Drop-Shipping: Information and FAQ
- What is dropshipping?
- Who uses the dropshipping method?
- Can I make money using the dropshipping method?
- How much money can I make using the dropshipping method?
- What are the benefits of dropshipping?
- What are the downfalls of dropshipping?
- Do I need a business license to purchase from dropshipping suppliers?
- Do I need to charge sales tax from my customers?
- How is dropshipping different than becoming an affiliate?
- Where can I find legitimate dropshipping suppliers?
- What kind of products can I buy?
What is dropshipping?
The term “drop-shipping” refers to a company offering merchandise to its clients for the purpose of reselling, without the client ever handling the product(s). In other words, the client (middleman) purchases the merchandise from the drop-ship supplier at a discounted price – after they have made a sell. The supplier then ships the merchandise directly to the customer. In short, you (the reseller) never handle the merchandise, fill orders, or ship products.
Why use a dropshipper and be a middle man
Don’t get caught up with other sites telling you middlemen cut into your profits. That is the way America was built. You buy to sell to another at a marked up price until it makes it to the end-user. Most, on and off the internet are middlemen in some fashion. Wal Mart is a middle man, they buy from manufacturers in China, India, Hong Kong, and several other countries. Some of the largest online stores are middlemen. Other sites are called the source when they are only out to make money off you by selling the information they get for free, while Dropship5 gets the companies listed so you don’t have to pay for a list of these companies that might not even sell to you because you don’t have a brick storefront and $10,000.00 to start an account. If there are so many wholesale companies and manufacturers that will sell and dropship one item at a time, at wholesale prices, then why is there only one source that knows this? If it sounds too good to be true, then it just might be.
Who uses the dropship method?
Believe it or not, this method is used by even large corporations, but they have set-up an account with the manufacture and the manufacture knows they sell millions worth a year. From our knowledge, a large amount of eBay sellers use dropshipping and are resellers, most online stores use the drop-ship method. Their partnerships with some of the distributors (not manufacturers) allow them to ship orders directly to the customer. The closer you get to the manufacture, the fewer middlemen you will have to go through.
Can I make money using the dropship method?
Yes. This basic concept allows small business individuals or sole proprietors the opportunity to sell products without the high cost of purchasing inventory. You can think of the “drop-ship” method as another way of running an affiliate program. For example, you could sign-up for Amazon.com and start selling their books, cd’s, videos, etc. and earn a small commission on each sale. They will “ship” the products directly to your customer.
How much money can I make using the drop-ship method?
That’s a tough question to answer. The margins for profit are as high as you want them to be. by using a dropshipper, you don’t have to pay for multiple shipping charges that in turn creates a lower profit. The dropship method is a good way to start if you don’t have a lot of money to work with or don’t want to bother with the packaging and shipping. The amount of money you make from your business greatly depends on how much time and effort you want (or have) to put into it.
What are the pros of dropshipping?
Low overhead. You don’t need to carry any merchandise or stock an inventory. In addition, you don’t have to pay someone to package and send the merchandise. The other major benefit is the ability to operate under your own company name. If done correctly, the packaging should contain your business address on the return label.
What are the cons of dropshipping?
Using a dropshipping supplier will give your customer’s personal information to maybe use in future sales to bypass you and get a new middle man. Lower profit margins. depending on the product In some cases, the supplier will charge an additional “dropship fee,” cutting directly from your profits. This will hinder your ability to compete with others that stock the item. Subsequently, you have less control over your customer service. While your name may be on the package, it does not mean you know when the package was shipped, or if the product is in stock. Without the ability to compete price-wise, your customer service will need to be in superior form. Unfortunately, drop-shipping prevents you from offering the best possible customer service. good customer service is a must.
Do I need a business license to purchase from dropshipping suppliers?
Most drop-ship suppliers will not require proof of a business license or Federal Tax ID. However, you can check with your state business licensing office to see what licenses are required. Chances are, you may want to get a reseller’s permit, but not totally necessary at startup.
Do I need to charge sales tax from my customers?
Depending on the type of business you’re running, you may have to charge a state sales tax. These would be items sold in the same state as your business. This differs upon each state. Again, you’ll want to check with your state business office for more information. Don’t forget the federal and state taxes you must pay on the income you make. For this reason, it’s always a good idea to keep accurate records.
How is drop-shipping different than becoming an affiliate of a company?
Basically, it is the same idea. You are selling products for the supplier and earning a small commission for each item sold. The drop-ship method should allow you to operate under your own name. For example, all packages sent will have your address on the return label. Affiliate programs, in most cases, do not offer this option and you get only a small commission. Being a reseller (middle man) as most are in most cases of online selling. You have control over what your profit will be.
Where can I find legitimate dropshipping suppliers?
Find them as wholesale dropshipping companies at Dropship5. Don’t buy a wholesale list or pay for a directory when you get yours for free.
What kind of products can I buy?
All kinds of products, such as the ones listed below.
|Hardware & Tools||Kitchenware||Collectibles|
|Novelty Products||Gift Items||Toys & Games|
|Cellular Accessories||Clothing Accessories||Adult Toys|
|Art & Framed Pictures||High-Ticket Product||Fitness Products|
|Automotive Products||Books||Outdoor Gear|
|Food & Nutrition||Printing||Smartphones|
|Pet Products||Candles||Music Products|
What is Dropship5?
The website meant for everything Dropshipping related.