Drop shipping is a highly profitable, low-risk method of delivering products to customers that is easy to set up. Because you hold no inventory, you preserve valuable capital that you can invest into other areas of your business. This is especially important with eBay businesses, where cash on hand is often limited and can’t be tied up in inventory.
Here are a few ways the power sellers use drop shipping to boost their profits:
Launching a New Business
If you are launching a new business, there is no sense in investing a lot of money into it before you know if it will work. Instead, you could try it through drop shipping. The margins will be slimmer and you may even risk losing money, but you will be able to prove how much volume you will be able to generate before you risk cash on inventory. It is much better to risk 30 cents per sale through drop shipping, than it is to risk $30,000 by stocking a thousand units in inventory.
Testing What to Upsell
Let’s say you are selling fishing rods. You don’t know if you should also sell hooks, lines, sinkers, bait boxes and books on fishing; therefore, you shouldn’t buy 500 of each just to test selling. Instead, establish a drop shipping relationship with your wholesaler and try each of them. It won’t cost you anything to figure out which products don’t work. Once you find the ones that do, you can continue drop shipping, or order wholesale.
Seeing Customer Response for a New Product
Again, you don’t have to take a financial risk to find out whether customers will like or dislike a new product. You can launch new products without risking cash by drop shipping. Read the reviews and talk to your customers to determine if the product is worth it. Once a product has proven its earning potential, only then do you stock up on inventory.
Testing a Vendor Relationship
Apart from the product itself, drop shipping is a great way to test a new vendor relationship. Do they fulfill drop-shipping orders promptly; do they hassle you about billing before your net 30/60/90 period is up; do you feel as though you have connection and rapport? It is much better to ferret out any problems in the relationship on a $20 drop-shipping relationship than on a $20,000 wholesaling relationship.
These are just a few of the methods that smart eBay power sellers are using to boost their profits. Drop shipping can be a very powerful way of increasing your profits while decreasing your risks. You can use it to launch new businesses, test upsells, test new products and even test a new vendor relationship. You can do all this without tying up any significant amount of cash.
