Dropshipping Basics Explained

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There are a lot of ways to earn money on the web. As a customer of the dropshipping business, they allow you to sell whatever goods they’ve. Heres the problem. At any time you use a dropshipper, you are paying for their convenience of not needing at deal with stock yourself. Typically you end up paying a lot more for the products you are selling and a lot of times you have to pay additional shipping & handling fees, dropship fees, and possibly a monthly membership fee just to use their program. Heres a real-life example: Lets say you’d like to sell coffee baskets on the internet. 

You’ll find a dropshipper that brings the coffee pot you’d like to sell. The coffee pot has a retail cost of $120 and the cost from the dropshipper is $90. They charge a billion fee and $12 to send the item to your client if you sell it. If you market a coffee pot for $120 and cost your clients $7.95 shipping, here’s what the numbers look like: $127.95 – $90 – $4 – $12 – . $21.95 profit in your pocket. 

Sounds pretty good, does not it? Not so fast. Here’s how a new numbers break down: $109.95 – $90 – $4 – $12 – . $3.95 profit in your pocket. Hardly worth the effort now. And that does not include any expenses you’ve in making that sale like advertising, credit card processing fees, etc. I don’t know about you, but sell a product for $109.95 and just making a gain of $3.95 is not very exciting. Sad thing is, thats the way most dropshipping structures work. Purchasing Wholesale – Now for the great news. Rather than forking over the majority of your gains to a dropshipping business, you should consider buying stock straight from the producer rather. 

Ordinarily, this will let you buy goods at 50% off the retail price in place of their 25% off you were getting in the dropshipper. Now lets look at the numbers whenever you purchase products direct instead of utilizing a dropshipper. Again, using the same theory of purchasing the coffee pot in 15% off the retail cost. $109.95 – $60 – $12 – . $37.95 profit in your pocket. Hmmm, $37.95 gain compared to $3.95. Thats the distinction between a thriving business and one destined for failure. I know exactly what your saying to yourself. You do not want to purchase inventory, store it in the garage, spend 2 hours a day printing shipping labels, shipping out orders and driving to their post office or United Parcel Service everyday.

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