One of the best small businesses to start is Drop-Shipping. It’s a supply and retail strategy where the retailer does not have inventory on hand and the manufacturer ships out the product to the buyer instead. In all other aspects it works similarly to traditional marketing and but it has some specific advantages and disadvantages.
An obvious advantage is the ability to operate without the need for a warehouse. Since the product comes directly from the producer’s stores, you no longer need space to put your stock. Stock management and replenishment is taken out of the retailer’s plate
Factory wholesale pricing is generally lower and this gives the retailer a higher profit margin. Start-up costs tend to be lower too since there is no need to purchase an initial stock.
Another advantage is the positive cash-flow cycle. A drop-shipper can receive payment for items that he has purchased on credit from the wholesaler. Since credit isn’t paid immediately, the drop-shipper has access to funds he can use to purchase other products that can only be paid for with cash. This allows him to get better deals from suppliers who prefer cash transactions.
If there are pros, then there are also cons for new and veteran drop shippers. Since you don’t control the inventory, you have to monitor the wholesaler’s existing stocks constantly or you risk unfulfilled orders. This is bad for any seller’s reputation. You also need to track the prices so you get the best deals all the time.
There are also a lot of drop-shipping scams being perpetrated online by very unscrupulous people. The most common approach is through an offer of getting your own home based business. You are then asked to pay a fee to get access to a list of suppliers. A lot of these so called suppliers are actually middle-men themselves and you end up paying retail price for the items you’re selling.
Before you start a retail business, whether an online or a brick & mortar one, you need to do the legwork first. This means doing in-depth research on your market, your suppliers and your sales channel. Since we are focusing on the home based model, your primary source of sales will be your online store.
You can join forums that specialize in drop-shipping so you can network with suppliers and experts. Try to establish connections with other people who believe drop-shipping is one of the best small business to start.
Learn what you can on how to improve your site. Security & SEO will be very important at the start. You need to get people to your store and then you have to keep the momentum going so you can grow it.
Momentum isn’t just about traffic. It’s also about efficient order fulfillment. You do not have control of the shipping and the stocks of items you’re selling so you have to be able to monitor stocks as close to real time as possible. You should be able to update your website information on item availability.
Once you start receiving orders, you can’t afford any customer complaints, especially about delivery. Your site’s reputation will suffer greatly if you miss deliveries. There’s nothing more fatal to a drop-shipper than getting bad reviews about inconsistent deliveries. People are very sensitive about their money; even a low priced item that doesn’t arrive on time can eliminate any chance of repeat business.