipping Model - The drop shipper has the inventory. You just sell, get paid, keep the profits and send the order to the drop shipper who has bought the inventory and does the shipping for you.
This is the method used by most small retailers. They order inventory from a manufacturer or distributor and store it in a place that they control. This business model has some advantages:
You can ship products immediately because you have total control. The faster you can turn around the order, the more impressed your customer is, and the better chance you have of getting him back the next time.
You can provide excellent customer service. In case of a problem, you will have all the records at your fingertips to trace the order and make a correction.
The Inventory Method, of course, has its disadvantages, too: You need the cash to buy and store inventory. Regardless of the size of your company, you never have enough cash to do everything. So tying up money in inventory that sits on your shelves can limit your growth.
Paid for inventory can sit on your shelves, tying up capital. When you own the inventory, you also own the risk if not being able to sell it. If a product doesn't sell, you're stuck with disposing of it at pennies on the dollar.
A second common Internet distribution model is the fulfillment house. A fulfillment house will store your inventory and run the fulfillment system for you.
A fulfillment house is nothing more than a warehouse operated by a company that provides storage and delivery services to other companies. They are specialists in getting products to your customers.
They will maintain inventory, assemble, pick, pull, pack, and ship. They do all do all this according to your specifications and with your labels. They can, if you wish, also handle the order taking, an Internet shopping cart, and provide an ordering and customer service call center if you need one. In other words, you can run an entirely virtual business, outsourcing everything to the fulfillment house, if you like. You provide them the inventory, you sell it and they take care of getting it to your customer.
This is the system used my most large mail order catalog companies and web sites that have the capital to purchase their own inventories.
You can see a fulfillment service at this link.
One of the simplest order fulfillment models to use is the drop ship model. Every successful business person knows the importance of focus. Business people articulate their focus by talking about their "core business" activity. In short, it means the primary activity that generates cash for them. Some people focus on selling. Some focus on running a warehouse. Some focus on manufacturing a product. Others focus on advertising.
Mail order catalog companies and professionals who use the internet focus on selling. They are professional sales people who know their chosen target market and they find products to sell to their chosen market. These people do not manufacture product, run warehouses or run advertising services. They do not buy tons of inventory. They have manufacturers put products in fulfillment warehouses, at the manufacturers' costs and have the warehouses drop ship products their customers.
Let's put that another way. They have absolutely no stocked inventory and they spent absolutely nothing on inventory. They just have catalogs and web sites. They take an order from a customer. They keep the profit. They send the cost of the product to the fulfillment warehouse. The fulfillment warehouse puts the catalog company's invoice in the box and sends the product to the customer. The customer gets the product and thinks that it came from the catalog company's own inventory in its own warehouse. The fulfillment warehouse drop shipped the product for the catalog company.
Drop shipping has some very strong advantages and a few disadvantages. Let's look at the advantages first.
You don't have to pay for anything until after you sell it.
You have do not have inventory costs. You know that purchasing inventory ready to ship to your purchasers is expensive. In addition to the out-of-pocket costs, you need a place to store the inventory. Finally you have to pick, pull, pack, and ship the products once the order is placed. Having the distributor or manufacturer take all these costs and responsibilities lifts a real burden off your shoulders.
A drop-shipper is transparent. With most of your drop shippers, especially those with whom you do a regular business, you can send them labels and forms so their package looks like it is from you. Your customer probably won't know that your hands never touched the product. The customer will think that you have a warehouse.
You can sell many more products than you could if you had to buy and store them yourself. Drop shippers give you a wide choice of products so you can sell a lot more.
It almost sounds too good to be true. But there are two things that you should consider:
Lower margins. While the manufacturer may be willing to sell you product for 30% to 40% of suggested retail, if you want drop-shipping services expect to see another 10% or so off your margins. This is to be expected. There is a lot of work and expense in storing and shipping inventory. Someone has to pay for it.
On the Internet, some categories of products are very price-sensitive. If you are selling computer hardware, for example, and using the drop shipping model, you may find it hard to be competitive price-wise and still make a profit. The difference between making money and losing it may be only a few percent. So be sure to pick a product that makes sense to drop ship.
You will be using third party customer service so you will not have full control. Drop shipping is really outsourcing your order fulfillment services to a third party. You will be dependent on your drop shipper to have the products in stock, to deliver on time, and to properly pack and ship your products. So pick your drop shipper carefully.
At the end of the day, however, drop shipping exists because it works. And the largest catalog companies and web sites use it. And savvy small web sites and auction site sellers use it.
The choice of your model depends on you.
If you selling off line at fairs, trade shows, expositions or in a shop, then you need some inventory in your shop and the inventory model is for you.
If you have enough cash to buy a substantial inventory for retail or if you want to be a distributor and sell to retailers, a fulfillment house will probably be your best choice.
If you are starting up or want to conserve cash while expanding your product line, then the drop ship model is for you.
Most companies ultimately use drop shipping in one way or another. And they spend a lot of time trying to find drop shippers.
Here is a standard and well recognized source of drop shippers.
Drop Ship Source Directory - This directory lists of nearly ¾ million products that you can have shipped directly to your customers. This is our first and best recommendation for an expansive directory that you should have regardless of whether you use drop shipping or the inventory model. http://www.chamberofcommerce.pl/sl/dropshipdirectory
Think through the model that you want to use. Don't make rash decisions. Take your time and do your homework.
Top Five Drop Shipping Resources
Drop Shipping Source For eBay - A drop shipping supplier that sells a lot of product for eBay. Primarily used for eBay. Drop Shipping Guide - This is the best way to get a good background and business plan. Do be sure to add this to your library. Drop Ship Directory - If you are ready to go and want a broad selection of products from all over the world, this drop ship directory is the best directory of the lot. Drop Shipping Course - This is a free tutorial series that is full of essential information.
IN DEPTH INFORMATION
There is, of course a lot more to it. And you should continue your study. To create good will for our Chamber and the hope that you will eventually purchase products from our members, we have assembled many free tutorial series. One of those is the series on drop shipping.
We have tried to assemble the most comprehensive guide to drop shipping that we possibly can. You are invited to get it free.
This is a professionally written tutorial series that gives sound, fundamental information about starting up and running a business using the drop shipping model. It compares the benefits and drawbacks of buying your own inventory and drop shipping. It also provides other very useful information for using the internet as a tool to improve your profits.
It is not a "get rich quick, everything is easy, magic road to riches course". It was written for the Poland Import Export Chamber of Commerce on Line as part of the Poland Chamber program to promote Polish products. It is professionally presented as you would expect information from a Chamber of Commerce to be. " It covers the basics well, gives useful information and gives you the opportunity to discuss your own individual situation with the author.
In general, this course is for someone who is interested in building a solid, sustainable business with current and long term income benefits. The course is structured so that you can refer to it as a resource.
Here is what some people have said about it.
"I found you by making a persistent search for honest people. I am very impressed by the cooperative nature of your web-site and the fact that there are no membership fees or garbage filled lists for sale. Thank you for the information." BJ, United Kingdom
and
"First of all, I want to tell you I'm enjoying your course, much of it I did know, but what I appreciate is that you put the info in your own words. I see too many times, people just cut and paste the same info over and over.
Renee M"
United States
and
"Thank you so much for all your help Gary. I consider it a blessing to have met you and your folks.
Michelle"
and
I also want you to know that I really find this course to be extremely valuable, and as a matter of fact I'm quite sure that there is nothing comparable available online - at least surely nothing that is free. As I surf the web trying to gather information about dropshipping and everything related to it, I can see that there are a lot of people out there who need to take some advise from you. Thank you.
Best Regards,
Shawn R
and
"Dear Gary, Your drop shipping tutorial is very useful to me while preparing to start-up my own e-commerce business. I am in the process of generating a business plan. This tutorial has been so helpful! I inadvertently deleted Lessons #4 and #5 (one having to do with affiliate programs). I need to read these lessons. Could you please send them to me again, at your earliest convenience?
Thank you!
Sincerely,
Wanda B"
United States
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Gary Granai
Director
Poland Import Export Chamber Of Commerce On Line
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