Common Questions Asked About Home Based Business Drop ShipSimply put, with a drop ship business, inventory is ordered, stocked and managed by someone else - the drop ship supplier. You don’t have to stock any product. You also do not have to ship product to your customers. Sounds pretty good, huh? Well, statistics reveal how viable drop ship businesses are going to continue to be. Drop ship businesses account for a percentage of on line retail sales and according to a Forrester Inc. report, online retail sales will grow at a 25% annual growth rate over the next five years. Online retail sales will reach nearly $230 billion and account for 10% of total US retail sales by 2008. But, before you decide whether or not a home based business drop ship is for you, consider how a drop ship business works. First, let’s look at product distribution. Then we’ll be able to more easily understand how a drop ship business works. Product Distribution: A company manufactures a product, but that company does not sell it directly to the public. Why? Because that company is too busy making the product. Basically, they are committed to being a manufacturing operation. They need companies who will take their product and distribute it to the places that will sell it. These companies are called Distributors. Typically distributors work with a chain of retail stores. The retail stores sell the product to the consumer. Now, each step of the way, the price of the product changes – it goes up. The manufacturer sells the product to the distributor for one price. The distributor sells it to the retail store for a bit more. The retail store sells the product to the consumer for a bit more. Now, let’s look at how a drop ship business works. As a home based business drop ship owner, you become the retailer in the above product distribution model. Keep in mind that you are not drop shipping the product to your customer. The company who supplies the products that you’re selling sends the products directly to your customer. Meaning, the supplier “drop ships” the product to your customer. Today, with the presence of the Internet and at least one computer in most homes, there are many possibilities for a home based business drop ship. Here are a few ideas: Designer Clothing While a home based business drop ship is very viable, there are several things to consider in having a home based business drop ship business. 1) Be careful of “drop ship business opportunities.” You do not need to pay thousands of dollars for training and start-up materials. You can build your drop ship business yourself for about $800 or less which should cover costs related to your web site, merchant accounts, and software for setting up and marketing your business. Make sure that you do your home work and that you know how to avoid scams. 2) You have much lower risk compared to many other types of businesses. Your customers pay you upfront, greatly reducing the risk involved in your retail business. For example, in a store where you have to stock products on shelves, you only make a profit on the items on your shelves that sell. You will experience a loss on any items that do not sell. In a drop ship business you make a profit on each sale, but do not experience a loss on products you’ve stocked that do not sell. 3) You do not have to be concerned with meeting minimum quantity requirements. You can sell as much of your products as you want – how much you sell is limited only by the demand for your product and your marketing efforts. 4) You may want to test which products are most feasible for your target market. As pointed out above, because you do not have to stock inventory, you also do not run the risk of purchasing large quantities of stock that then will not sell. So, test products that suppliers provide to see which products sell the best. 5) Also consider what type of turnaround time your supplier can provide. Your customers are not going to want to wait more than a few days to receive the product that they ordered. So, make sure you’re doing business with suppliers who have a good turn around time. You can ask your supplier what their turnaround time is. However, you may want to also place an order to test how long it takes for you to receive it. 6) Stay on top of your supplier’s stocking levels. Your suppliers are also supplying products to other retailers. You do not want to take up too much time making sure your supplier can fulfill orders that your customers place. Consider automating your web store stocking levels. You’ll need database software to automate this process of your business. You want to import into your database two types of files: an electronic product file provided by your supplier and a file from your shopping cart indicating what products you’re promoting and what products your customers are ordering. You want to set-up your database to do the comparison of the two files. Specifically, your database needs to reveal: 7) Differentiate yourself. If you want to have a successful business, whatever type of business you have, you must communicate to your target market how you are different from your competitors. Give this some thought. Research your competitors and what they are offering in terms of products and level of service. Ask your self how you can provide more value to your customers. Then, use what you come up with as a way to differentiate yourself from your competitors when you market your business. 1) Conduct research to determine the market that you will target – you’re looking for a niche where you can see a strong demand for your products. There has to be enough demand in that niche but not too much supply in order for your business to be profitable. So, seriously consider the supply and demand ratio for any target market that you’re considering. 2) Develop a working business plan for your home based business drop ship. Avoid under estimating this critical step. Your business plan serves as your road map. With this road map you’ll take one step at a time versus “winging it” or being “all over the place” in building your business. With this road map you’ll be far more focused and less likely to feel overwhelmed by what you’re going to do to build your business. Consider all of the relevant sections of a business plan. I can not stress enough how much having a well thought out, complete, working business plan in place will help you in building a successful drop ship business. 2) Contact suppliers of your choice and establish your agreements with those suppliers. Make sure that you establish with each supplier how you will be communicating orders to them, what their turnaround time is, what your price is for each product and all relevant terms and conditions for doing business with them. 3) Design a website complete with a product catalogue and shopping cart. Include product descriptions and images in your on line catalog. You should be able to get these from your suppliers. 4) Set-up your on line payment function. Ensure that you’re providing your customers the ability to make purchases on line by using a credit card. 4) Establish your retail price. Your profit will be the difference between what you’re charged by your supplier and what you charge your customer, minus any costs you incur. 5) You need to drive large volumes of traffic drive large volumes of traffic to your website by marketing your business. Understand that everyone who visits your site may or may not make a purchase. Those that do buy are those that like what they see. The more value you provide on your site for your customers, the more you increase the percentage of visitors who will make a purchase. If you want assistance building your business, then please make sure you book mark this site and visit it often. Access all of the resources available on this site. We’re always adding resources to further assist people in building their businesses. So, come back often to see what we have for you. Also, remember that we’re here to help you. So,
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