Several retail businesses operating on the internet are actually utilizing drop shipping which takes care of half of the job for the business owner. As you may already know, in the drop shipping business the retailer links up with the wholesaler whose products the former tries to sell for a profit. The wholesaler’s job is to provide the supply and deliver this to the customers who place their orders to the retailer. The customers would not know that the retailer they are dealing with is simply an independent agent and the retailer behaves as if he has control over the products that he sells.
For anyone who does not have a capital to operate a store, the drop shipping business provides an opportunity for them to own a business that would otherwise be impossible without this kind of resource. Drop shipping eliminates certain requirements that would be too costly for a small business owner like the availability of a warehouse where supplies are kept until they are purchased, a huge supply of stocks and the manpower to manage the stocks and their shipment to the customers.
If you are among the many hopefuls who intend to use drop shipping for their business, you must first be aware of what you are getting into. The reason that you have decided to use drop shipping is that you think this is an easy way to earn money. This may be true but to avoid any surprises in the future, it is good to know the costs involved in drop shipping a product.
Before agreeing to work with a drop shipper, know in advance the costs that will be passed on to you by the drop shipper when a product is shipped to your customers. Expect that different drop shippers will charge you differently for their services. Some drop shippers, will include an additional fee on top of the cost of the product and the drop shipping charge while others would only charge for the cost of product and shipping. Other companies will charge a membership fee in the beginning but this will be returned to you after you have made several sales.
In order for you to calculate your expenses and profits for every sale, ask the drop shipper for an itemized list of charges just to be clear. Know how much will be the cost of the product, the shipping and if there are taxes. Some states actually charge an additional tax on purchases so you really need to know all possible expenses that you will incur when you drop ship. Find out also whether you will be billed monthly or if you will need to pay as orders are placed.
Another important matter that you must not leave out is the drop shipper’s return policy. From the very beginning understand the policies that the drop shipper has on returned and damaged items. Some will accept returned items due to damage while others will not. If there is no return policy then you know that when a customer sends back a product, that will have to be factored in your expenses. It would be much better if you ask for a written policy so you can browse through the details and perhaps you may even inform your customers about a no-return policy so that you do not have to shoulder additional costs for returned products.
As a final word of advice, be careful in choosing a drop shipper because not all are real and legitimate. You may check a drop shipper from the Better Business Bureau to find out if there had been any complaints filed against it.