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What is drop shipping?
Drop shipping is when the product distributor takes care of all the shipping for you. Rather than ordering stock in bulk, the stock remains with the distributor. Then, when you make a sale, you send an email to the distributor and they pack up the item and send it straight to the customer with your company label on the box.
Drop shipping is a very popular option with sellers because it takes a lot of the grunt work out of selling on eBay. However, there are some major downsides to drop shipping - especially for new sellers.
Here's a list of the pros and cons of drop shipping so that you can make the right decision for your business.
Drop shipping Pros
1. No storage room required
You don't have to fill up your living room with stock and packing materials! This is particularly useful if you are selling large items such as kit-sets, furniture, sporting goods, and so on.
2. No shipping costs getting stock delivered from the distributor
Drop shipping means you don't have to pay a carrier to bring stock from the distributor to your own storage area, which can mean big savings in the long term.
3. Spend more time on other areas of your business
You don't have to organize the packing and postage system, nor do you have to drive to the post shop each day to post your packages. This gives you a significant increase in time to spend on other tasks such as marketing and communicating with customers.
4. No packaging required
You save money by not having to order and store packaging materials.
Drop shipping Cons
1. Can be Costly
You have to pay for the cost of the labor and materials involved in drop shipping. Generally this is between $2 and $5 per item. Many new sellers find that the additional costs of drop shipping greatly reduce their profit margins and sometimes nullify the whole operation. This is the main reason why drop shipping is not a viable option for some sellers.
2. You are still responsible for any shipping problems
So the item arrived damaged? Was there a shipping delay? You'll get the flak for anything that goes wrong with the shipping even though it is technically out of your control.
3. Hard to find a distributor who will do it and do it well
Many distributors will not drop ship because of the extra paperwork involved. Then there is the matter of checking up on quality standards to make sure your items are being packed correctly.
4. Low stock levels may cause unhappy customers
Your drop shipper won't necessarily tell you when they are running low on stock. If they run out and have to do a back order, you may end up spending a great deal of time placating a bunch of unhappy and impatient customers.
Drop shipping is a very appealing prospect for many sellers; however it is not always a realistic one. Despite the hassle, 'doing it yourself' can often be a more sensible option financially, especially for new businesses.
About the Author: SaleHoo is one of the fastest growing product sourcing portals on the internet. It contains a database of drop ship, wholesale, closeout and manufacturing suppliers offering thousands of product suppliers to consumers! Located at http://www.salehoo.com, visitors are allowed to sign up for unlimited and lifetime access to the completely searchable database of products and suppliers. The database is regularly updated, ensuring that the latest retail products are always available for purchase and SaleHoo carries the BBB Reliability Seal!
What is Affiliate Marketing?
Affiliate marketing is a method of promoting web businesses in which an affiliate is rewarded for every visitor, subscriber, customer, and (or) sale provided through his or her efforts. It is a modern variation of the practice of paying a finder's fee for the introduction of new clients to a business. Compensation may be made based on a certain value for each visit (Pay per click), registrant (Pay per lead), or a commission for each customer or sale (Pay per sale), or any combination.
Merchants like affiliate marketing because it is a "pay for performance model", meaning the merchant does not incur a marketing expense unless results are realized.
Some e-commerce sites run their own affiliate programs while other e-commerce vendors use third party services provided by intermediaries to track traffic or sales that are referred from affiliates. Some businesses owe much of their growth and success to this marketing technique, although research has shown in general the increase to be approximately 15-20% of online revenue
Merchants like affiliate marketing because it is a "pay for performance model", meaning the merchant does not incur a marketing expense unless results are realized.
Some e-commerce sites run their own affiliate programs while other e-commerce vendors use third party services provided by intermediaries to track traffic or sales that are referred from affiliates. Some businesses owe much of their growth and success to this marketing technique, although research has shown in general the increase to be approximately 15-20% of online revenue
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