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How to Set Up a Drop Shipping Business and Run it Successfully

How to Set Up a Drop Shipping Business
The Internet provides to those who know how to use it smart. That was 5 years ago. Today, all you need is an idea and an Internet connection to just get going. And the drop shipping business is one of these fruitful prospects that you can do.
Arun Prabhu
Last Updated: Mar 26, 2018
Ever wondered how eBay items get to the customers? Well, let's say, eBay is port A, and you are sitting at port B. eBay needs a middle-man to get the product to reach port B. That's where drop shipping comes in place. If you're in it, then what you do is find a buyer, buy the product from the original producer, charge your margin to the consumer when you sell it to him/her. You basically become the retailer for a customer, transporting goods from the wholesale provider to the customer.
Establishing a Drop Shipping Business
There are certain things you need to take care of when you start drop shipping. I've provided you with all the important things you need to know if you decide to start.
Why Drop Shipping is Good?
There are certain heavy advantages in this profession. Use them wisely and you will have yourself a pretty serious source of income:
  • You don't need to actually possess any items or an inventory with you. All items are provided by the wholesale outlet. This means you don't need to store any extra items with you, probably having to sell them off at discounted prices later.
  • You don't need to do the shipping either. This will be explained later in detail.
  • You get sale credit for the product sold, if the main distributor chooses to stay out of the credit loop. Good publicity always gets more customers.
Starting Up
Here's a checklist for you when you start up on your drop shipping business:
Online store
  • Find out a good product. Search online sites that provide specific products. Choose the ones that you think sell best.
Businessman with wholesale provider
  • Find out the wholesale provider for that product. You need to take care of the reputation of the distributor at this point. You can check their annual sales online along with their distributor locations and consumer ratings.
  • Check the shipping options that the distributor may provide.
Opening package
  • Make an optional test run on the product if you still doubt the distributor. Buy a package for yourself and check the product to see if there is anything wrong with it.
Website design
  • Start on your website design once you're sure of the distributor and the shipping procedures. Make the deal with the distributor and then start working on your retail website. Bear in mind that you need to establish a firm deal with the distributor before you spend time and money on the website.
  • Establish yourself as a corporation. This will not only protect you from name-grabbers, but it will also provide you with some great incentives if you do it from good corporate site management service providers.
Steps To Your First Sale
I'll now explain the favorable scenario using the steps above:
  • You found product X to be selling pretty well; decent numbers and in a steady pattern.
Businessman doing business
  • You then check out the major distributors for that product. As you narrow down your search, eliminating other possible middle-men from the picture, you figure out the distributor you want to start dealing with.
Discussion of business
  • You approach the dealer, explaining them that you can help them make more sales if they allow you to be their retailer. This step needs to be done properly, if you want your name and your company's logo on the product package.
Business man meeting
  • Get to know the distributor's policies better. There will be some distributors that have strict rules as to where you may be able to sell their product. You need to gather as much information about all the little details right now to avoid choking later. Here, you need to give the distributor your business and credibility information, like your official business name and tax ID number.
Website word
  • Once there's an understanding between you and the distributor, you can either start up your own corporate website or create a retailer's account on a major website (like eBay).
Woman doing online shoping
  • A customer will see your product on your site/eBay (depending on how well you publicize the product or if the item already sells like hot cakes.) He/she will place an order for the product with you.
Delivery of cargo
You will then contact the distributor, providing them with the customer address and shipping details (if necessary). The distributor will then give a deadline for the product to reach the customer, which you convey to the customer (the deadline can be predicted by you once you get used to it).
Things To Take Care of
There are a few to-do things that need to be done on a regular basis.
Man with computer
  • A follow-up on the product after it is shipped to the customer is necessary. If the customer is unhappy with the product, you may need to replace it with another one. This will also give you a general feedback on the product, so you can constantly check the demand for the product. You keeping a good relationship with the customer also sends a positive image to the customer, improving your publicity.
  • Keep a tab on the production and storage capability of the distributor. You don't want to make a sale only to know that the distributor doesn't have any products at the time.
Female accountant
  • Charge a reasonable margin on the product. It will generally be under or around 30%, depending on the product quality, shelf-life (if it has one) and total period of usability.
Man working on computer
  • Keep a record of all the sales you have made and your transactions with the distributor.
  • Maintain your site/eBay page regarding shipping details, whether they will be on time, delayed, or canceled. Make sure your policies are crystal clear on the site to avoid misunderstandings.
That's pretty much how you start up a drop shipping business. Follow the steps right and be sure of yourself. Be prompt and clear at all times. Maintain a good customer relationship and you'll never have a problem with your business.