Drop shipping is an excellent way to make money but like everything, you need to find your niche.
Drop shipping is essentially selling products online but without the need to hold stock. This works perfectly for the business backpack concept as you can run a full online shop, selling pretty much whatever you want but you don’t need a warehouse to store your stock or require constant visits to the post office to send your customers their products - this is all performed by someone else.
My first venture into online retail was a failure simply because I did not think about it properly. I started an online e-cigarrette business but because I held the stock myself, it meant I could only properly run the shop i.e. package and post products to customers when I was home. The business didn’t fit into the backpack - I couldn’t carry all of the products around with me each day, so it failed.
How does drop shipping work?
Drop shipping is a four stage process:
- A customer makes an order on your web site
- You receive payment and an order notification from your web site
- You pass the order, customer information and payment on to the drop shipper
- The drop shipper sends the product directly to the customer
You may your money by charging the customer more for the product than you have to pay the drop shipper.
My experience with drop shipping
My drop shipping adventure started after our web site design company was asked to create a new online shop for a customer who sold logo mats - those mats you see in hotel and business reception areas with the company logo printed on to it.
They were a big company, in the top three in the UK for doing this sort of thing. They sent us impressive images of the headquarters and there were quite a few staff so I assumed that they manufactured and printed the mats in their own factory.
We later found out that all the did was drop ship mats, made in China, to customers throughout the UK.
A customer would make an order through their web site, choosing the material and size of the mat, upload their logo and hit the ‘order’ button. The company would send this information to the drop shipper in China who would then manufacture the mat, with the logo printed on it and post it directly to the customer. The logo company in the UK would never see the finished product - they literally collected the money and sent a few e-mails. That is easy money!
This got me thinking. I really wanted to start an online shop but I could not store stock. Drop shipping seemed like the perfect way to make money online whilst fitting in with the backpack lifestyle.
I started thinking about high-value items that could be sold this way. Low value items like the e-cigarettes are only worth it if you can sell thousands of them otherwise the work-to-profit ratio isn’t high enough. Amazon works like this. They keep their profit margins on each item incredibly low but they make money because of the sheer numbers that they sell.
Logo mats was one way to go but after working on the customer’s web site, I realised that there was already a lot of competition and not something that I was really interested in.
I started thinking about expensive items that everyone needs. Finally, it occurred to me that mattresses were both expensive and universally required.
I started doing some research and decided to test the market. I found some suppliers, set up a web site and started promoting the business.
It took some time but after six months, we made a sale. Then another, and another… I was making money and all I had to do was send a few e-mails. The customer would order and pay through the web site. I would pass the order on to the supplier who would then process it and send the mattress straight to the customer. I would send a follow up e-mail the day after the delivery just to check that the customer was happy and that was it.
Unlike my competitors - bricks and mortar mattress shops - I did not have staff, rent or depreciating stock to worry about so I was able to undercut them on prices. Some of the mattresses only had a markup of £15 but £15 for sending a few e-mails, that’s not bad is it?
Drop shipping is a great way to make money but finding a product and reliable suppliers is fraught with difficulties. There are literally thousands of articles on drop shipping available on the Internet, all extolling the benefits, but finding people who you can trust to deliver is something that you must take your time over.