Drop shipping is an order fulfillment method of doing business whereby the seller uses a third party vendor to supply the customer with the goods purchased. Let’s look at an example. Adam lists Peachtree Pro Accounting 2011 on Ebay. Adam does not possess any Peachtree Complete Accounting 2011 software. Bob sees Adam’s listing and buys one. Adam then orders 1 Peachtree Complete Accounting 2011 from a drop shipper. Adam pays the drop shipper and provides him or her with Bob’s shipping address. The drop shipper then ships Bob his package and the transaction is complete.

In the above example, Adam’s profits would be the difference between what Bob paid for the item and what the drop shipper charged (less Ebay fees of course). The obvious benefit for the seller is that he does not have to keep inventory.

If you have any experience in the business of reselling anything, you know that inventory expenses are a significant part of your costs. Inventory is an investment. If an item doesn’t sell, you lose money. With drop shipping, if something does not sell, you don’t make any money, and there is a big difference. The risk is transferred to someone else.

As with everything else, there’s a catch. When you drop ship an item, you are counting upon a third party to provide your customer with the item she ordered, in the conditions she is expecting, and in a timely fashion. Your reputation and your business depend upon it. With that said, it is of the utmost importance that you only form relationships with reputable and dependable businesses.
Reputable drop shipping companied are found in the same way as any other reputable business is found. Do your homework. Use the Better Business Bureau; talk with manufacturers and resellers in your product category, etc. Put all of the effort into finding companies to deal with as it deserves. That may sound vague, but it is true. It depends upon how much it means to you to be a success in business using this type of order fulfillment. Don’t expect anyone to hand over to [spin] you with the names of the businesses they use to fill their orders. Most people won’t want the added competition.

Beware of the list sellers! There are many people out there, especially on Ebay, selling lists of drop shipping companies. For the most part these lists are useless. Finding a Dependable Suppliers willing to drop ship for you isn’t [spin]difficult . Finding ones to drop ship for you who sell their products at prices that allow you to make a profit is the difficult part.

Many companies will charge you for memberships in order to access their drop shipping services. Many times, you will have to join and pay in order to view their prices. Don’t do it. The prices that they offer will not allow you to sell at a profit. Some companies will give you a free trial period before you join. At least that way, you can make an informed decision. Personally, I do not pay to access anyone’s products and I do not recommend it. With that said, many companies will charge a small, per order fee, for drop shipped orders. Usually, this fee is only a couple of dollars to cover the additional expenses associated with drop shipping.
Drop shipping is a valuable way of handling order fulfillment and inventory management issues for small businesses. If done properly , this business model can be a success for both the vendor and the customer.

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