Why buy a cow when you can get the milk for free? That's the quote used for all sorts of things, but when you are looking to start a new business online it also applies. Why spend money stocking inventory you may or may not sell when you can earn a little less margin, but have no risk. It's possible to get full margins as well if you look to the right drop ship wholesale providers. Fronting the money for retail sales is getting tougher and tougher as the economy weakens and the internet has become a great place to open a new business for the least amount of money. There are pros and cons to this which I will discuss.
When there is no barrier to entry as is the case with ecommerce retail sites than the competition must be fierce. There are many new competitors opening ecommerce sites every day competing for the same search engine rankings and pay per click views. The best way to offset some of the risk and expense is to set up relationships with great companies that offer to ship their products for you. It's even better if you can find one spot where they have lots of items in the industry you are looking for as well as copy and images for you to upload.
Baby gifts are a great gift to sell online because many people search for baby gifts and they are happy to have them shipped for them. Look for places that offer personalization and if they do it in only a few days you know they do it themselves and are not farming it out somewhere else.
You may lose a little bit on margins when you go the drop ship route. The best companies still offer close to a full markup while others will really cut the margins close so it becomes hard for you to profit in this way. Only use the best places because their service can make all the difference. Take a look around and you'll come up with some good ideas of how to make extra money with an online business while eliminating much of the up front fees a brick and mortar store would have.