Introduction to Dropshipping

Welcome to Joe Money’s “Drop Ship Crash Course” written by dropshipping and affiliate marketing guru Ryan Moran.  In these short lessons, we’ll cover the essentials to drop shipping on the internet, which is a major strategy that many use to make money on eBay and from their own e-commerce stores.

Drop shipping is a topic that one can spend months studying, so this course will only begin to scratch the surface of the drop shipping industry. However, it will help you get an understanding of how the process works and assess as to whether or not it is a business model that you’d like to pursue.

The truth is that many people use drop shipping to create significant income streams on the internet, and many eBay Powersellers achieve this status from drop shipping. Contrary to popular thought, the big money on auctions sites like eBay is not always made by people who go to garage sales and put their findings online. Instead, drop shipping provides a way for people to sell physical products on the internet that they never have to see, store, package, ship, or even pay for.

On paper, it sounds way too good to be true, but once you understand that process that is behind it, it’s a very simple concept. Drop shipping is simply selling other people’s products at a premium, and keeping the difference as a profit. This practice is common not only on the internet, but in catalog businesses and even retail stores.

Drop shipping is not a new idea; it has been used by merchants and retailers for decades. However, the internet has opened the doors for the average work at homer like yourself to capitalize on this type of an opportunity. When sites like eBay became popular, it became easy to sell physical products online, so drop shippers used it as a way to sell additional units of the items that were already selling.

Today, drop shipping has become a very easy way for average people to make solid income streams from home, because it is easy to do, can be done in your spare time, does not require start up money, and is a understandable, realistic approach to make money from home.

How Drop Shipping Works

The drop shipping process is a very easy concept, which is one of the reasons that it has become so popular. The reputable formula is the very reason that it is so profitable. It is an easy process that can be duplicated and done time and time again to bring in revenue on a consistent basis.

When stripped to its simplest form, the drop shipping process breaks down into four steps:

1.) You, the drop shipper, find wholesale items and list them for sale on eBay or your own online store.

2.) The product sells, and payment is received.

3.) The drop shipper orders the product from his or her supplier and specifies that the item be shipped to the buyer.

4.) The difference between the sale price and the wholesale price is the drop shipper’s profit.

You may notice a peculiar thing about this process: the item is sold before it is ever ordered. Therefore, you collect payment before you place the order of the item. In this way, you never have to use your own money. This is one of the benefits of drop shipping. Because of this fact, it is very easy for someone to get started without putting down any money.

You’ll also notice that the product is shipped directly to the customer. When someone purchases an item that you drop ship, you simply arrange for the item to go to the buyer. When doing this, you never have to handle the item. Because the item goes directly from the supplier to the purchaser, they handle the packaging, they handle the shipping, and they handle the delivery. You never see, store, or touch the items, and because the customer pays you before you order, you never have to pay with your own money.

Therefore, once you find an item from a wholesale supplier, you can sell it over and over and profit the difference between the wholesale price and the selling price. This can range from a few dollars to hundreds of dollars per item. How you collect your profits is another question that is raised, and is addressed below.

How You Get Paid

At this point, everything about the drop ship process sounds easy and super cool, but the idea of how you get paid can confuse some people. While you’re aware that the profit comes from the difference between your buying price and the selling price, how will you receive the cash?

In truth, it can come from a couple of different places. If you are selling on auction sites like eBay, you can receive the money in any way that your auction accepts payment. That may be from a money order, a personal check, or a variety of other ways. If you are using your own website, however, things can get a little hairier, depending on the types of payment that you will accept.

However you decide to go about things, the most important thing is this: receive payment before you order anything. In doing so, you never have to use your own money. What other business model allows you to sell before you buy? In theory, you could start with no money and still drop ship items to make money, because you never have to buy the items yourself.

When first starting out, these little questions can seem like mountains that need to be climbed, and many potential work form homers are scared away because they don’t know the answer to their problem. The truth of the matter is that, once your business starts taking off, these little complications fall by the wayside. However, it can seem like quite an obstacle for those who have never done it before.

If that is the case for you, and you’re not sure how you’re going to accept payment, then start off using only PayPal. PayPal is a safe, secure form to both send and accept payment. When you sell an item to drop ship, accept PayPal. When you buy the item from the supplier, pay with it using PayPal. In this way, you never have to see the funds, and money is simply channeled to the hands to which they belong. Furthermore, your profit will simply be the difference between PayPal transactions, and the money will add up. All major credit cards are on file with PayPal, so people will be able to use their credit card. It is also eBay’s preferred method for transactions, so most people will use it as the method of payment. Therefore, if you are unaware what you’re going to do for payment, use PayPal.

Using PayPal will simplify the process of both buying and selling, and it allows you to save time and drop ship more items. As long as your supplier accepts PayPal as a method of payment, you can use it in every step of the drop ship process and make things extremely easy. Then again, how can you find a supplier that meets your needs? For the answer, see the next section.

How to Find Suppliers

The success of your drop shipping ventures lies in the quality of your suppliers. That is, the source of the goods that you sell is essential to how much money you can make in drop shipping. In order to have items to list on eBay or your own web site, you have to find a supplier that has the item and provides it at a price low enough for you to make a profit. It wouldn’t do much good if you were able to sell an item, but you weren’t reaping a profit. Therefore, you must find goods that will sell at prices that will reap a profit for you.

While this is the most important part of the drop ship process, it is also the most difficult. Finding a supplier for a given item seems near impossible if you don’t know where to look. However, when you find the supplier that meets your needs, it is like striking gold. Many drop shippers have success from using only one supplier after establishing a relationship with the company. On the other hand, some drop shippers keep looking for new suppliers in order to provide better prices and a greater variety.

Therefore, the question stands: how does one go about finding quality suppliers? The most common way that people find suppliers is from dropship and wholesale directories. These directories compile quality supplies into one place, so users can quickly browse through to find those that meet their needs. For example, if you are looking to sell baby supplies, you can search for these types of suppliers in a dropship directory. Having these types of opportunities in your belt can simplify the work required for you to find profitable items to dropship.

Having a directory at your disposal also gives you the opportunity to compare prices before choosing a supplier. When searching on your own, you may only find one supplier in a given niche, and you will be forced to buy their products at their prices. When you have many suppliers at your fingertips, however, you are able to choose based on the supplier that meets your needs most accurately.

There are several different types of directories. There are those that simply give you a list of suppliers and let you have at it. Then, there are those that provide educational materials along with a list of suppliers. There are those that test each supplier to make sure they are legit, and there are even drop ship services that negotiate prices and attempt to make the process very easy for the drop shipper. What you need is completely up to your experience level and what you are hoping to do with your business.

There are many drop ship directories and services on the internet, and it can be overwhelming to sift through each one in order to find one that fulfills what you are looking for. Therefore, Joe Money has reviewed several different drop ship directories and services in order to aid in the decision making process. To find the best suppliers for whatever you are hoping to drop ship, return to our Make Money page and look for the reviews under the dropshipping section.