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Drop Shipping Myths |
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Submitted by Vada Vallejo
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by Stuart Lisonbee
For a lot of people, drop shipping can seem like a perfect solution to start an internet business. While drop shipping has its place in the world, there have been many myths associated with it.
Myths are propagated by people who think they understand something, but don't. You may have heard many things, both good and bad, about drop shipping. But if you want to know the truth about something, you should go to somebody that actually works in the business, rather than someone who has little more than rumors and conjecture.
Having run a business using drop shippers as my product source, as well as having worked in the drop shipping industry, I have nearly 10 years of personal experience with drop shipping. Here are some of the common myths that I have often heard associated with drop shipping and drop shippers.
Myth #1: Drop shipping means big money for little work
Running a business is a lot of work! Sure drop shipping saves you from warehousing, inventorying, and packaging and shipping items. But in the end, you've still got a retail business to run. Furthermore, profit margins are thinner because the drop ship supplier takes on much of the risk involved with warehousing the products.
Myth #2: All drop shippers will be happy and willing to work with me
Some drop shippers will work with anybody. Those drop shippers will typically have a fee associated with them, or else their wholesale price is not as good. Other drop shippers have minimum requirements. For example, you may be expected to have several thousand orders per month.
Some drop shippers will even charge you a non-refundable application fee. If they decide you're not big enough to work with them, you lose your application fee.
Of the more than 50 suppliers Doba works with, several have application fees, a few have monthly fees, and several more only agreed to drop ship for us because we promised them high volume, something we can do thanks to the combined purchasing power of our membership. Fortunately, Doba does not pass along any application or monthly fees, and you never have minimum requirements.
Myth #3: It's impossible to make money with drop shippers
It is true that your profit margins will be thinner, but some of the internet's largest retailers use drop shippers exclusively as their product suppliers. If they weren't making money, then they wouldn't be some of the largest retailers on the internet.
Something that new entrepreneurs often fail to understand is that pricing is only one small part of business. If your focus is exclusively on price, then your business will never succeed because you'll be completely ignoring the many other parts of business that are required to succeed.
I once sold a product in a very competitive market. The product had an average 10-15% return rate, and the mean price was $19.95. I sold my product for $33 and had a return rate of 5%. My website also had a conversion rate about 2-3 times that of my competitors.
Why was I able to sell my product for 65% more than my competitors, maintain a higher conversion rate, and yet still experience far fewer returns? Very simply, I chose to focus on all aspects of my business, rather than just one or two like so many of my competitors were doing.
Myth #4: Drop shipping is the magic solution
Drop shipping is a specific service that fills a specific need. It is not a cure-all solution for business. Before jumping in, you should be sure that your business will benefit from drop shipping, and you should have a well laid out plan for making that happen.
Like all things, there are pros and cons to drop shipping. Make sure you understand how drop shipping will affect your business so your business doesn't end up a myth itself.
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