Starting an online based retail business is a popular choice for many individuals looking to generate income from home on a part-time or full-time basis. There are numerous ways to go about this, but one of the most cost effective methods of starting an online based retail business is to use a method known as dropshipping. Doing so allows an online business to sell products without having to stock an inventory. Here’s how it works:
There are numerous companies out there who are dropship suppliers. Basically, these are companies that have inventory of different types of products that can be purchased at wholesale prices (or perhaps just slightly higher than wholesale) without purchasing in bulk or large quantities. In essence, they do not have a minimum wholesale order requirement like most wholesalers. Once you set up an account with one of these companies, you can build an online retail store and sell the company’s product line on your website. When you make a sale, you contact the supplier, place an order for the product you just sold, and you have them ship it directly to your customer. You charge your customer retail price, the supplier charges you wholesale price, and you pocket the difference. Only a small percentage of wholesalers will offer dropshipping, so you will have to do some research.
Let’s look at an example with some numbers attached to you can see exactly how it works:
You start an online based retail business and you find a supplier that will dropship computer printers (hypothetical example). You now list all of this companies computer printers on your online store at retail price. You make a sale- someone buys a printer on your website for $79. You charge the customer the $79 plus any applicable sales tax or shipping fees and then you contact your supplier and order the same printer from them at wholesale pricing. Let’s say that is $39. They ship the printer directly to your customer and you pocket the $40 difference without ever touching the printer.
Now, it is a simple process but keep in mind that you will need to build a website, establish a merchant account with a bank so you can accept credit cards online, establish accounts with dropshippers, and most importantly, learn how to market your website. Please do not make the mistake that so many people make by thinking that simply owning an online store will make you money. In fact, the exact opposite is true. Owning an online based retail business will COST you money far before you ever MAKE any money and if you do not market your site the right way, you will have monthly expenses and no monthly income. I highly recommend that if you are contemplating this type of business, you should find a program that will teach you how to market online on a one-to-one basis (classroom type settings are usually less effective).