by Tim Knox
The popularity of eBay has inspired many people to start a business. And for those entrepreneurs who don't want to invest in a ton of inventory but still want to set up shop, dropshipping is a logical solution.
Before you get started, consider these seven steps involved in starting a dropship e-business:
Choose a product to sell. The very first step in any sales process is deciding what product to sell. Many factors should be considered before you make the decision, but for now, let's say that you've decided to sell CD players on eBay.
Locate a supplier who will dropship for you. Using a research tool like Google, ThomasRegister.com or an industry-specific resource like The Ultimate eBay Dropship Power Pak, you can search for and find a company that will dropship CD players for you. If the company offers you a 35 percent markup over cost, which means that it will supply the CD players to you for $100 each, then you should be able to retail them for $135 apiece. Make sure the dropshipper has a good stock of CD players on hand so you don't end up selling a product that must be back-ordered.
Set up an account with the dropshipper. Now it's time to set up a reseller account with the company that will supply the CD players. This can often be done online or by phone, but some companies will require that you complete and return a reseller application to open an account. Some may also require a tax ID and a business license.
Advertise the product for sale on eBay. Now that you have your supplier lined up and you know that the product is in stock, it's time to make a sale. That means it's time to advertise the product using an eBay auction. Since you know what you must pay the dropshipper for the product, you also know what minimum amount you will take for the product. In this case, you could start your auction at $100, since that is your cost. If you are confident that you can get more than $100 for the product, you can start with a lower price, but remember that if the product goes for less than what it costs you to fill the order, you will lose money. Also remember that the dropshipper will charge shipping, so make sure to figure that into your sale.
The product sells. Great news—your CD player has sold for $135, and your customer pays you with a PayPal instant payment. I highly recommend that entrepreneurs use PayPal or some other online processor to accept instant payments. This allows the customer to pay you faster, which lets you place the order with the dropshipper faster, which gets the product to your customer faster.
Place the order with the dropshipper. Once your customer pays you, you should contact the dropshipper immediately to order the product on your customer's behalf. The dropshipper then ships the order to your customer under your company name and address.
Follow up after the sale. This is where many new e-business entrepreneurs drop the ball. Just because your customer has paid you and you've placed the order with the dropshipper, does not mean that you are out of the loop. Quite the contrary: If there are problems with the order, you are the one that will be held responsible in the eyes of your customer.
It's best to be proactive in your customer relations. Follow up with customers to let them know when a specific item has been shipped. Offer yourself as the personal contact for any issues that may arise. This is also a great way to sell customers more products. Invite them to check out your eBay store or Web site, if you have one.
Many people are afraid to use dropshipping as a method of sales due to the horror stories that fill the Internet about unscrupulous dropshippers who take the money and don't fill the orders, merchandise that is eternally back-ordered, unscrupulous middlemen posing as dropshippers and so on. Make no mistake, the dropshipping industry—like most other industries—does have its share of shady characters who would rob you blind given the chance, but there are also hundreds of honest dropshippers who can help you build a profitable eBay dropship business.
Dropshipping is a complex topic that can't be completely addressed here. For that reason, I have written a detailed report on dropshipping called SPECIAL REPORT: eBay Dropship Profits that is available as a free download.
Here's to your success!
The author, Tim Knox, operates dropshipwholesale.net, the website where you will find everything you need to start your own eBay dropship, wholesale or online sales business TODAY!