Drop shipping is an old business concept given an online commerce face lift! Similar in nature to mail order catalog shopping, online drop shipping ventures are interactive product catalogs. The lightning speed of online transaction processing even makes drop shipping a seamless operation. The customer clicks and buys, the warehouse ships, and the website owner takes a small cut. Easy, right?
The greatest profits come from a B2B bulk drop shipping ebusiness model. B2B customers are repeat customers who purchase case lots of wholesale items. As a result, the transactions are larger and the small profit margin a drop shipper receives on each item is greatly multiplied. Even in bulk drop shipping, profits erode away when business owners agree to unfavorable terms with their wholesale suppliers or business customers.
The biggest sap on profits is doing more work than what your cut covers. With rising shipping costs, there is no reason for a wholesale supplier to ship first to you, and then you ship the products to the customer. With bulk B2B transactions, this isn’t even feasible, as one customer could purchase hundreds of items in just a few case lots! Smart drop shippers only work with wholesale vendors shipping directly to buyers.
Another profit killer is in the “product catalog” available online. Are you only selling one type of wholesale product to your business customers? Make sure you can add lots of different types of wholesale vendors to your back end interface. Most business customers don’t want to visit multiple web sites. If you can be a one stop shop, that is value to your customer. Stay away from minimum orders smaller than one case lot. Let your customer determine the stock level needed, not an arbitrary minimum order amount. It’s tempting to use one to pad transaction levels, but it will only squeeze small business owners out of your market.
Unreasonable delivery needs will also jeopardize the profit on a drop shipping transaction. Most business customers order stock well in advance, but make sure you do not solicit business customers with tight delivery schedules. For example, you want to stay away from bulk perishable wholesale goods, or business customers without appropriate storage space for their order. Otherwise, you might be looking at an unreasonable return, which costs your bulk drop shipping business.
New drop shippers can make many costly mistakes. There are online resources available to help bulk drop shipping e-businesses maximize profits and minimize risks. Learn more about arranging exclusive contracts with the large retail giants, and negotiating techniques. Find ways to increase your wholesale product offering and tips for impeccable customer service plus a lot more wholesale news insider tips!