One of the great things about drop shipping is all the shipping and returns are done by the suppliers which means a dropshipping business can be run from anywhere in the world. It is also much easier to scale up a drop ship business than a traditional importing business as you don’t need to pre-purchase anything upfront. You don’t need a warehouse, and you don’t even need any local staff. Just so we’re on the same page, the term ‘drop shipping’ means passing all orders direct to your suppliers. So your supplier ships your orders direct to your customers.
The great thing with this strategy is you can have one or more virtual assistants working for you in say the Philippines and they process all your orders for you and then your suppliers do all the hard work of boxing up the orders and shipping them to your customers. This of course frees up your time to do more constructive things like building your business. As a KPI (key performance indicator) you should always be spending 10% of your profits on outsourced virtual assistants as your virtual assistants become the engine that powers your business and just as importantly, your virtual assistants grow your business for you.
Another word by the way for drop shipping in the industry is ‘virtual inventory’. It’s called virtual inventory as you don’t keep the stock on hand but instead use your supplier’s inventory. One of the reasons there has been the big movement to drop shipping in the last 12 months is in the past one of the biggest dangers with drop shipping was overselling inventory and this of course was caused by suppliers running out of stock. Thankfully though technology has rapidly moved forward we can now purchase from just suppliers who have websites which show when items run out of stock.
You can then use virtual assistants or software to continually check your supplier’s websites to make sure the items are still in stock and if they run out, the VA or software can automatically make your listings on say eBay go to zero. This has been a complete game changer for drop shipping. Now, just on suppliers most people when they start drop shipping want to purchase from wholesalers and distributors but the reality is most wholesalers and distributors do not want to ship one item to 1 of your customers.
A true wholesaler or distributor wants to ship 50 100 or 1000 pieces at a time, not one piece to 1 of your customers. For this reason, over 90% of online drop ship sellers just use online retailers. You can use any online retailer which meets the following four criteria.
- The first criteria for suppliers is they must be located in the country you are building the business.
- The second criteria for suppliers are they must have a dynamic website which shows whether or not items are in stock.
- The third criteria are the supplier must do what we call ‘electronic invoicing’ and that is they email you the invoice and don’t put the invoice in the box. Obviously if you sold an item for say $500 and the customer receives the item and it has an invoice in the box for say $300, the customer gets upset, because they see you made a $200 profit and they obviously are going to get upset.
- The fourth and last criteria is the supplier must dispatch the item within two business days.