What is Drop Shipping? and the real Secret to Making it Work…

dropshippingI was speaking on stage the other day and received the question “What is Drop shipping?” so I figured it is worth defining here.

Drop shipping is when you are selling a physical product online, and instead of you the retailer keeping the keep goods in stock the manufacturer or wholesaler of the physical product keeps the goods in stock at their premises.

So when a sale from your online store occurs, you then place an order with the manufacturer and pass on the end customers order and shipment details.  The manufacturer then ships the goods directly to the customer on your behalf.

You make your profit on the difference between the wholesale and retail price.

I have been in several internet marketing niches where I have used drop shipping successfully in both the US and in Australia.   While many internet marketers prefer to sell information products because of the higher profit margins it is still possible to make drop shipping profitable and work for you.

The real secret to making drop shipping work for you is to sell an everyday product that people actively want and do buy online, but to make sure that it is a high enough priced product for your profit to be worth while.

For example, if you are selling $30 widgets and your profit on the sale is 10% then you are only making $3 per sale, and as we know from online markets it generally costs far more than that just to acquire a customer.  But if you sell $300 widgets or even better $3,000 widgets that they really want or need, your profit on the sale is going to be $30 or $300 respectively.

Other things you can do to bump up your profit including selling ‘bundles’ of products or ‘customising the customers order’ by allowing them to choose additional complementary items before they check out.  Both these techniques increase the average sales price and your profit.

If you are really clever you will find a product that has a continuity component meaning that they will need to purchase it again and again,  hopefully on an automated charge the card basis.

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