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Sunday, August 25, 2013

Is Drop Shipping a Viable Way to Make Money?

Drop shipping is when you purchase an item from a middleman who has to order your item from his supplier.  The middleman makes a profit from you by selling the item at a higher cost than the supplier sells it for.

Anyone can be a drop shipper especially with auction sites like Ebay.  I briefly thought about becoming a drop shipper a few weeks ago.  I found some great drop shippers that don’t even charge a membership fee.  I crunched the numbers, and found that a sizable profit is obtainable, the only problem I face is fitting this into my already busy day.

That’s the purpose of this blog, to show you how to make money, without purchasing and storing products ahead of time.  The owner of a million dollar a year window treatment (blinds) business uses this business model.  He and two other business partners have cleared hundreds of thousands of dollars every month, by selling a product that they don’t own, and product that they don’t have to store, a product that brings great revenue to their bottom line.



How to Get Started!

Finding Your Suppliers

First, you have to find some suppliers, but don’t worry, I’ve already found them for you.

1. Mini In the Box, Hong Kong – (www.miniinthebox.com) Offers cell phone, electronics, and other zany products at reasonable prices.  Shipping can take up to one month.

2. Alpha Imports, New York, NY - (www.alphaimports.com/help/drop-shipping.html) Offers quality men’s and women’s jewelry; from gold, silver, diamonds, and other semi-precious stones.  No membership or drop shipping fees.  Paypal Accepted.

After you chosen one or all of the suppliers, you have to search the website(s) and find items that you would like to sell.  Print the item(s) with the prices and shipping costs, this will help you in the next step.



How To Set the Price and Still Make A Profit?

You will find on Ebay and other auction style sites that sellers are often underbidding or under selling an item(s), just to get them to sell.  Trust me, this is on way to increase your bottom line.

You want to make between $4.00 and $25.00 profit, per sale depending on the item(s). If an item is under $5.00 (your cost), don’t even bother with it, it is not worth your time.

Below is an example of an actual product that I have calculated for resale on July 25, 2013:

Six-ounce Hip Flask & Cigarette Case (gift box)
engraved

I want to sell it for $39.99 (complete)
Similar product is selling on Ebay for $32.50

Costs:

Product costs----$  8.96
Gift Box----------- $  6.50 (box, 2 shot glasses, funnel)
Engraving---------$  4.00
My Costs----------$19.46

Fees:

Ebay---------------$  4.83 (http://www.fees.ebay.com/feeweb/feecalculator)
Paypal-------------$  2.15 (2.9% + .99)
My Fees-----------$  6.98

Total Costs--------$26.44
Retail Price (-) ---$39.99
My Profit----------$13.55 (per item)
-or- My Profit-----$5.25 (with shipping added to my costs)
 
Shipping: They will pay $8.30 for (USPS Priority).  If your profit is large enough, you can including the shipping in your fees and offer Free Shipping on the item(s). 

Shipping Included – My Profit would be $5.25 (which is still well within the profiting range)

Use the example above for setting your own prices for your products.  Don’t forget to consult with Ebay and Amazon by looking on-line for the exact products that you intend to sell.  Compare prices, and see if it’s viable for you to sell an item at the price that you’ve set.




The Sellers Platform

 
Whether you sell on Ebay or Amazon, you normally have to pay some sort of fees.

Ebay

Ebay is currently offering a ‘No Fees’ special if you sell 100 items or $5,000 in products per month, they won’t charge you any listing fees, but they will still charge you a ‘your product sold’ fee.

This fee can be found using their interactive online calculator

www.fees.ebay.com/feeweb/feecalculator

They will add up all of your fees and charge you one price at the end of the month.  If your Ebay account is connected to Paypal, they will just deduct the fees from there.

For most sellers, you will find that this is the way to go.

Paypal

Paypal is used by millions of people each and everyday, Paypal also charges a fee of 2.9% on (your sales price) plus 0.99 cents.

Amazon

Offers two unique sellers platforms, at two costly monthly prices and other fees.  They also require that you accept returns, something that Ebay doesn’t, and you can’t offer free shipping options.  I feel that Amazon would work best for items that you can get the most profit off of.


The Ad Copy

With perfect and flawless ad copy, you can sell a flat tire to anyone.  Ad copy is the description that you will use to advertise and sell your product.  If you sell on Ebay, your ad copy can be more flexible than on Amazon.

Example of Ad Copy using the Six-ounce flask:

Bad example:
6 oz Hip Flask & Cigarette Case Gift Set $39.99
Steel flask wrapped in leather.  Perfect for the drunk or party goers in your life.

Includes:
Free engraving
2 shot glasses
Funnel
Gift box

(what’s wrong with this ad copy?  It does not present the buyer with enough information to make and informed decision on why your Flask is better quality and price than Jon Doe’s Flask.  More than likely, Jon Doe’s and Your Flask both come from the same supplier.)

Good Example:
Six-ounce (6 oz) Leather wrapped Stainless Steel Flask with built in Cigarette Case & Free Engraving.  Gift Box Set only $39.99

Beautifully crafted flask features a built in cigarette case and is delicately wrapped in 100% genuine leather.

Makes the perfect quality gift for those who are important in your life.  Make a statement with this gift!

Gift Box Set Includes:
6 oz. Leather Flask
2 – Shot Glasses
1 – Filing Funnel
Gift Box
Free Personalized Engraving
Free Shipping

(what’s right with this ad copy?  Can you picture the product in your mind?  Can you visualize the quality?)

Whatever you plan to sell, make sure that your ad copy correctly explains all of the details that are included in both the packaging and the price.  When I post items on Ebay, I include a ‘Legal’ section just below the ad copy.

The Legal(s) should include:

- Whether or not you accept exchanges, returns, or refunds
- How long it will take for you to prepare an item for shipping
- If you will provide tracking information or not
- Other details not included in the ad copy
- Where the item ships from, and/or delays in the shipping process

Note: if you do not state everything about the product your are selling, you may be required to pay Ebay back, if your product sells and the buyer has an issue between the ad placed and the product received.

Example of ‘the Legal(s)’

All sales final, sorry, no exchanges, refunds, or returns.  Product will ship in one business day after payment clears Paypal.  Your item will ship by USPS first class mail.  The tracking number will be provided when available.  Please allow up to 10 days to receive your product.


The Wrap-up


Is Drop Shipping a Viable way to make money today?  Yes!  If you approach the items correctly and choose items that can obtain a higher mark-up value, thus increasing your overall profits.

If you have time on your hands to:

- Find the product(s)
- Create the final selling price
- Create refreshing ad copy
- Place the ad(s)
- Wait for an item to sell
- Order the item from your supplier
- Wait for the customer review
- Wait to receive your funds (depending on your status on Ebay it can be up to 21 day, even longer on Amazon)

If you can do and wait on all of the items listed above, plus keep orders straight, then you will have a bright career as a drop shipper.  Much success!

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