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How to Start a Drop Shipping Business

By Charles Hopkins Published 04/20/2006 | Home Based Business
There are so many ways to start a home business online. One of the challenges most people who want to start a business from home face, is the lack of space to carry inventory. Fortunately, there are businesses that do not require sellers to store products. This is a "drop ship" type of business.

What is drop shipping?

Drop shipping is the method of retail merchandising which allows business owners to sell products without first purchasing and stocking the items they sell. This arrangement is made between the seller and the supplier. In other words, a seller would display a product, either on a website or on a mail-order catalog, without having it in their inventory.

How does it work?

The seller charges a certain price, which is over what the supplier is selling. The difference between those two prices is the seller's profit.

When a buyer purchases that product, the seller can go to his/her supplier's website or call the supplier and place the order which will be delivered directly to the customer's mailing address.

In this way, the seller is responsible for the promotion of the products and the supplier takes care of fulfillment.

As with any other business, one should do thorough research before starting. Probably the most important thing to consider is whether there is a market for the product. A mistake that many marketers make is to start with a product they think will sell, only to be disappointed down the road when they lose money.

How do you find a hot market?

The beautiful thing about the Internet is that all the research being done by multi-million dollar corporations is readily available. You just need to know where to look to simply take advantage of the online giants' technology.

Two great, free examples that can give one tons of niche ideas for products to sell are eBay and Overture.

eBay trends about what is selling can be observed by visiting eBay pulse at http://pulse.ebay.com. One can then drill down by categories and sub-categories and find niches of interest.

With Overture's tools you can establish demand and supply in an instant.

If there are advertisers spending good money for products, then it's a good sign that the people in that market are spending money on the items. Overture's bid price tool shows this information: http://uv.bidtool.overture.com/d/USm/search/tools/bidtool/

Another important aspect of the drop shipping business, is to find reliable suppliers. Some things to look for are:

1. Are they charging a handling fee per item?
2. Are they using reliable shipping methods?
3. How are they handling returns?
4. How long have they been around for?

By using "drop shipping" product of interest, in Google's search, one can locate many drop shippers.

In conclusion, drop shipping is a great business model for anyone who does not want to deal with carrying inventory and fulfillment. However, it is very important to identify a hot market where customers are already buying and to locate a reliable drop shipper before starting a drop shipping business.