Drop Shipping: A Viable Home Based Business

We have all heard of umpteen home-based business opportunities - earning a living online is the mantra of the day. But how viable is an online business system? Will this be a dream come true for every Internet entrepreneur? Will it cost you an arm and a leg? To answer these questions, let us explore a system that has worked for others - Drop Shipping.

If you have been on the lookout for those elusive online business options, you might well have heard this term. In simple layman language it means just that - you provide a service/product to your customers by arrangement with your business partners, that is, the suppliers/wholesalers. Once customers sign up for your service all you need to do is get their location details and pass it on to your supplier. He ships the product you offer at the agreed wholesale rate, while you have sold it for the retail price. Neat profit!

Now here's how you do it.

Step 1: To start with, you build a website through which you can market one or more portfolios of products.

Tip: You can also use online auction sites such as E-bay to test the interest in your product. Get a feel of the market before investing in a website.

Step 2: Now your product catalogue will vary with your target audience. Looking to sell to businessmen? You can sell stuff useful for a business. Or may be you want to try the teenage market? Try Game CDs or Harry Potter collections. Use your imagination! Try to ascertain the product's demand, and also your competition in this area and what they charge.

Step 3: Now what remains is to contact your suppliers. Do the basic investigation in your area or use the greatest research tool ever - the Internet. The best deal comes with wholesalers, so establish you partner base with care. You don't want to entangle in a joint venture where your costs will exceed your income. A thorough analysis of the income-expenditure graph should help to ensure that there is a definite and substantial profit.

Step 4: Now you begin to establish your clientele. This is perhaps the hardest part (or the easiest if you have some backing to support your marketing strategy). Internet marketing is perhaps the least trusted and also the most over-employed. Which is why you need to ensure that your product portfolio is strong. Try to drop ship only tangible products. These will generate better prospects and leads than a product that you will need to convince people about. And yes brands will sell better than lesser-known commodities.

Let's get down to the nitty gritty of this now - an illustration of how the profit margin looks should help.

Assume you have created the website to market mobile phones. Prospects who visit your site may purchase a trendy little model for say $600.

He signs up for the deal and provides his personal details, shipment information and the required credit card details (or whichever payment mode you accept) so you can charge for the service rendered.

You pass on the required information to your wholesaler or supplier.

He will then take care of the shipping to the customer, yes in your name, and charges you let's say $500.

So now you have made a cool profit of $100!Now that would have certainly gotten your attention! To extend the analysis further, it makes sense to calculate the traffic to sales ratio, especially in an online marketing scenario such as this. Now let's say the traffic to sales ratio is 2%. And on an average if about 50 customers visit your site each day - that amounts to a deal per day. Calculate on the same lines and you may well make more than a few thousand bucks a month. Not bad for a part-time job! Now if you market more aggressively you can increase the traffic range, more hits mean more business, and you stand to make a whopping profit!

Ok, sounds simple? Now there are a couple of things you might want to look at before you jump in. You can develop this business in two ways:

Option 1 is with you as the marketing and pre-sales entity. You operate as the mode of customer contact initiation and take care of collection of orders and shipment information. This way the wholesaler handles the dispatching and delivery of goods to the customer. As is obvious this is certainly the best option for a beginner, not only because it saves a lot of time and effort but also because it projects relatively a lesser risk. Your profit margin looks more attractive and simple and will amount to (Retail Price - Wholesale Price) - the supplier charges include the product as well as the shipping costs.

Option 2 is to take in the stock from the wholesaler, maintain your inventory, and deal with the packaging, dispatch and delivery of the products. In this case, the customer is dealing with you directly. You still make profit on the difference between the retail price and the wholesale rates. But your overall costs will include the additional expenditure of inventory management and shipping. Obviously this may seem like a Herculean task for the uninitiated. A beginner is best advised to try and see how feasible option 1 is before trying this method. To a seasoned marketer however this may earn better since you remove the wholesaler from the picture. You charge your price and can strike better deals and even clinch bulk orders with experience.

Tip: Since you have more liberty to decide pricing with this option, feel free to use some innovation and business acumen. Draw a better response by offering discounts or entice your client with some attractive freebies!

Remember repeat customers bring in more business, so don't aim just for customer satisfaction - endeavor for customer delight! Enchanted customers will come right back - they are your bread and butter.

Finally, whichever technique you choose, it is undeniable that Drop Shipping is certainly a legitimate and workable work-from-home opportunity. It is undoubtedly a perfectly simple and relatively uncomplicated opportunity that allows you to fully exploit the benefits of the Internet and turn your time into a profitable business. So are you ready to begin? Start with some of the website links provided and you might just land one of those glorified home business opportunity after all.