Drop Shipping

What is "drop shipping?" If you've heard anything about drop shipping at all, you might think it is the answer to every internet entrepreneur's dream. In a nutshell, you market and sell a product online at a price you choose. After your customer purchases the item, and you receive payment for it, you place an order for the product you just sold with a "drop-shipper." The drop shipper charges you a wholesale price and ships the product directly to your customer. You pocket the difference between the wholesale (or near wholesale) and retail prices. The best part is that you have no inventory to hold or finance, and no shipping hassles. Wow! Sounds great, doesn't it? Well, it is. But you have to do your homework for it to be profitable.

1. First, you must find a product that will sell in sufficient quantity and at a sufficient mark-up to make it profitable. Just because you know of a drop shipper that sells croaking ceramic frogs at a great price, does not mean that anyone will buy them. Research the market for any product or product line that you are considering. Try to determine the product's demand, how much competition there is, and what the competition is charging. Some lines of business have a lower margin than others.
   
   
2. Sell only a few products, or at least make sure that the products you sell are related and targeted at the same market. Don't try to sell every drop shipped item you find. This will help you concentrate your marketing efforts and costs where they will make the most impact.
   
   
3. Find a reputable supplier. With the popularity of drop shipping, many scams have arisen around the industry. There are sham lists of drop shippers being sold for hundreds of dollars. There are middlemen posing as drop shippers who will charge you more than you need to pay. There are "turnkey" internet businesses that claim to provide a complete package of products, e-commerce, and marketing - but for such a hefty membership fee or monthly cost that you will never make a profit. Don't let this scare you away - just be aware. To get started on the right track, take a look at Chris Malta's Worldwide Brands, a directory of legitimate drop shippers that has an excellent reputation.
   
   
4. Be prepared to deal with backorders and returns. Just because some of the hassles of online business are elimitated with drop shipping, not all of them are. You will run into times when the product you've just sold is not available immediately. There will be returns and refunds. Work these matters through with your drop shipper ahead of time, so you will know how to handle them when they arise.
   
   
5. Treat this like a real business. Don't SPAM, don't use a personal or free Web page address for your store, register with your County Clerk, get a Tax ID number, and be prepared to file taxes. Proceed with the expectation that you'll make a decent profit, and the chances that you will automatically increase.

From Ana Rincon

12 Tips for a Successful Web Store

By John Clyman

Hosting services that integrate site-building tools and e-commerce capabilities can simplify building an e-commerce site, but you can still take some steps to make the most of the opportunity. Here are a few suggestions:

Before You Start...

1. Compare the costs. Monthly hosting fees are just the beginning. You'll also need a merchant account if you intend to process credit cards. That often means another monthly fee, as well as a percentage "discount" on each purchase, and possibly a fixed per-transaction fee. Some hosts, like the Yahoo! Merchant plans, take a cut out of each transaction as well, and some merchant accounts withhold a reserve against charge-backs (disputed or reversed transactions).
2. Get your paperwork in order. Secure your domain name, if you haven't already. Set up your merchant account. Even if your business has one for a retail location, you may need a different one to accept card-not-present transactions. And consider a visit to your accountant and attorney to find out if expanding your sales to new regions will have tax or legal implications.

   When You Design Your Site...

3. Plan your site. Know who your customers are and develop a clear vision of how your site will meet their needs. Devise a plan: Put together some simple mockups—even on paper—and decide what pages and sections your site needs before you jump into designing pages and uploading your product catalog. Remember that different users may prefer to find products in different ways: browsing by manufacturer or brand, browsing by product category, or using a site search, for example.
4. Apply best practices to your design. Common principles of effective Web site and e-commerce design are well established at this point. Consult books and Web sites, like Jakob Neilsen's Alertbox (www.alertbox.com), for expert advice. Surf your competitors to see what they do well—and not so well.
5. A few basic principles: Keep it simple. Don't make your customers work hard: Other sites are just a click away. Make sure your pages are slim and fast-loading (lots of users still have dial-up connections), but don't skimp on detailed product information that will help them make an informed purchase. Use tactics like creating thumbnail images that you can click to enlarge; this helps keep page size down but still lets customers see lots of detail if they're interested in a particular item.
6. Include critical information. Almost every e-commerce site needs to provide contact information, payment options, shipping and return policies, and a privacy policy. If you also have retail locations, be sure to provide addresses, business hours, maps, and directions, too. Other types of content that are often useful include an About Us page describing the company and providing bios of key personnel. You can also have pages for customer testimonials, news and announcements, and order status.
7. Conduct informal usability testing. Do a quick sanity check on your design and site organization. Show it to a friend or colleague who hasn't seen it before and is willing to give an honest opinion. Ask them if they can figure out how to find interesting products and place an order. Repeat this with a few different people and you'll quickly flush out major shortcomings and oversights.
8. Check your site carefully before you launch. Nothing says unprofessional like broken links, spelling errors, missing graphics, and other obvious glitches. Make sure you catch them before the site goes live. And check again after you launch to make sure nothing changed when you went from preview mode to live site.

   After You Launch...

9. Gain visibility. You don't necessarily need to pay for a search-engine submission tool: It's not hard to submit your site manually to the big players like Google and MSN Search. You can try to get a listing in directories like Yahoo!'s, but you'll have to pay for the privilege. Driving traffic to your site can be a major challenge, so consider cross-listing your products in high-traffic marketplaces like eBay or Amazon.
10. Keep it fresh. Take advantage of seasonal opportunities, refresh content regularly, and consider running promotions and specials so that visitors get in the habit of returning to see what's new. Don't forget to remove dated material when sales or other special offers end.
11. Build customer relationships. It's often much more efficient to service repeat customers than to acquire new ones. Entice visitors to sign up for e-mail notifications, offer promotions and discounts to your best customers, or find other ways to go beyond just fulfilling individual transactions.
12. Monitor your results. What sections of your site are customers visiting? How many of them buy, and how many just leave? Which products are selling well? Use whatever reporting tools your host provides to learn as much as you can. Update your site often to serve your customers better.