Archive for June, 2009
What is drop shipping and can I use it? Part Two
Posted by Dan Blacharski in Bulk Drop Shipping, Drop Shipping on June 30th, 2009
One of the primary benefits of drop shipping that many newcomers fail to recognize, is that you can increase your product line with different drop shippers who offer different products, and often with different countries of origin. In this way, drop shipping can be a real boon. But it depends really on knowing your drop shipper, and going the extra mile in cultivating drop shipping relationships, whether they are local or international in origin.
And therein lies the negative in drop shipping for the online retailer. You have to make the effort to cultivate those drop shipping relationships–there’s really a lot more to it than just signing up online and picking products from a catalog. If you simply dropship with someone based solely on the convenience factor, you might find yourself without product or even worse, you might find yourself without a drop shipper at all. This happens as a result of one of two things. First, if you are without product for a long period due to production delays (which will happen regardless of source, by the way), it means your drop shipping source didn’t tell you he was running low, or you didn’t make the effort to inquire as to his projected inventory or production that would affect your product lines. If you cultivate those relationships, drop shippers will tell you in advance when things are getting dicey, and they might even tell you without your inquiry. Always keep up to date on your product. Always.
Second, and even more importantly, drop shippers who have cultivated relationships with you might tell you if they are going out of business. Think of the drop shipper as your friend: a friend will tell you before he goes out of business when things are out of control, whereas the general public will not get notice until the business is already liquidated and gone. When you cultivate these overseas or local relationships, you can save a lot of headache for your business, and you can keep your product and cash flow running smoothly because you know what is coming down the road that others might not get wind of until it is too late to do anything.
Seeing the hurricane and watching the weather reports can save a world of pain long before the hurricane ever comes ashore. Take it from someone who has seen the hurricane and prepared, and from someone who didn’t plan for the coming storm and paid the price many times over.
How Tradeshow Attendance Can Fuel Your Business
Posted by Alex in Home Based Business, eBusiness on June 30th, 2009
If you’re in the business of wholesaling or an integral part of the e-commerce industry, then you’ve likely shown your face at a few tradeshows far and wide. Despite the type of product that you’re manufacturing or selling, there is almost definitely a tradeshow devoted to showcasing and highlighting your spin on an otherwise “common” product. From furniture to area rugs to tools, cookware, lighting and everything in between, many manufacturers and wholesalers set up shop in a dedicated showroom several times each year to demonstrate the value and versatility of their particular product offering.
Because product communities gather to market their updated lines and new additions a mere handful of times each year (generally quarterly), it can be a pivotal time for wholesalers and retailers alike to be caught up to speed in regard to product categories that are likely to experience significant growth trends. By attending tradeshows, you allow yourself to pick and choose from the best of the best in order to seek out a selection of products that will likely propel your overall business sales.
In addition to viewing fresh product first-hand, tradeshow attendance allows you to network with other industry professionals. Here is where you can not only catch a glimpse of product designs and ideas, but where you can also converse with experts and gain insight into styles and patterns that can positively influence your current or future product offering. These perks alone will enable you to effectively determine what is and what isn’t working for your target audience, and then allow you to capitalize on ways to capture potentially lost sales. Perhaps a particular manufacturer has designed a product that could work with a few modifications – use this opportunity as a chance to revitalize your product offering so that you can garner the interest and attention of a particular sector of your audience.
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Further, tradeshow attendance can be instrumental when it comes to branding. Getting your name out there in markets that are generally already quite saturated can help your cause significantly. Introduce yourself to prominent market players and try to solidify partnerships that boast the potential to drastically assist your brand or your goals. Showing legitimate interest in your business and in your competitors can help you to stand apart from the rest. Respect your competitors and allow their successes to aid yours. Don’t be short-sighted, look at how past mistakes have affected both your business and the industry as a whole, and work to remedy these issues.
Tradeshow attendance is critical to the overall success of a given market. These venues help to spark new ideas, new partnerships, and new market players. Wholesalers are generally looking for credible retailers to help them with their sales while retailers are seeking the same benefit. It’s this type of mutualistic relationship that enables product markets to effectively and efficiently continue to grow and develop over time.
Selecting a Wholesale Product Category
Posted by Alex in Home Based Business, Wholesale, Wholesale Sources, eBusiness on June 30th, 2009
While the business of wholesaling can result in tremendous profits, there are a number of factors to consider prior to simply beginning your company. From surveying and understanding your potential market to weighing cost factors and margins to finding a product niche that suits you and your competitive needs, there are a plethora of elements to analyze as you get started.
With so many product markets seemingly becoming increasingly over-saturated, it can be challenging to find a niche that has the bandwidth to accompany yet another fresh, new idea. However, this shouldn’t deter up and coming wholesalers from overcoming potential obstacles. Do your research and get a firm grasp on your competitive landscape. Closely monitor what competitors are doing, including concepts that have worked as well as those that have not. See if you can modify any of the less successful ideas and transform them into top-selling products. Investigate ways that will enable your line of products to stand apart from the rest. Understand what your target audience is looking for and how you may be able to modify existing products so that they more effectively appeal to your consumer base.
Does a particular product category boast more potential in terms of margin, revenues, and profits? If you’re fortunate enough to have the option to choose among several various product categories, then profit margin is what you should use as your determining factor. Because it can be difficult to differentiate your product offering from those of competitors, you’ll want to ensure that you’re earning money with the items that you’re able to sell – particularly with those items that virtually sell themselves. Further, ensure that your total costs are significantly less than the amount of which you can realistically sell a high volume of product.
While you may not be able to create a totally unique product, it’s important that your offering boasts distinct features unique to your mission. Find products that can be and distributors that are willing to dropship so that you can reduce your overhead costs. Moreover, ensure that there is substantial demand for your products and services. If there isn’t a distinct market need for what you’re hoping to sell, then cut your losses immediately, and develop an alternative business plan. Adding a new facet to a standard, convenient product can add to its resale value.
Despite your specific financial goals, it’s important to understand your market before you move forward with developing your business plan and just jumping into a product category. Make sure that you can identify potential pitfalls and drawbacks and immediately strategize ways to prevent these issues from affecting your future successes. Perhaps most importantly, refrain from spreading your resources too thin. While you may see potential in selling a vast variety of products, it’s best to start with one targeted niche and to work on expanding from there.
What is drop shipping? Part One
Posted by Dan Blacharski in Bulk Drop Shipping, Drop Shipping on June 29th, 2009
Drop shipping has garnered quite a lot of attention over the past few years, presenting an easy way to become an Internet retailer. Is it just another get-rich-quick scheme? Multi-level pyramid deal? Flash in the pan? Not really. Like anything, you do have to put some energy into it. When you first consider the concept of drop shipping, it seems remarkably simple. You don’t have to carry any inventory, and you don’t have to do any shipping. You just put up a web site, send the orders to the drop shipper, and collect the checks.
Well, it’s not really that easy, folks. Successful drop shipping involves successfully doing two things: Making a good product selection, and marketing. On the product selection front, it’s easy to just load up everything the drop shipper has to offer into your virtual catalog, but a more effective method is to create a niche for yourself—specializing in one particular area. Don’t try to be everything to everybody, because the customer will just get lost. Specialize in one area and position yourself as the expert in that area. On the second front, marketing—again, it’s easy to just put up a web site, but will anybody see it? How many web sites are out there today? With no marketing, again, it will get completely lost.
That said, drop shipping can be an effective management technique, especially for handling inventory.
Drop shipping, for the uninitiated, is a form of inventory control whereby the retailer sells his items to the customer, but instead of having a supply of the item on his shelves for immediate delivery, the retailer orders his items directly from the manufacturer or the wholesaler, who then ships them directly to the retailer’s customer. In this way, there is no need for the burden of carrying inventory. The retailer still retains his profit margin as a difference between the wholesaler’s or manufacturer’s price and that of the retailer.
Often, the final customer never knows that the retailer is drop shipping his merchandise because the retailer chooses not to disclose this up front, thereby hiding his inventory control from view. There are several ways to hide the drop shipping from customers. The best way to do this is to have the manufacturer or wholesaler ship the product with the retailer’s name and logo on the packaging slip.
The benefits are obvious: no inventory means less cost can be passed on the retail customer, and the retailer retains positive cash flow throughout the entire process. The potential downside is that it may take longer for the customer order to be fulfilled, since it’s going through a third party, there may be a backorder that the retailer is unaware of, and the retailer’s markup will not be as high as if they were sourcing, warehousing, and shipping the product direct.
In part two of this article, I will explain a few of the positives and negatives of drop shipping in more detail, and how the retailer who drop ships can benefit in the end. To be sure, there are negatives to the drop shipping idea, but they are manageable if you know how to navigate the drop shipping maze.
How To Start An Online Business With Drop Ship Services
Posted by Bob in Home Based Business, eBusiness on June 29th, 2009
If you’re thinking about starting an online business, one of the best ways you can get started is by using a dropship wholesale service. When you use a dropship wholesale service, you dramatically reduce the up front costs of starting your business. You don’t have to worry about losing money on inventory, or when a particular product stops selling.
In addition, starting an online business with dropship services can be relatively simple. There are, essentially, four main steps in the process:
- Work up your plan. It should go without saying, but a successful business needds a good business plan. Even if you’re not planning on trying to bring investors in to your business, you still need to know where you’re headed and how you plan to get there. A well-designed business plan is your own roadmap to success.
- Research and select dropship wholesale vendors. There are plenty of wholesalers out there, but some are much better than others. Do the legwork here. Choosing the right suppliers today will save you big time as your business grows. There are many aspects to choosing the right vendor, so don’t rush this process. Always have a backup plan in mind in case your primary wholesale dropship vendor doesn’t come through for you, as well.
- Create your online presence. You have several options when it comes to your online presence. You can start a simple storefront on Ebay, for example. If you’re especially adventurous, you can purchase domain hosting from a hosting provider and install your own e-commerce software. There are many factors that will go into this process, from your technical ability to the particular product or products you want to sell.
- Promote your business. Yes, it’s important to do the prep work. Yes, you want to choose your suppliers carefully, and you want your online store to look as good as it can. But at some point, the rubber has to meet the road. You need to put your online business into the top of your priority list. Here is where you make up for the fact that you don’t have all of that overhead a brick and mortar store has. You may not have to invest as much money, but you sure need to invest more time and creativity if you’re going to make it work.
Following these steps doesn’t guarantee success, but they will get you started on the right foot.
Basic Business Plan Elements For Your Online Drop Ship Business
Posted by Bob in Drop Shipping, Home Based Business, eBusiness on June 29th, 2009
Have you started, or are you thinking about starting a dropship business? If so, you need a good business plan. We’ve talked elsewhere about why a business plan is important to your dropship business, but the bottom line is that you need a roadmap to success that you can follow.
Here are some of the basic elements your dropship business needs in a business plan:
Business Description
The first thing you need in your business plan is simply a description of the business. It should cover the type of products you are going to sell, where you will find dropship wholesale suppliers, and what the basic supply chain flow looks like. In other words, this section should tell the reader what exactlybusiness does and how it works.
Market Analysis
The next thing you need in a a good business plan is the market analysis. The market analysis takes a look at the popularity of the product or products you’re selling, as well as a look at the type and amount of competition for selling that product. This can be a little bit difficult to judge fully in the online dropship business world, but you can still identify some of the other major players in your niche.
Financial Information and Projections
A good business plan will also include financial projections. You need to be able to estimate how many sales, for example, it will take to sustain the business. You need to identify specific costs for the business. While one of the big advantages to an online dropship business is that you don’t have to have a standing inventory, there are other costs involved, such as marketing your products. Being able to identify ongoing marketing costs and being able to make sales projections help you to take the fiscal pulse of your business later on down the road.
Marketing Plans
Your market study only tells part of the tale. You also need to state how you’re going to sell your product. You’ll also want to include information in your business plan about how you intend to market. You need to be able to distinguish yourself from the other online dropship businesses out there, for example. You need to have a strategy to put yourself ahead of your competition.
The Bottom Line
The better your business plan is, the better your business will be. Invest some quality time in a business plan, and it willy pay in the long run.
Verifying Wholesale Drop Ship Suppliers
Posted by Bob in Wholesale Sources on June 29th, 2009
Weeding through the available dropship suppliers for your business can, at times, be tedious. Still, if you want to make sure you have a reliable supplier who can provide your customers the right product at a price that allows you to make a profit, you need to go through the process. While you can obviously lessen your workload by finding a reliable online database of dropship suppliers, there are some specific things you ought to do as well to verify the legitimacy of a given supplier.
How do you do that, exactly? The best approach seems to be a multi-pronged one. You start by making sure that your dropship supplier directory service is legitimate, current and reliable. They’ll weed out the worst of the worst when it comes to suppliers, and they’ll keep scammers from getting through to you, as well.
Beyond that, though, you should still do some verification on your own. For example, you might decide to run a financial report on a potential wholesale supplier. A D&B (Dunn & Bradstreet) report can tell you a lot about a company’s history, financial standing, and even their payment trends. In addition, a D&B report will give you information about the company’s creditworthiness, as well as any credit limit recommendations that D&B might recommend.
You should also consider doing a legal records search. A legal records search can turn up a number of important pieces of information about a company. For example, you can see if the supplier has filed bankruptcy. You can check to see if their are suits or liens against a company. All of these things can, and should, play some role or another in your selecting the right wholesale vendor.
While we’ve often talked here about word of mouth when it comes to wholesale suppliers, the fact of the matter is you can’t always rely only on customer recommendations. Some customers might get lucky, or a wholesale supplier might even stack the deck by providing references inside the company. Using online wholesale supplier directories, financial reports and legal searches allows you to fully trust a potential supplier before you ever do business with them.
Vetting potential suppliers in this way will save you time, money and headaches in the long run. Perhaps most important, it could save your business’ reputation and avoid losing repeat business because of a supplier that’s less than stellar.
Why Drop Ship Businesses Fail
Posted by Bob in Drop Shipping, Home Based Business, eBusiness on June 29th, 2009
If you are starting a dropship business or thinking about starting one, you need to be realistic. Statistically speaking, around half of all small businesses fail within the first three years of opening their doors. Those aren’t especially good odds. dropship businesses are different from other small businesses in a lot of ways, but this is not one of them.
Knowing why dropship businesses fail can help you avoid some of those common pitfalls and insure that your business comes out on top. There are several things to look out for:
Supplier trouble
While most businesses depend on their suppliers to one degree or another, dropship businesses depend on their suppliers for very life’s blood. Your customers’ satisfaction rises and falls, not on your ability or dedication, but on your supplier’s quality and consistency. Choosing the right dropship supplier, as we’ve said over and over again on this site, is key to your success.
Market trouble
Let’s face it, markets are fickle things. What sells today may not sell tomorrow. You might find a great niche product and sell it like hotcakes - for the first two weeks you’re selling it. Then, without warning, your sales drop to nothing. A successful dropship business can anticipate these kinds of market trends, and prepare for them when they happen. Offering a diverse selection of products can help, as well.
Financial trouble
While it’s true you don’t have the same layout of capital for a dropship business that you do for a brick and mortar store, there are expenses. Sometimes, cash flow becomes an issue. If you’re taking more money out of the business than what it needs to grow, you can find yourself hurting financially. When that happens, it can be extremely difficult to recover.
Motivation trouble
Especially if you’re running your dropship business from home part time or running it as a sole proprietorship, it can be easy to slack off a bit. After all, once you’ve got your online storefront up and your fulfillment system worked out correctly with your wholesale suppliers, there isn’t much to do other than sit back and watch sales. However, the successful dropship businessperson will work hard at other tasks, such as expanding product offerings, doing market research or even opening new dropship businesses in other niches, and never become too comfortable with the status quo.
Nail down those shipping terms ahead of time
Posted by Dan Blacharski in Home Based Business, Wholesale, Wholesale Sources, eBusiness on June 26th, 2009
Importing from a wholesaler overseas is often a superior strategy for getting goods very cheaply. Let’s face it, many of the products you are going to sell come from Asia–and the closer to the source you get, the better your wholesale price. You may get a product from a stateside distributor at what seems like a good price, but where is that distributor getting it from? Either from another distributor in Asia, or direct from the manufacturing facility. Now I’ve always advocated just going there yourself to examine and select the products in person, and then arranging shipping directly, but that is admittedly a major task, and it probably takes some foreign language skills, and believe me, languages like Thai, Mandarin, Cantonese, or Japanese are notoriously difficult to learn.
Either way, it pays to understand the shipping terms. It may well be that although you would get a better wholesale price from the Asian source, your overall cost–including shipping–may still be cheaper if you have a distributor close to you. Here’s the first thing to know: Suppose you buy a shipment of items from a source in Asia, and the terms specify “FOB Hong Kong.” That means the source is responsible for getting the goods to the port in Hong Kong, but from that point, you’re responsible for the rest of the costs.
The second thing to know is that shipping costs aren’t just what you pay the shipper. There may also be a customs tariff due upon arrival, as well as a customs bond, cargo insurance, and a clearance fee. there may also be an additional “last mile” fee involved. Where is the nearest port to your home or office? Sea freight comes into the nearest port. Your shipping fee may cover the cost of shipping from Hong Kong to San Francisco, but your office is in Nevada–so there’s an extra fee for shipping it over the last leg, unless you want to make the trip to the port and pick it up yourself.
When you calculate it all out, you may still be better off paying a slightly higher price to your stateside distributor, as opposed to going direct, especially if you are buying in smaller quantities. On a per-square-foot basis, shipping over a couple boxes from Taiwan or Bangkok is a lot more expensive than shipping an entire container load. Your distributor is getting an economy of scale on shipping, more than likely bringing items over in large containers, and as a result they don’t have to add on as much to the price when they sell it to you. Shipping cost per item may be several times more for you, if you’re just buying small amounts.
Tips for dealing with customs: Be specific
Posted by Dan Blacharski in Home Based Business, Wholesale, Wholesale Sources, eBusiness on June 25th, 2009
When you bring in goods from overseas, there are some complexities involved, and the US customs department will make your job just a little bit harder–or maybe, a lot harder, depending on how you approach it.
If you’re working with an overseas supplier, they will take care of most of the paperwork; all you’ll have to do is pay the customs bill. But if you’re overseas yourself acquiring goods, and you want to ship them back to yourself in the States, you’ll have quite a lot of paperwork to do. Your shipping company can give you a good idea of what you need, and can probably provide you with the paperwork.
You will complete a bill of goods, which shows exactly what is in the box–and here’s where a lot of importers spend unnecessary money on customs duties. On this list, you need to itemize everything. But what you need to realize is that tariffs are enormously complex, and you need to be very precise. For example, the tariff you will pay to receive a box full of cotton shirts will be different from the tariff on a box full of silk shirts. The same holds true for any item, and you always must specify as much detail as possible. Have a box of chopsticks? If you simply list it as “chopsticks,” customs may delay your shipment, because they don’t know what they’re made out of. Say “wooden chopsticks,” “ceramic chopsticks,” or “plastic chopsticks,” to be more specific. You’ll also have to specify the country of origin, failing to do so can also cause delays. And so, the tip of the day is this: Be painfully specific, even when it’s obvious. Customs officials never make assumptions, and if you don’t explicitly say what they need to know, they’ll send your paperwork back to you.
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