If you have an idea for a catalogue or online store but don't
have the funding - or storage space - for large consignments of
products, drop shipping may be the answer.
What is drop shipping?
- If you start a drop shipping business, you essentially
become the middle-man connecting the supplier and the
customer without ever needing to hold the goods in stock.
You then make a profit on the difference between the wholesale and
the retail prices.
- Drop shipping wholesalers can help you hide the source of
your products by creating customised packing slips with your
name, logo and contact information, and even creating a customised
return address for you.
- Drop shipping is popular among online auction
sellers who don't have the space to store items. The seller
will send the item directly from the wholesaler to the highest
bidder, making money from the difference between the wholesaler's
price and the winning bid.
Advantages of drop shipping
- If you're a small business with a tight cashflow, you
drop-shipping means you don't have to take a gamble by buying
up large quantities of stock which may then sit in your
stock room, waiting to be sold.
- Drop shipping helps you maintain a positive
cashflow by making sure you are paid before you buy the item
- protecting you from late payment and allowing you to invest in
more stock earlier in the cycle.
- If you generally sell your stock in small quantities but
receive a large order for a product, drop shipping can help
you meet demand quickly, without you needing to find space for
large quantities of a product.
Disadvantages of drop shipping
- Drop shipping has been subject to scams, which
involve organisations offering you great 'work from home'
opportunities, then introducing you to a 'wholesaler' who is, in
actuality, another middleman with no product of their own, who will
then charge high prices and extraneous fees.
- If the wholesaler you choose sells out of a product
without letting you know, you will either need to refund
your customer or back order the product, which could incur heavy
delays. This means drop shipping can be unreliable.
- Because you are buying products in single units, you
won't be able to take advantage of the knock-down prices
retailers who buy in bulk get from wholesalers, decreasing
your profit margin.
- Your drop shipping wholesaler might ask you to pay a sign-up
fee or pay for support materials, such as brochures. Be wary
of these payments - check with other clients before you sign
How to find a drop shipping wholesaler
- Trade shows are often good sources of drop
shipping wholesalers. See Exhibitions.co.uk for a
comprehensive listing of all the trade shows held in major UK
- There is no official trade body for drop shipping wholesalers,
so ask for recommendations from your industry trade
- Online forums, such as the Smarta Q&A section
or the one on Startups.co.uk are great sources of information and
advice from others in similar situations. You can also use the
internet to check the wholesaler you want to use is reliable. Use
forums and social media to find other clients of the
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