Archive for May, 2009
If you’re in the business of buying goods wholesale, chances are a lot of those goods are being imported from Asian countries like China, Vietnam or Thailand. When you buy wholesale lots of these goods, you may either be getting them from a distributor here in the US, or direct from a manufacturer in Asia, or you may even decide to go there and get them yourself. Regardless, it is educational to take a look at where a lot of these items come from.
The goods you buy wholesale may originate from two decidedly different types of suppliers. You may be buying them from a distributor or a wholesaler, but where do they come from to begin with? Who makes them? In some cases, your imports come from mid-size to large manufacturers, who cater specifically to the wholesaler/importer market. These mass-produced goods may be of good quality, but they are, after all, mass-produced. More unique and original goods can also be had from the second type of supplier, and this is the individual craftsperson who sells their products in a large bazaar. A surprising number of the goods found in online stores, retail shops and on offer from wholesale distributors actually originates from an individual craftsperson’s simple back-room workbench.
Take jewelry, for example. Outside of the more costly fine jewelry that incorporates diamonds, rubies and emeralds, most ordinary costume jewelry and jewelry that uses semi-precious stones are made by individuals, who sell their goods in bazaars. These are for the most part, not large companies. They are either very small operations with just a few people, or in many cases, just a single person. Many such goods are sold in the big, bustling bazaars of Asia’s back streets, where dealers spend their time collecting large quantities of these goods for export. Let’s take a look at one of them.
In Bangkok, the world-famous Chatujak Market contains goods that often find their way to shops all across America. Looking for attractive, inexpensive, genuine fresh-water pearls? You can find them here at surprisingly low prices. Imagine if you will, a small vendor stall, no more than 10 feet by 10 feet, with pearls hanging everywhere. The vendor is also the jeweler, who will custom-make a pearl necklace for you to your exact specifications. He is sitting in the back of his stall eating noodles. There are hundreds of people walking by, and it’s hard to even get up to the counter, and when you do, you notice a live chicken standing on top of the vendor’s workbench. You pick out the silver clasp and the quality of pearl. He shoos away the chicken and gets to work, and ten minutes later, you have your necklace.
Besides freshwater pearls, you can find virtually anything and everything there. There are thousands of vendors in this sprawling center of commerce, with goods ideal for import—including costume jewelry, handbags, and wallets made from leather, snakeskin, alligator, and stingray. There are dozens of vendors selling silk scarves, cashmere pashminas, and decorative batiks from India.
Chatujak is visited by tourists and locals alike, but there are quite a large number of importers, individuals who run import shops back home, wholesale distributors, and online merchants who visit as well, searching for unique items. The number of people buying in large bulk quantities is so great that there are several shipping companies right there in the bazaar who will take your goods and ship them back to your stateside location. As you shop, you can continue returning to the shipping stall to drop off your goods until you’re done.
Whether you go in person or purchase them through a distributor, these highly unique and creative items made by craftspeople—and not mass-produced—present an excellent opportunity for highly saleable goods that you can acquire at very reasonable prices.
Beginners in the wholesale/retail business often look for a simple formula for figuring a standard markup. Should you double the price? Multiply your cost by four? By ten? If only it were that simple. Many beginners search in vain for a simple formula like this, only to find out that in the end, it just doesn’t exist.
There’s really two parts to figuring markup. One is mathematical, and the other is just knowing your market. You may for example, have a standard rule of thumb of marking things up by three. But what if that item that cost you $10 won’t bear a $30 price tag? There may well be dozens of other web sites selling the same item for $20. As such, it’s really an individualized process for which no set formula can always apply. Besides just doing the math, you have to have a “feel” for what your product is really worth.
You may have heard the term “keystone pricing,” and this again is a rule that doesn’t have to be kept all the time. But, it can be a useful guideline. Keystone pricing simply doubles the cost to set the retail price. It’s an easy way to set prices, and if you’re doing a reasonable volume, should cover your costs–but it’s just not practical to depend on a simplistic method like keystoning for everything in your catalog.
Here’s an example: Suppose you take a trip to Thailand, and bring back a suitcase full of earrings. You can buy very nice earrings in the wholesale bazaars in Bangkok for about 50 cents a pair–and not the cheap plastic ones, either. They’re hand-made and quite attractive. Keystoning would set a price for a dollar a pair, which is very much under par for the market for good costume jewelry earrings. You can easily sell them for up to five dollars a pair, which means you’re multiplying your basic cost by ten.
If you’re selling goods you bought wholesale from a manufacturer, they may have a “manufacturer’s suggested retail price” (MSRP), which is their suggestion to you for your selling price. This too, is practical only sometimes. In the Internet world, competition is fierce, and there will be other vendors selling at below MSRP. Also, some less-than-reputable wholesalers may suggest unrealistic MSRPs just to get you excited about the product. Look at the MSRP and keep it in mind as a guideline–but then do your competitive research and see what others are selling it for.
Before you move forward with your business idea you need to consider the legal ramifications of your business. It is important to contact a lawyer or read through internet laws. Cybersquatting laws, for example, were put into affect in 1999 and help protect domain names and other online property from copyright infringement. You can read through the laws on your own but getting a lawyer to guide you through the perils of online business is probably best. Aside from copyright and trademark laws you need to consider incorporation, contracts and licenses. It is not as easy as “setup a website and sell stuff”.
Start-up Costs should also be a major consideration when starting up an online business. While it is cheaper to begin an online business than to set up a physical store there are still costs associated with the start up of the business. One has to find the right web hosting and pay for the domain name before the business can ever get off the ground. Web hosting is a monthly cost and can range from a few dollars to about $100 a month, depending on the hosting site and the package you choose. Most beginner businesses can get away with lower hosting fees but will likely need to upgrade as the business grows.
Most online businesses will also find that the design of the web space is as important as the product itself. A poorly put together web site will not generate the same sales as a beautifully designed and easy to navigate space. If you were starting up a physical retail site you wouldn’t simply slap a sign on the front of a garage and call it a store. You would spend time decorating, painting and design the space with customers in mind. The same needs to be done for a website. It needs to be appealing to the eye and easy to navigate so customers don’t get lost along the way. Most online business owners should consider hiring a web designer to get the site functional. Designers can cost a few hundred dollars to a few thousand dollars. If you are looking to go with a low-budget designer you should check colleges with graphic design or web design programs. The students will be much cheaper than designers who have years of experience and their work will still be good, plus you will be helping a young designer add to their resume.
Finally you can’t expect your business to blossom overnight. It is not going to happen and thinking that it will eventually leads to regret and unhappiness. You will need to put a good amount of time into marketing online to get people to visit your site and it might take time before people decide to buy your products. You need to get your name out there to your targeted demographic. Luckily online marketing can be fairly cheap, but it does take some serious time and dedication.
These are the most basic things you need to consider before starting your online business but if you do take serious time to consider the basics you will form a sound foundation for which your business can grow and prosper.
Online business are cheaper to start up and have fewer overhead costs than traditional physical retailers. A business owner can start an online business directly out of their home. All that is needed is a spare room, some computer equipment and products that online consumers want to buy. The online shopping sector has basically exploded in the last five years and there is still more room for business owners to jump in, even this late in the game.
Ten years ago online shopping was just beginning to find a place in the retail world. People were still leery about the prospect of placing their credit card information online and most still preferred to go to stores to see the product they were buying. This was not a good thing for the online sector and most small online businesses could not get off the ground, but times have changed significantly. According to Nielsen research the online shopping sector has seen significant growth for the last five years. Statistics from February of this year showed that online shopping grew 13% despite the troubled economy and the downward spiral of physical shopping sales.
In an economy when retail is looking grim the online sector is the silver lining and individuals looking to start up an online business have a pretty bright prognosis. Online shopping is obviously a huge part of the retail pie right now and it looks like it will continue to grow in years to come. People are comfortable with the internet and online shopping so those who are jumping into the sector as a business now have part of their work done for them already. While online retailers still need to work to gain the trust of consumers via good reviews and feedback the basic foundation of trust already exists.
Word of mouth also spreads more readily in the online sector. The Kelsey Group found that online shoppers are more likely than retail shoppers to shop based on the advice of online social networking communities. In 2008 there were some 82.5 million user generated content about online shopping sites and 116 million people searching for that information. While word of mouth has always been a basic principle of marketing the online sector opens that up significantly as people are taking the advice of relative strangers on the internet. If you do good business with one party the word of mouth can spread quickly and widely across internet users; the exact people you are trying to target.
If you need more prove of how easy the online market is to penetrate all you need to do is look at the companies that have flourished on the net. When Amazon began it’s rise to fame it was an online book retailer based out of a garage in Seattle, Washington. Ebay started as small auction site with a garage sale mentality. Ebay is now the number 1 auction website in the world and does millions of dollars worth of business every day.
What is drop shipping?
Simply put, drop shipping is a method used in online retail or e-commerce ventures that requires wholesale suppliers, or drop shippers, to send products directly from a warehouse to an individual customer. The retailer sends the details of individual orders via fax or email to the supplier, and the supplier processes, packages, and ships the item in order to complete the purchasing cycle. The retailer receives the difference between the retail price and the wholesale price for profit. Online retail companies and e-commerce businesses generally opt for this retailing method when they have neither the space nor the desire to physically house inventory or keep stock.
What are the advantages of drop shipping?
Drop shipping boasts a number of advantages that are not commonly experienced with traditional retail methods. When you opt to drop ship products, you relinquish the responsibility of having to purchase and house inventory. You simply receive and process orders, which are then filled by the respective supplier. Drop shipping affords retailers the opportunity of reducing overhead by eliminating the need to invest in stock, and by minimizing shipping and delivery charges. Further, as a retailer, you can instantaneously add SKUs and products to your website without waiting for the delivery of bulk quantities. Because of this, you can essentially create a limitless product catalog, if that aspect fits into your business model.
How do I find suppliers that will drop ship product?
In order to locate suppliers that will drop ship product, there are a number of resources to investigate. Search high and low online for reliable sources and directories dedicated to providing relevant and updated information about wholesale suppliers and drop shippers. Attend trade shows to meet and greet with industry executives and sales representatives within pertinent product categories. Scour competitor websites to see which supplier lines they’re partnered with and incorporate this information into your own business plan.
What should I look for in a relationship with a drop ship supplier?
In order to create a sustainable and profitable business, you will want to partner with drop ship suppliers that understand your goals and that can successfully address your needs. Veer away from establishing relationships with partners that will add extra shipping, delivery, or drop ship fees to each individual order. Work with drop ship suppliers that can provide you with product guarantees or warranties. Find wholesalers that will effectively handle returns and refunds so that these processes don’t consume your resources. Choose partners that are familiar with the nuances of the business and that can provide superior service and support to your staff.
How do I start my drop shipping business?
Once you have identified a niche market and set up drop ship supplier relationships, you can effectively develop your virtual storefront. Request images, product details, features, and specifications from your suppliers. Upload the product content to your website and create a user-friendly and drop ship friendly shopping cart. Consider investing a portion of your resources into creating keyword or pay-per-click campaigns in order to drive traffic to your site. Receive orders and send the details to the respective drop ship supplier, and repeat the process time and again!
If sustaining an e-commerce business were a simple undertaking, then everyone would be investing time into creating a virtual storefront in order to sell other peoples’ products for guaranteed profit. While developing an online business is certainly an appealing and intriguing challenge, it does require intense research and planning. Sure, there are a plethora of goods available for drop shipping, but this doesn’t necessarily mean that you’ll end up with a lucrative business. From discovering a niche market to finding authorized wholesale suppliers or drop shippers to selling profitable products, there are a number of elements to consider as you determine types of products to drop ship.
Because the markets for consumer and commercial goods alike are heavily crowded, it is becoming increasingly important to perform vast amounts of research prior to delving into an e-commerce venture. One solution is to identify niche markets that boast the potential to be effectively marketed online. Consumer electronics, media, and clothing reflect markets that are already heavily saturated throughout both brick and mortar and online storefronts. As you outline your business plan, you’ll want to design a site that functions as a one-stop-shop for your consumers. Discover a niche market with a strong demand that will allow you to drop ship everything that your audience may need within a particular product category. This is a tactic that will allow you to increase your sales while effectively retaining and servicing your consumers.
Once you have a clear idea of how to set up your virtual storefront, you’ll need to find reliable partners to drop ship your orders. Seek out authorized wholesale suppliers and reputable drop shippers in order to reduce the risk of miscommunication and added costs. Every penny counts when you’re trying to establish and sustain a profitable business. Find drop shippers that won’t tack on additional shipping, delivery, or drop ship fees to individual orders. Do your research in regard to drop ship supplier damage ratings in order to minimize potential setbacks before you even begin a relationship.
Perhaps most importantly, find a category of products with the potential to reward you with an exorbitant amount of profits. Of course this is easier said than done, but at the very least, stay away from low margin product categories or lines. If you’re going to become involved in the business of drop shipping, then it is imperative that you find a product category that can be retailed at double or triple the wholesale price, so that you can cover your overhead costs while simultaneously making the money that you had anticipated at the onset of your venture.
Finding products to drop ship is not much of an issue these days, but discovering niche markets with a strong demand in consumer or commercial markets is becoming more of a challenge. Do your research and identify niche product categories that have an online audience, that promise profitable margins, that can provide you with the opportunity to become a major player and authority, and that will inevitably expand in scope and size over time. Together, these elements boast the potential to reward you with a lucrative business.
While an original concept and a market demand for a specific niche of products command the attention of your business endeavors, so to do a variety of other business aspects. Drop shipping represents one facet that you should research as you begin to incorporate strategic elements into your business plan. By leveraging the benefits and opportunities provided to you through drop shipping, you can focus on effectively building and developing your business. Solid supplier relationships, a continually expanding product catalog, and preserved capital each represent factors critical to achieving e-commerce success.
A focus on solidifying drop ship supplier relationships should be at the top of your list as you identify ways to continually build and develop your drop ship business. Proven sales records and trustworthy supplier relationships can reward your business with a number of unique propositions. From wholesale price breaks to exclusive deals and promotional opportunities, your continued success with a particular product line can lead to an increase in margin points, profits, and sales. Further, because suppliers are generally aligned with more than one merchant or retailer, they can typically produce accurate top-seller lists. Such lists function to help you effectively direct your marketing and advertising efforts toward product categories and collections that are more likely to convert into sales as well as to remain aligned with current product trends.
Using drop shipping as an integral part of your business model can assist you in creating a virtually limitless product catalog. So long as you’ve properly nurtured your supplier relationships, you can likely anticipate an expansive product offering. An extensive product line can translate into higher conversion rates, average order sizes, and overall sales if the selection is efficiently organized. Further, because you are freed of the need to house inventory, you can alter your online catalog at will. Instantly add best-selling SKUs instead of having to wait for bulk inventory quantities, and add items that will appeal to multiple and greater audiences.
Because drop shipping allows you to effectively reduce overhead and preserve valuable resources, you have more flexibility to test new initiatives, ideas, and efforts. In doing so, you just may stumble upon a strategy or method that can ignite the future of your business. Further, because you are not responsible for physically tracking, packaging, or shipping product, you may have the resources necessary to establish multiple satellite offices should that more effectively suit your business goals. The overhead reduction that you immediately experience as a result of utilizing the benefits of drop shipping readily allows for vast opportunity.
Allow the element of drop shipping to afford your business the opportunity of maximizing revenues and profits. Build and develop your foundation by solidifying supplier relationships in order to create an expansive product catalog that targets various audiences, markets, and sectors. Take advantage of the reduction in overhead to test out and implement new initiatives in order to successfully grow your business. While drop shipping is just one aspect to factor in when considering expansion, it is a pivotal element to bear in mind as you increase the scope and size of your business.
Your drop shipping business will only be as successful as the relationships that you pursue and develop. The status of these relationships is essential to the core, growth, and success of your overall business strategy and mission. Being personable rarely, if ever, causes harm or detriment to the nature of a relationship. Make an effort to properly introduce yourself to your business partners. Not only will this demonstrate common courtesy, but it will also enable both parties to begin the partnership on the same page and to start off your relationship with common interests and goals in mind.
Because of the sheer nature of your business model, you’ll likely have more communication with your suppliers than you would if you were keeping stock. For this reason, it is imperative that you take the time to personally introduce yourself to your suppliers so that you may outline your interests and goals with them. From particular products to sell to anticipated monthly sales volumes to how you’re working on promoting and developing your business, it’s a wise idea to get your suppliers involved. Eventually, as your business expands and your employee roster increases, you may want your suppliers to come in to conduct product demonstrations and trainings to effectively educate your sales staff. Further, order status, inventory status, and delivery status are all pieces of information that you’ll need to have confirmed by your drop ship suppliers prior to passing along feedback to your consumers. You may find yourself in contact with your suppliers multiple times each day, which is not uncommon depending upon the size of your product offering and customer base. For this reason alone, it is logical to build a strong relationship with your suppliers.
As your drop ship supplier relationships develop and your volume of sales increases, you may experience unique perks and exclusive merchant benefits. If you have proven to a supplier that you can provide an effective outlet or venue for increasing product sales, then the supplier will likely want to increase product selection and maximize visibility on your site. The math is quite simple on this one, more products provide opportunities for additional sales. A mutually beneficial relationship is synonymous with a happy partnership. In addition to an expanded product offering, drop ship suppliers may consider you a candidate for wholesale price breaks. Wholesale price breaks do not necessarily need to be reflected in retail pricing. You can use this opportunity as a chance to increase margin points and profit on relevant products, or you can pay it forward and reward your consumers with an equal discount. If you continue to prove your sales track record with particular suppliers, then they may even approach you with private label proposals and other unique promotional opportunities.
Leverage the opportunities that a drop shipping business model provides in order to strategically build supplier relationships. Solid supplier relationships can effectively increase merchant advantages while simultaneously positively impacting the overall consumer experience courtesy of timely and relevant communication. Afford your company the chance of becoming half of a mutually beneficial partnership by working hard to solidify and develop reliable drop ship supplier relationships.
Profit, profit, profit. That simple six-letter, two-syllable word represents the pot of gold at the end of the rainbow for every online retailer, entrepreneur, and e-commerce venture. After accounting for all of your operating expenses and overhead, you can effectively calculate your profits. If this number discourages you or creates stress on your business, then it’s probably time to revamp your business model. By reducing your overhead costs, you can significantly increase your profit margins. Drop shipping reflects a practical and effective solution for trimming expenses and ultimately creating a more sustainable business.
If you’re starting extremely small, then at the most basic level, you’ll need a computer, virtual storefront, phone, and a handful of reliable drop ship supplier partnerships. As your product offering expands, your conversion rate increases, and your site matures in the search engine result pages, then your sales will inevitably increase. Given, of course, that you’ve launched a functional site with a product that will sell. In this capacity, drop shipping creates a way for you to gain capital from your customers while preserving the capital that you’ve already earned.
Selling other peoples’ products without having to house inventory represents a brilliant way to grow and develop an online business. Without having to invest in warehouse space, you relinquish your responsibility of keeping stock and tracking inventory. Drop shipping also alleviates the burden of packaging and shipping orders. These two elements alone can drastically reduce overhead and can positively impact your bottom line. Because you don’t need to allocate resources to fulfill warehouse capacities, you can invest your resources into more rewarding efforts. Hire a team of knowledgeable sales and service employees to help you effectively increase your average order size and number of sales. Implement a team of strategic marketers to help you analyze how to increase conversion rate and to determine where to add more products or product categories. Use your new profits to maximize your advertising efforts.
Since you will not be responsible for keeping stock, you reduce the risk of dealing with product that do not sell. Instead of finding a way to move discontinued product or poor sellers, you can either feature a limited time sale on your site or simply remove the SKUs from your product offering. Conversely, if you discover a top-selling item that you’re not currently carrying, you do not have to wait for a manufacturer to ship you a bulk order of the desired item. Instead, you can instantaneously add the SKU once you have the relevant information entered into your system, and you can then immediately capitalize on product sales. Lack of lag time and prompt additions can easily translate into higher profits.
While you certainly need to give or invest in order to gain and receive in the business world, drop shipping can help you to increase your sales and preserve your capital while maximizing your revenues and profits. Leverage the advantages of drop shipping in order to increase your profit margins, develop your business, and become a major player in a lucrative market.
Starting a business these days is a bit easier and more streamlined than it was just a few decades ago. The solution? The Internet and the ability to drop ship product. Without having to invest in actual retail space and the overhead that comes with it, you’ve already saved yourself a sizable chunk of change by eliminating a variety of costly resources. But, how do you actually create a sustainable e-commerce business? From performing market research to establishing relationships with reliable drop shipping wholesalers to effectively developing an organized and optimized site, there are a number of factors to consider prior to simply launching an online storefront.
Performing market research is an essential step when creating any business, but may be even more important when developing an online business. Since you will not be housing inventory, you must familiarize yourself with every aspect of your potential product offering. You must first decide upon a product or niche of products to market and sell. From here, it is imperative that you get a feel for the competitive landscape. Is the market for your product already heavily saturated or is there still a strong demand? What type of mark-up will your audience allow? Will your product offering translate into legitimate profits? If you’re one of the first retailers to consider marketing this particular product, are you confident in your ability to sell it and to sell it well? Will your product offering appeal to both consumer and business-to-business markets? Leverage the results of your findings to help you make tactical and strategic decisions as you develop your business plan.
Once you have established the type of product that you will be marketing, you will need to find reliable drop ship distributors. Attend trade shows to connect with industry executives and sales representatives as well as to view product first-hand. Conduct in-depth online research to find specific information about particular suppliers, and decide if their services and policies fit into your business model and mesh with your needs. Are product lead times and delivery times reasonable? Is the order fulfillment rate high and consistent? Are damage ratings low and lost in transit occurrences rare? The ability of your drop shipping companies to meet your deadlines will ultimately determine the success of your business.
Upon establishing what you’ll be selling and whom you’ll be working with, you can work on creating your virtual storefront. Request high-resolution images and detailed product specifications and features from each drop ship supplier. Ask for additional collateral and reference materials to provide to your service team so that they can effectively assist consumers as well as positively impact the development of your business. Create an organized site with superior functionality and intuitive navigation in order to provide your consumers with the ultimate online purchasing experience.
Initiating the development of a drop shipping business can eventually reward you with a lucrativeness. Market research, profitable products, reliable partners, and a solid virtual storefront each represent elements essential to achieving both drop ship and e-commerce success.