Drop shipping puts the virtual in virtual store

Filed in archive How-to on July 11, 2006

A while ago I promised readers a post on drop shipping and have been derelict in getting to it because of pressing business.

Simply put, drop shipping is a technique allowing retail businesses to place single orders for merchandise with wholesalers after they have already sold the item to a customer.

Properly done, it can put the virtual in your virtual store/home based business because the process allows you to forgo not only the overhead of a physical brick and mortar retail location but even the maintaining of the inventory you sell in that store.

Of course, drop shipping can be used in more traditional mail out catalogues and other applications, but the principle remains the same and is tailor made for the bootstrap retailer seeking to minimize start-up cost.

About.com expert Ana Rincon offers these suggestions:

1. First, you must find a product that will sell in sufficient quantity and at a sufficient mark-up to make it profitable. Just because you know of a drop shipper that sells croaking ceramic frogs at a great price, does not mean that anyone will buy them.

2. Sell only a few products, or at least make sure that the products you sell are related and targeted at the same market.

3. Find a reputable supplier... There are middlemen posing as drop shippers who will charge you more than you need to pay.

4. Be prepared to deal with backorders and returns. Just because some of the hassles of online business are eliminated with drop shipping, not all of them are.

5. Treat this like a real business. Don't SPAM, don't use a personal or free Web page address for your store, register with your County Clerk, get a Tax ID number, and be prepared to file taxes.

Though Rincon and home business blogger Frank Ross both recommend Worldwide Brands as a reliable directory of drop ship suppliers, Ross points out that, with a bit of effort, you can also find your own. Frank explains:

Any real wholesaler can be a drop shipper provided they will (a) sell in quantities as low as one and (b) ship directly to your customer. You can ask any wholesale supplier representative and they'll tell you. Start with (a), then ask (b). Many times you won't get past (a) because they will have a minimum order policy.

Because my passions sometimes run to the tropical, here's an example from my own personal searches of what a typical home-based retailer of drop ship merchandise might look like.