Drop Shipping Products for Beginners

eBay Completed Listings to Prove Your Products Sell

If things work for one person, it'll effectively work the same for any other person. If companies are selling your product and are making money doing so, it means that you can make money doing so. A successful company is already proving to you that your ideas work and have laid down a path for you to follow.

Frank Sinatra said “if I can make it here, I can make it anywhere.” If the retail product you want to sell, is selling well on eBay, then most likely it will sell well on Amazon and your website too.

We'll start by looking through all the eBay categories and search the completed listings to find what products sold and what product did not sell in last 90 days. We're going look at eBay completed listings and search product categories. You want to see how many products sold and did not sell.

For the baby product category, we'll see that there are so many sub-categories you can choose to sell. We'll start by clicking on advanced search and click on the category you want to view. We want the price to be above $250 and make sure we're only looking at “buy it now” listings, finally click the search button.

2,700 baby products sold on eBay in last 90 days and sold for at least $250.00. You can scroll through all of the products yourself to get a feel for what products sell and what don't. Next, look at completed listings, these are the total amount of products that sold and did not sell in the past 90 days. Total listings are about 12,000. You can determine that about 9,000 products did not sell. That's great, because you're only going to sell 20% of your products. 20% of your products will make up for 80% of your profits.

For our next example, click on the “music instruments and gear” product category. Click on “advanced search.” First, check off “sold listings” with the items priced at least $250.00. Next, check off “buy it now” and check off “brand new” listings.

You'll see that about 41,000 items sold in the musical instruments category on eBay. When you dive deeper into research, you see that about 18,000 guitars sold. Get a feel for what products sell and what don't. Research brand new products that sold for at least $250.00 with buy it now listings.

Finally, we'll see a total of 180,000 items were on eBay in the “musical instruments” category. That means, 140,000 items did not sell. That's okay, we'll do the math and determine about 41,000 items sold divided by on 180,000 items total. That's about 20% of items sold. We'll apply the 80/20 principle which says 20% of products make up for 80% of profits.

Amazon Rankings to Prove Your Items Sell

Validate your retail product ideas using Amazon search. We'll be sticking with the same product category examples of baby products and musical instruments.

The “baby department” on Amazon is on the left hand side of your screen. Scroll down to price and select the “$200 and over.” First, you'll see the baby monitor to the right is priced at $240 dollars. Scroll down to product information, and under the additional information, to the right of your screen, you'll see that this product is ranked “Top 800 Best-Selling Items” in the Baby Department. It's also ranked “Top 20,000 Best-Selling Products” of all Amazon Departments. In my experience, those products sell at least 5 per day.

Moving on to musical instruments, find the department to the left side of your screen. Scroll down to price, and select the “$200.00 and over” option. For today's example, we'll be looking at the “Jam Stick: Plugin This Guitar into Your iPad.” Next, we'll scroll down to product details and we'll see this product is an “Amazon Bestseller” its ranking in the top 5,000 products.

We can assume from experience that this product alone sells about five per day. If you're making at least $10 profit per sale and making at least five sales per day. That's $50.00 profit per day. If you want to make $250.00 profit per day, all you'd need to do is focus on selling five items at a time. Focus on the products that are already selling. My recommendation would be to search through every Amazon Department and find the best selling items priced over $200.00.

How to Use Google Trends to Prove Your Items Sell

Google Trends is another tool you can use to research products. When I sold football cards, Topps Chrome football was a best-seller, but only for a few months in the year. We'll use Google Trends to research which months are best to sell this product, because it would be a waste of time to keep trying to sell the product, if no one is buying it.

We'll see that the peak times people are searching for this product is in October, this is when the product is released. As the football season goes on, interest for the product declines and ends when football season is over. Once March rolls around, people focusing on baseball products. You'd turn your attention to selling baseball cards in the summer. This is part of finding and focusing on products that are actually selling.

Tax I.D. to Work with Dropshippers (U.S. only)

Applicable to the United States, an Employer Identification Number or EIN is the corporate equivalent to a Social Security Number, although it is issued to anyone, including individuals. The purpose of an EIN is so that the IRS will be able to identify your business for taxes.

You need an EIN to work with wholesalers. Without it, you will not have access to legitimate wholesalers. With an EIN you won't have to pay sales tax on products you buy for your business, including items for resell.

How to Setup a Business License (U.S. only)

The reason to consider getting a business license is because you separate yourself from your business. Your business becomes a person and will be considered one. At the start, I chose to become a sole proprietorship. You alone own the company and are responsible for it's assets and liabilities.

Once you're making money and the business becomes profitable, I became a limited liability company. LLC's are not taxed as a separate business entity. Instead all the profits and losses are passed through the business to each member of the LLC. Members report profits and losses on their personal federal tax returns.

Advantages of an LLC, members are protected from personal liability for business decisions or actions. If the LLC incurs debt, the issued members personal assets are usually exempt. Keep in mind that limited liability means limited liability. Members are not necessarily shielded from wrongful acts, including those against employees. Finally, there's less registration paperwork and there are low start-up costs.

Disadvantage of an LLC is self-employment taxes. Members of an LLC are considered self-employed and must pay the self-employment tax contributions towards Medicare and Social Security. Their entire net income of the LLC is subject to taxes.

To get an LLC, you must file the Articles of Organization, which is a simple document that legitimizes your LLC. It includes information, like your business name, address, and the names of its members. In most states, you file with the Secretary of State. There will be an associated filing fee for this document. You can register with the state you live in. Go to your state government website. You can file with your state online.

How to Setup a Business Bank Account

Once you have an LLC, your money should be separated into a business bank account, and kept away from your personal bank account. You're letting the IRS know that your business is a separate entity and that you're serious about making a profit. If you're being sued and you don't have a separate bank account for your business, then you're not showing that your business is a separate entity!

Bank of America allows you to spend $10,000 per day with your debit card and you don't need to maintain a minimum balance. Bank of America charges $16/month for having a business bank account. They give you some options to get that $16/month back, by spending at least $250 with your debit card per month or business credit card. Otherwise, it's $16/month.

Bank of America has very good customer service, with very nice people. You have an easy access to ATM's and Branches everywhere in the United States. You can deposit cash and checks at any ATM.

I went to Bank of America to open a business bank account and brought all these business documents. Articles of Organization, Tax ID number, Driver's License, Birth Certificate, and Social Security number.

You should be capable of waiving the $16/month fee by spending $250/month with your debit card when you charge your eBay fees, cell phone bill, and other business expenses. If you want to be successful, continue to keep your costs low. On average, when people expend purchases with their debit card, they spend an average of 13%-18% more than cash.

The first time I opened a business checking account, it was with a local credit union. I had a personal checking and savings account with them and they weren't that bad.

It was March 26, 2012 and the biggest product of the year was being released. Wholesalers were gonna charge my bank account in the afternoon and ship my customers orders afterwards. All the money was in the account, over $7,000. But, it's not that easy. The credit union called and they told me that two wholesalers tried charging my account for around $7,000 and labeled it as suspicious activity. The bank said there was a $3,000 spending limit per day. Even if I had a $100,000 in my bank account.

People usually aren't best friends with their banks. Does anyone have a good experience with their bank? Leave a comment below and tell me about it!

How to Start a Business Internationally

20% of students on Udemy are from from India. So, Google “starting a business in India” and you'll see that your government offers plenty of information. Use it in order to sign up and register a business. To work with wholesalers, all you need to do is prove you have a legitimate business.

Once you set up a business in India, you are legitimizing your business and you are able to do business anywhere in the world. If you want to do business in the US, call the manufacturer who produces the item you want to sell. Introduce yourself, the name of your company, and where your business is located. They'll give you a list of wholesalers you can work with in India or wherever you're located.

I'm not a lawyer or an accountant and I can not give you legal advice. When you "Google" this information, you'll be connected to your government website. Make sure it's a legitimate government website because you don't need to pay anyone to file the paperwork to become a legitimate business. The government will show you a step by step process, for free and will give you in-depth information in order to legitimize your business.

This will enable you to get products at wholesale prices and work with legitimate wholesalers in the US and internationally to start dropshipping products to your customers, anywhere in the world.

Calling Corporate Headquarters

You want to call the company's corporate headquarters and ask for the sales department. Tell the sales department that you own a retail business and want to sell their products. Ask them for a list of their wholesale distributors in the US. Tell them where your business is located so they can direct you to the regional sales manager. They want to sell as many products as possible and they will be happy to give you a list of wholesalers and dropshippers you can work with.

Calling Dropshippers

Call them enthusiastically with a smile on your face because they will notice a considerable difference. Slow down your talking and movement by about 50%. Use pauses when speaking. “Hello, this is Matt Bernstein from Low Cost Hustle, LLC I'm interested in retailing your products on my ecommerce site. Would you tell me how I can get started?” If you get transferred to the sales department say this “hello this is Matt Bernstein from Low Cost Hustle, LLC. I got your number from [this] manufacturer and we're a retailer interested in carrying several of your products. Would you tell me how to apply for a new account please?”

How to Spot Fake Wholesalers

A real legitimate wholesaler will not do business with you unless you have a tax id. They will not show you wholesale prices unless you set up an account with them first. All accounts are free. There is never a risk in setting up an account with a wholesaler.

Signup for Wholesale Accounts

When you're applying for wholesale accounts, they're going to want specific information about your business. Have the following information ready. Business name, Tax I.D. number, business address, business phone, number, and for business status, you tell the wholesaler, you're a new LLC. The following are additional questions the wholesaler will ask you. Answer them truthfully, are you a storefront? online retailer? How long have you been in business? Tell them you're a new online business for less than a year. The wholesalers will want to know your trade references and bank references. Considering, you don't have any yet because you're a new business, tell them you'll pay upfront for every order.

Once you set up your wholesale account you can begin to ask questions. Such as, “how soon after you place an order does the order ship?” and “do you do overnight shipping?”

Supplier Policies

Be sure you understand the supplier's policies in each of these areas:

Pricing

The manufacturer may set a price floor or ceiling in an attempt to control a market. This means you must sell the product within a specified price range. Otherwise known as MAP Pricing

(Minimum Advertised Price)

Refunds

The refund policy defines whether you will get your money back if your customers return an item. Your supplier will define if and how they provide refunds. If a customer returns their order, often you're responsible for refunding your customer and keeping their items as your own inventory. This is the cost of doing business because I only had one return in two years of business.

Returns

The supplier will have specific conditions under which it will accept returns. A normal wholesaler return policy will have the ability to return items anytime within 30 days.

Guarantees

Most suppliers will stand behind the manufacturer's product guarantee. You can honor that guarantee or give your customer an additional guarantee as incentive to purchase from you.

Goods Damaged During Shipping

This policy describes the conditions under which the supplier will accept the return of a product that is damaged while in transit.

Back Orders

Most suppliers do not have a specific policy if you submit an order for an out‐of‐stock product. It will be up to you to determine how you want to handle this situation. In the interest of good customer relations, you may want to let the customer choose a different product or get their money back if an item is on backorder.

NET30

Type of trade credit where the payment is due in full 30 days after the item is purchased.

How to Place an Order with Dropshippers

TO: Sports Images

DROP SHIP ORDER

The following is a Drop Ship Order from Sports Pulse, LLC Account #12345

Please ship the product(s) to our customer with our COMPANY address listed as follows”

Sports Pulse

Street address

City, State Zip

PLEASE CONFIRM THE RECEIPT AND STATUS OF THIS ORDER by return email at service@sportspulse.com, including tracking number where possible.

PLEASE INFORM ME ASAP if item(s) are backordered or discontinued.

SHIP TO:

CUSTOMER SHIPPING ADDRESS

ITEM #: ABCDE

QUANTITY: 1

DESCRIPTION:

PAYMENT METHOD: CREDIT CARD

SHIPPING METHOD: UPS GROUND

Thank you so much,

Matt Bernstein

Sports Pulse, LLC