The short answer is yes, drop shipping works and can make you money online. But at the time the more accurate answer is it depends on many factors.
I’ve personally never tried drop shipping so take my assessment of it with a grain of salt, but I’ve been in online marketing for many years through a field known as affiliate marketing, made great money there and can tell you that both these industries can work very well together if you have the right formula down.
I’d like to quickly explain the concept of drop shipping for anyone whose new to it because the truth is this business often sounds much more complicated than it actually is. In reality it’s pretty simple:
You basically sell other company’s products (sort of like a middleman) via places like E-bay. When someone purchases the product, you let the manufacturer (the owner of the product/s) know about this and they send it to to the person who purchased it.
The basic idea to successful drop shipping business is to…
Find a good drop shipping company that will work with you and have a set price on their products.
While I can’t speak for any places in particular as some places aren’t legitimate, and certain programs like Amazon or eBay don’t allow it anymore (see examples of where drop shipping isn’t legal or allowed).
If you were tying to do drop shipping through popular e-commerce stores, you’re likely looking at more fees and a smaller profit margin per sale. Dealing directly with a drop shipping company and better yet negotiating a set price for a product/s you’re looking to sell is much better in the short/long run.
If I were to name the most important keys to success with drop shipping (DS), it would be this:
1) Find a good drop shipping company to work with (if you can).
Like I said before, there’s less red tape and hassles. On the flip side however, not every company is a good as they say. You’d have to do some research and see which companies you can trust with this. In fact if there’s anyone reading this right now who does successful drop shipping with a company, I’d like to hear which one/s you recommend.
If you can’t find any company, you’ll have to focus (at first) on the traditional approach which is just selling a product from an e-commerce site (that allows it) on places like E-bay.
2) Be able to negotiate with the company you find for the lowest price possible.
This is SUPER important. If you are looking to sell an expensive product which costs $100 (market value), and you get in contact with a DS company who will help you sell/send the items to customers you get them, they’ll likely pay you as little as possible per sale to maintain a higher profit margin on their end. Maybe they’ll charge $90 for each of these products (wholesale), meaning each time you make a sale, you’re looking at $10 profit (minus taxes and perhaps other fees). Long story short: Small profit margin.
The better you can negotiate a lower price with the DS company, the higher profit you can make per sale. If you have little experience selling or don’t exactly have a good reputation in sales, it’s going to be difficult to convince a DS company to lower the price for you. So unless you have GREAT negotiating skills, I would focus on developing experience in selling online. My personal preference is this method to making money online.
As someone whose been/is in business, online, I can tell you that knowing how to do online marketing can/will GREATLY help you in your DS endeavors.
Additionally, be very, VERY careful with which DS company you do business with. Some of them like to inflate their wholesale prices to increase their profit margins. Do your research and see what the product you’re looking to sell is actually selling for in other places and use that as a reference when picking a DS company/negotiating with them.
3) Sell multiple products (duh).
There are good training programs (but they are very expensive) on DS. One of the best is The Amazing Selling Machine.
4) Don’t charge so much for the products you’re going to sell.
Some people look at this business as a way to make a quick buck so they try to sell expensive items for a much higher price than it’s market value in an effort to earn more. Often times this doesn’t work out well because most of the competitor’s products are sold at a lower price meaning inflating your price isn’t going to lead to sales.
You’re going to have to learn how to price “your” products in a way that gets them more sales. I had a friend who used to buy items online and then re-sell them on places like Amazon/E-bay. His “Trick” to selling more items would be to charge 1 PENNY less than the other competitors. This led to many sales.
The success of this tactic is also connected to what kind of negotiated price you can come to with the DS company you do business with so it’s all interconnected.
5) Avoid using “automated” DS programs that charge you monthly fees or cost a lot to try ($100’s).
They are a waste of money. Places like DS Domination is a great example of this.
Eventually if things go well for your DS business, you’re going to want to have a system in place that automates sales and monitors who wants to buy from you. If you don’t, you’re going to go crazy keeping track off and changing your prices (since competitor prices constantly change). Look for free programs available online that can help with this or at the very least ones that aren’t very expensive.
How much can you make through Drop Shipping?
It depends yet again. You’d have to look at multiple factors:
- What you’re selling.
- The price of which it’s being sold for.
- The profit you make per sale.
- How many products you sell.
- How consistent/sustainable what you’re selling is.
- And more…
There are people who have figured out a great way to make a living through this business and while it does have potential and you CAN make money online with it, I’m not someone who believes too much in it. My though process when it comes to making money online is to:
- Have a website that works for me 24-7.
- Promote other people’s products (affiliate marketing) without having to worry about negotiating prices, monitoring/updating prices, calculating fees/translations, ect…
This is what I’ve personally be doing for the past 8 years and I’ve had great success with it. If you’re looking to make money online, I would recommend my approach because in my opinion, there’s less hassles to deal with. It’s not simple, but if you have the proper guidance via places like Wealthy Affiliate and take action, you can have an online business for you on auto pilot. Of course some people still prefer the DS option and that’s also a viable way to succeed.
Update: A good drop shipping option is Oberlo, a company I do like for this method, but I still prefer you try affiliate marketing.