Mahibay Helps Educate You In Drop Shipping

From Ana Rincon

Five Rules to Profit By

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.

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.

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.

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.

Be prepared to deal with backorders and returns. Just because some of the hassles of online business are eliminated 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.

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.

Mahibay suggests that you visit there website by Clicking Here to ask any other questions that you may have.

Drop-Shipping-News.com

Drop Shipping is used by middlemen and mail order firms who DO NOT STOCK INVENTORY of the products sold for future delivery through mail order, catalog and INTERNET ADVERTISING.

Middlemen send single unit orders for products to manufacturers, or major stocking distributors, who in turn drop ship the merchandise direct to the customers of the middlemen. Manufacturers providing drop shipping services can gain additional sales, shift advertising costs to middlemen, offer advertising material and reduce inventory requirements. Middlemen who initiate drop ship orders shift the risks of stocking inventory to the supply source, including storage, insurance, overhead, and personnel BY SPENDING NOTHING ON INVENTORY, until AFTER THE PRODUCT IS SOLD.

Having products drop shipped by manufacturers, allows middlemen to concentrate on sales and advertising functions, rather than stocking INVENTORY THAT IS ALREADY BEING STORED BY MANUFACTURERS. All of the costs of warehousing and the personnel needed to pick, pack and ship products are eliminated. Orders can be sent by fax or email direct to the drop shipping supply source. Small firms can compete and advertise a tremendous number of products on Internet malls, if the product supply source will drop ship. BUT NOT ALL MANUFACTURERS WILL DROP SHIP: most prefer to sell in quantity to full function middlemen who stock inventory, as products are physically shifted through the channel of distribution.

If there is anything unclear or you don’t quite understand what drop shipping is about, feel free to contact Mahibay.

E-Commerce Techniques: Drop Shipping

Fulfilling, customer orders by having the wholesaler drop ship directly to shoppers is a popular e-commerce technique. An expert talks about the issues involved.

By James Maguire
July 19, 2005
As many online merchants would agree, drop shipping is an e-tailer's best friend. While brick and mortar retailers have to stock every product color and size, many online merchants carry minimal inventory.

Instead, many Internet merchants fill orders as they receive them. They simply route customers order to a wholesaler, who drop ships directly to the customer (preferably with the merchants label on the box). No fuss, no muss. And, most importantly: no expensive inventory to hold.

But relying on drop shipping — also called virtual inventory — is neither as easy nor as profitable as it appears at first glance. "Freedom has its costs," says Steve Craig, the CTO of ShopNBC. Craig is an expert on using drop shipping to increase inventory size. (About 20 percent of the ShopNBC goods are fulfilled through drop shippers, Craig says.)

Certainly, drop shipping has advantages. First, it allows an e-merchant to "have a very diverse portfolio, a really nice mix of goods," Craig notes. Additionally, because it requires no up-front investment, "If you don't sell anything, you're not out anything."

But on the other hand, the problems are just as clear. A merchant who relies on drop shipping "is putting no capital at risk, but it really does lead to a lesser margin," Craig notes. Many Internet retailers who use virtual inventory are forced to buy at MSRP (manufacturer's suggested retail price). In this case, there is precious little room for an e-tailer to mark it up. More News about Mahibay Drop Shipping at Bebo

Furthermore, "It's an open market," he notes. "You have to realize that there are several other sellers doing exactly the same thing, everybody could hook up to that vendor and sell — do you have enough volume, do you have a captured audience so that you can drive more and get more margin?" More News about Mahibay Drop Shipping at 20six

Returning orders can be a special headache for those e-tailers with virtual inventory. Most wholesalers have a complete profit and loss structure (P+L) around shipping and handling. In short, they may accept a return, but they will not refund the customer's shipping and handling charge. Nor will they refund the shipping and handling charge to the merchant for returned items. More News about Mahibay Drop Shipping at Wordpress

An e-tailer can even lose money with virtual inventory, if there are enough returns. "You need to make sure you're not losing money on the pick, pack and ship element," Craig cautions. More News about Mahibay Drop Shipping at Xanga

Is This Drop Shipper Trustworthy?

Many large e-tailers have their own vendor manual full of rules for their drop shippers. "It's a very thick document that your vendor has to comply with if they're going to be your drop ship vendor - if you're big enough, you can dictate those terms to them, within reason." More News about Mahibay Drop Shipping at Soulcast
For those e-tailers who don't have such a manual, caution is required in partnering with drop shippers.

First, merchants must research that wholesaler to make sure they're legitimate, "that they're not going to be here this month and gone the next," Craig says. More News about Mahibay Drop Shipping at Yahoo360

Questions to ask include: What is their mis-ship rate? How often do they accidentally ship the wrong product? What is the quality of the merchandise? Many wholesalers will accept returns, which they then put back on the shelf for future sales - but do they do their quality control carefully enough to make sure it's not defective? More News about Mahibay Drop Shipping at 21Publish

When looking for a wholesaler, it's a good idea to place a test order from them. This will determine, among other things, how the box is labeled when it shows up at the customer's door. "You would not want something shipped to your customer that has a Pier One or Wal-Mart tag on it," says Craig. More News about Mahibay Drop Shipping at Vox

Additionally, a wholesaler needs to include a packing slip that is — hopefully — branded with the e-tailer's name. Some wholesalers place coupons and special offers in their boxes (from third parties, or from themselves) that can result in no repeat business for e-tailers. More News about Mahibay Drop Shipping at The Spartan

A detail as small as the type of packing material can be important. For example, does the wholesaler use biodegradable packing peanuts? "If you're an REI or an outdoor gear retailer, maybe you don't want some biohazard packing material," Craig says. More News about Mahibay Drop Shipping at Sampa

Even after a vendor relationship is established, it's important to be "secret shopper," from time to time. "You might be shocked at what you get," Craig says. It's also a good idea for e-merchants to monitor their shoppers satisfaction. "If you're taking the brunt of your customer service calls, you can track an up tick of complaints against a vendor." More News about Mahibay Drop Shipping at Nabble

In short, a merchant needs to carefully manage their wholesale-customer loop.

"They are likely not just servicing you, they're servicing a plethora of other vendors who are doing the same thing you are and…they're going to make mistakes — they're only human," Craig adds. More News about Mahibay Drop Shipping at Myweblog

Inventory Management

Craig points to a common problem scenario. It's the holidays, and every kid in America wants the newest electronic game. "The drop ship vendor is letting you know how many of those they have in their warehouse. So they have, let's say, a thousand units sitting in their warehouse - and they sent that file to you and to the dozen or so other sellers who are selling them." More News about Mahibay Drop Shipping at MyOpera

As it often turns out, that wholesale can only offer maybe 200 to a given seller. At that point there may be some unhappy customers who have ordered that game and aren't going to get it. "You get into all these rules and regulations, even FTC [Federal Trade Commission] problems, over how long you can hold that customer's order," Craig notes. Informing customers that their orders can't be filled can result in minor chaos. More News about Mahibay Drop Shipping at Multiply

The moral of the story is that e-tailers need to make sure that their own inventory monitoring system is in sync with their drop shipper's actual inventory. Are there specific product levels that are reserved for you? Or not? More News about Mahibay Drop Shipping at Manicfish

In many cases, wholesalers do not send out real time reports of their inventory levels, Craig says. Instead, wholesalers inventory reports are often done on a daily basis, so stock levels can vary wildly from report to report. "A lot can happen in an hour." More News about Mahibay Drop Shipping at Journals.aol

Phone Calls

In some cases, wholesalers maintain a phone service department. When a shopper calls the e-tailer for product service, those calls are then "hot transferred" to the wholesaler who actually makes or ships that product. More News about Mahibay Drop Shipping at Greenpeace

In this case, an e-tailer says "'One minute, I'll hook you that to that department,' and they're actually dialing another number and hooking you into that customer service pool," Craig says. More News about Mahibay Drop Shipping at Greatestjournal

On other hand, some e-tailers simply give out the phone number and tell shoppers to call. "That's not what you would call 'red carpet service for that customer." More News about Mahibay Drop Shipping at Grab

One problem: sometimes a customer will call to cancel an order that is in process. The order has been routed from the e-tailer to the wholesaler, and is being packed for shipping. In these cases, "you have to figure out what your policy is going to be - will it be 'nope, you can't cancel?' It's very variable." More News about Mahibay Drop Shipping at Friendster

It's About Service

Many shoppers are willing to buy a well known brand from a third party online merchant — who is obviously having it drop shipped from a large manufacturer — because they trust that Web site. The question, Craig notes, is what factor in the customer's mind is closing the deal: is it the brand or the site? More News about Mahibay Drop Shipping at Freewebs

A customer may chose to buy, say, a Lazy Boy or a lesser-known armchair from ShopNBC, although they are well aware that ShopNBC didn't manufacture that item. "You're coming to me because of my commitment to back Lazy Boy or that no-name recliner," Craig notes. "My returns policy, my customer service is probably why you're sticking with me - you don't necessarily know this drop ship vendor." More News about Mahibay Drop Shipping at Familytimes

In other words, trust, fueled by good customer service, can be the deciding factor that enables an e-tailer with virtual inventory to compete in a crowded market. More News about Mahibay Drop Shipping at Egoweblog

Selling Treadmills Online

For merchants who sell particularly large or heavy items, shipping can be a logistical quagmire. FedEx or UPS won't ship these items. Instead, small independent haulers need to be hired. More News about Mahibay Drop Shipping at Bravejournal

Dealing with such small shipping companies requires that all the rules be carefully laid out in advance. Otherwise, "they're going to leave [the package] at the end of the driveway — and the next step is, they leave it right inside the front door." More News about Mahibay Drop Shipping at Blogsome

With the right contract, these shippers offer a "white glove" service, meaning they properly unpack it, they're nice to the customer, and they remove the empty shipping material. The key point in this is communicating any extra costs to the customer." More News about Mahibay Drop Shipping at Blogs.ie

"There are all these details that go around something as simple as 'I ordered a treadmill.'"

Finding Wholesalers that Drop Ship: Value Added Networks

For online merchants looking for wholesalers who will drop ship for them, the search can be frustrating. For many merchants, both online and brick and mortar, "it is somewhat of a proprietary secret who their vendors are," Craig says. Merchants guard the identity of their wholesalers like the family jewels. More News about Mahibay Drop Shipping at Bloglines

Craig points to Commerce Hub as a good source. The company bills itself as "the leader in drop ship commerce." More News about Mahibay Drop Shipping at Bloggerteam

Commerce Hub is a VAN, or Value Added Network. A VAN can be thought of as the "glue" that connects merchants with their drop shippers. The VAN companies provide the EDI — electronic data interface — that allows information files to flow back and forth. More News about Mahibay Drop Shipping at Blogspot
Unless a merchant is willing to handle the highly time consuming task of tracking each order to every drop shipper, they need a VAN provider to help with this. If an e-tailer is using only one drop shipper, a VAN probably isn't needed. But once a multi-supplier scenario is in place, order flow gets terribly confusing without a VAN. More News about Mahibay Drop Shipping at Blog

Because Commerce Hub is a VAN, "they already have a bunch of [suppliers] hooked up to their plumbing." So, if a site is thinking about, say, adding cookware to its inventory, "Commerce Hub probably has a cookware vendor that they could hook you up with." More News about Mahibay Drop Shipping at Blog.co.uk

Commerce Hub "has a community of vendors and products, that you as a merchant can chose from." More News about Mahibay Drop Shipping at Voyblogs

You can call Mahibay at (877) 304-8938 or you can visit there website at http://www.mahibay.com/

Mahibay
3651 North 100 East
Suite 300
Provo, UT 84604
(877) 304-8938