Can Drop Shipping Work As A Business?

Drop Shipping is often portrayed as the ideal business opportunity. You do not need to keep stock and your cash flow is always positive. Therefore, it seems to be an ideal risk and investment free way to start up in business. But what does Drop Shipping involve and can it really succeed?

Drop Shipping is acting as an agent for a supplier so that you do not need to handle the goods being sent to the customer. Customers will order from your web site and this will be passed on to the wholesaler. The supplier will ship the goods directly to the customer. Sometimes payment is made directly to the supplier with you receiving a commission. Alternatively you may receive payment directly from the customer and use this to pay the supplier.

You do not have to keep large quantities of stock and therefore do not have the problem with storage, wastage or obsolescence. You have a positive cash flow because you only pay for stock when you make a sale, often receiving credit from the supplier. Starting a Drop Shipping business requires very little investment, just a catalog or web site for a shop front. For a reasonable sum you can buy a business package that includes a ready made web site with Drop Shipping suppliers in place. This allows you to be up and running with your business very quickly.

Drop Shipping appears on the face of it to be an attractive business proposition. What then are the problems and risks that can occur? Let us assume that you have done your home work and you have been able to set up a decent web site to sell your products and that your supplier is a reputable company providing good quality items and that you are regularly updated about availability, new lines and sales promotions. You may have a promising business now, but your profits will depend on people finding your web site and buying from it.

Finding the web site will only happen if you ensure that it is well ranked by the most popular search engines. This means that you must either pay for advertising or spend a lot of time and effort cultivating your site's authority by using search engine optimization techniques. This expense or effort is not usually communicated by those who wish to sell you a Drop Shipping business plan.

If you do own a well exposed web site or are prepared to work on developing one, you will attract customers who will buy your goods that will be sent to them by Drop Shippers. Now the only things working against your business profitability is the cost you are forced to pay for the goods and the price your customers are prepared to accept. As you are only directing one sale at a time to the suppliers, the unit price is likely to be higher than if you were bulk buying actual stock from a wholesaler. This will reduce your levels of profit substantially. Add this to the fact that items that are Drop Shipped tend to saturate the market and as a result of the competition the prices fall with a knock on effect on your profits.

This results in you being more dependent on high levels of traffic to your web site to generate enough sales.

Drop Shipping is a viable business. However, like any other it depends on hard work, perseverance and not a little bit of luck. It is not an easy route to riches as often portrayed by the business opportunity web sites on the Internet.