Drop shipping is a business model you can employ to make money online. The economic and financial events of the last few years which has led to record unemployment figures has crystallised in people’s minds the need for an alternative source of income.

You’ve probably heard or read stories of people making a fortune online. The truth is that there are many ways to make money online and each has its pros and cons. Today I want to introduce you to a business model for making money online that involves minimum cost and risk. That business model is called Drop shipping.

So what is drop shipping?

Drop shipping is simply a process whereby you as an online retailer receive payment for an order (from your customer) but the product is delivered to your customer straight from the manufacturer. In a sense, you’re acting as a middleman between the customer and the manufacturer/supplier. You make your profit from the difference between the wholesale price of the product which you pay the manufacturer and the amount paid to you by the customer.

Below are 5 reasons why I believe this is a business model you adopt if you’re considering starting an online venture.

1. Low Start up costs

In a typical brick and mortar business, you would have to consider the cost of electricity, gas, insurance, rent, water rates, hiring staff, stocking up etc and the list goes on. These essential factors necessary to start a business do not only cost you money but time. Time you could spend in more profitable activities like marketing to attract more customers and serving your customers better.

However with a Drop shipping business you only have to consider getting a domain name, a web host, a store builder and finding a supplier. While a brick and mortar business could knock you back by several thousands of dollars, you could easily spend as little as a few hundred dollars in setting up your Drop shipping business online.

2. No Inventory to worry about

Most retailers will tell you that one of their most tough challenges is shifting stock that has not been bought. Just imagine if you were a designer clothes retailer and you bought a line of merchandise (for $45,000 or more) that was no longer in demand? Most retailers sell their merchandise below cost price just to move this unwanted inventory from their shelves and warehouse to create space for new products.

However, with a drop shipping business, you do not need to worry about the stress that unsold merchandise brings. You only pay the manufacturer for an item (may I add at cost price) when a customer buys from you…and not before. Sounds nice I hear you say.

3. Great Profit Margins

Now I have a confession to make to you. Until you step across the line from being a pure consumer to a retailer, you’ll never realise the profit margins retailers make on some of the items they sell. Ask yourself this question.

How is it possible, that a pair of designer shoes that sold for $99 is suddenly slashed to $27 or less during the Sales period and the retailer is still able to make a profit? Its simply the retailer’s ability to mark up the price on some of the items they sell. Depending on what you sell on your online store, you could make some mouth-watering profits on some of the products you sell.

4. Time to Spend on Marketing

Now you may have the best product in the world but if no one knows about it, then its absolutely worthless. This for me is one of the best benefits of having a drop shipping business. The time to spend on what really matters in any business. Attracting and keeping new customers. While your local antique shop owner worries about paying the light bill and hiring a new sales person after Sally left for the store down the mall, you can spend your time finding new and better ways to market your products on comparison websites, search engines and media outlets.

5. Quick Exit Strategy

Life happens. For some reason or the other you might want to move on and close down your drop shipping website. While a normal brick and mortar businessman has a multitude of obligations to fulfil if he wants to sell or close down his business, the exit strategy for an online entrepreneur are fairly straight forward and could be very rewarding if you’re selling your business and can show that its profitable.

So there you have it. 5 reasons why I believe the drop shipping model could be a nice launch pad to begin building your fortune online. I would like to know if there are any benefits to drop shipping I may have missed plus what you personally consider to be the best benefit of drop shipping.



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