Drop Shipping Products for Beginners
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|Section 1: Picking the Best Products to Sell|
Do I have to buy more than one product?
With dropshipping, you are not buying the products upfront. So it doesn't matter the number of products that you list for sale. With the light bulk suppliers in our database, they have minimum orders of $500 or less, so you can keep your own inventory for better profit margins.
Do I have to pay for the product before I sell it?
With dropshipping no. The supplier will be sending the product on your behalf to the end customer. You will pay for the product once a customer orders from you.
Do I have to pay the supplier a membership fee too?
We do not list wholesale suppliers with membership or account setup fees.
What is a drop ship fee?
A drop ship fee is also called a “handling” fee. This is the fee to pay the wholesale supplier to split apart cases and pack one product to send to your customer.
How much is the drop ship fee?
If there is a drop ship fee, they typically range from $1.00 to $5.00. Sometimes you will see a higher drop ship fee, which is understandable once you see the type of product that will be sent. Delicate products take more to pack and ship them, so the extra cost has to be charged in the drop ship fee.
What kind of profit margins are there with dropshipping?
This all depends on the products that you source and the supplier that you work with. All wholesale suppliers have their own wholesale pricing structures, so you will have to contact the wholesale supplier that you want to work with to get those wholesale prices to see what type of profit you can make.
Sports Pulse, LLC would profit up to 20% or as low as 5%. The average being 10%.
What are middlemen?
A middleman is a company that was created to simply pass on orders. A middleman will not hold inventory and will send your order to the actual manufacturer or wholesale supplier to send the product. They charge extra fees to do this, and that is typically found in the increased "wholesale" cost.
How do I get images and descriptions of the dropshipped products for my website?
The wholesale suppliers that dropship, will provide you with all the images & product descriptions that you will need to sell the product once you have setup an account with the wholesale supplier.
Can you use a drop ship supplier and sell on eBay?
You can use dropshipping to sell on eBay. eBay is a good place to test the product market to get more instant results. It is difficult to compete on eBay, so it's best to purchase in light bulk quantities to sell on the eBay platform. You will get even better pricing by purchasing wholesale products in this manner, and you will have the control over your shipping so there will not be an issue with feedback.
How do I know the product will still be in stock by the time I sell it?
Many wholesale suppliers have real time inventory. That means that at any given moment, you can go to the wholesale suppliers website, and they will tell you the number of items left.
Why does Dropshipping cost more?
Dropshipping wholesale prices are higher, because you are buying one product at a time. Bulk discounts occur when you can purchase the required minimum from a wholesale supplier. The more you buy, the higher the discount. This is how large chain stores like Wal-Mart, Target, Best Buy and etc are able to keep prices so low. They are buying in HUGE quantities to stock their stores Worldwide.
Why don't all suppliers offer Dropshipping?
Dropshipping takes extra time and manpower. Many wholesale suppliers are not willing to do business this way and it will increase their overhead.
Do I need a Tax ID to work with a dropshipper?
Yes of course! Legitimate wholesale suppliers will require a business tax ID in order to sell wholesale to you. This makes the products non-taxable to you, but you can tax your customers.
Do I need a Tax ID to work with dropshippers if I'm outside the US?
60%-70% of wholesale suppliers will work with international retailers. If you are interested in a specific country, and only want to work with wholesale suppliers in that country, you are welcome to do so. Keep in mind, that since International rules differ from the US, there is no tax ID involved like you would need for the USA. So you will typically not need a tax ID in order to work with US wholesale suppliers. However, you will still need to obtain a registered business name and any other documentation required to prove you are a legitimate retailer. So you will need to check with your country or region to see what you need to show you are a genuine retailer. Quick tip! In a search engine, type Starting a business in XXXX and replace the X's with your country name. There are a lot of great free resources out there that will provide you with what you need to know.
Do I need a Tax ID to work with dropshippers if I am only planning to sell on eBay?
Yes of course! The same rule applies as above. Legitimate wholesale suppliers will require a business tax ID in order to sell wholesale to you. This makes the products non-taxable to you, but you can tax your customers.
Can I use my website as my registered business name?
Your website or online store is your store name. Business names can differ from your store name. But the important thing is to register with your state.
I have an EIN. Is this the Tax ID the suppliers want in order to work with them?
An EIN is a federal ID number. This allows you to have employees and submit taxes on those employees. Many wholesale suppliers will accept an EIN, but you also need to get a Tax ID number from your state to charge sales tax to any customer that is also located in your state.
Will the dropship supplier use my company information on the shipment to my customer?
Many of the listed wholesale suppliers will send the product in your name, or they will blind drop ship, so the customer doesn't know exactly where it came from.
If I give my customer's information to the dropshipper, couldn't they steal my customer from me and cut me out of the sale for any future purchases?
A wholesale supplier's business is selling to retailers, not the end consumer. Some wholesale suppliers have contracts you can sign that will state they will not market to your customers.
How are returns handled? Do my customers ship the products to me or the supplier?
This will vary from wholesale supplier to supplier. Each has their own rules on returns. You will have to adhere to the wholesale suppliers policies.
What is Blind Dropshipping?
Blind dropshipping is when the wholesale supplier will use a return label that reads something like "Fulfillment Center" or "Shipper" as the business name.
How do I figure out how much to charge for shipping when using multiple dropshippers?
This can be complicated, since a customer could potentially order 2 different items from 2 different suppliers. You wouldn't want to charge your customer too much for shipping, so you can do a few things; 1. You can make sure that your suppliers use one service like UPS to ship. Then you can use the UPS calculator to get shipping costs for the 2 products from one location. Or 2. You can calculate shipping charges on each product and charge a flat fee for shipping. You will lose money on some shipping charges, but you will gain on others.
What are the benefits of using a Dropshipper for my business?
No overhead is the first benefit. You are not storing and stocking the inventory, so there are no extra costs involved there. There are no extra costs for you to take the time to pack and ship the product. Dropshipping is also great for testing the product.
Can I use several Dropshippers?
Yes you can, but it makes shipping more complicated.
Are the products from the drop ship suppliers junk and cheaply made?
These are all brand new, straight from the factory products. Some are products that can be placed in a dollar type store, but other products are more for boutique high end stores.
Do you have a hot list of products so we can start selling right away?
Hot lists are not to be trusted. If you are looking at a hot list, then thousands if not millions of other sellers are looking at that hot list too. That increases the competition on those products, and you can easily be driven out of that product marketplace.
Thinking of Retail Products
You should sell products that you're passionate about using and products you can't live without. These are the products you tell your friends to go buy. You need to love what you're selling, feel like you're making a real positive impact in the world and that what you're doing is important.
Sell products that people received more value in proportion to the money they spent. If you feel you're ripping somebody off, stop selling right now because you can't be greedy in this world. For long-term success you need to be giving people more value in exchange for their money.
You'll find customers who have similar values as you. They'll become true fans your business and will happily come back time and time again. Always leave the person you interact with in a better place then when you found them.
People seek things that make them feel good. Start by writing down a list of items that you're passionate about using. Sell products that have to do with your interests and hobbies. Do you like to play music? Do you like working in the garden? Do you enjoy knitting? Do you have any cats or dogs? There are plenty of products you can sell in these industries.
Brainstorm a list of products associated with your profession. A registered nurse knows all about the uniforms and accessories that other nurses would need. A landscaper would know all the garden tools, equipment, and outdoor decor they'd need. Complete your list of products right now because you're going to validate your retail product ideas and determine how many people are already buying those products.
Rules to Follow
You only need to do a few things right in order to succeed. All of your effort is equal, but you don't get an equal return for your investment of time and energy. You can get back much less or much more. 80% of business profits come from 20% of its products. You should put all of your time and effort behind selling more of these 20% products.
You're going to want to put all your efforts into the right things in order to get succeed. Start by selling items priced at a minimum of $250 because in retail, you make an average of 10% profit per sale. So for a product you sell for $20, you'd profit around $2 and products you sell for $250, you'd profit around $25. With the $20 products, you need to make 12 times as many sales to equal selling an item price at $250
12 more sales means you'd be more stressed trying to fill all those orders. It means more tracking numbers you have to upload to your website, more transactions you need to keep track of for bookkeeping. You'll make more mistakes and after a while you'll be wasting your time sending hundreds of emails to your wholesalers every morning to fill your orders. You'll probably start to hate yourself for it because it feels like such a waste of time. It's extra work for you and it isn't worth all of the stress. This is a lifestyle business and the less work you have the less mistakes are made. The goal is to make the most money possible with every single sale.
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|Section 2: Proving Retail Products Sell Online|
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.
|Section 3: Before You Contact Wholesalers|
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.
|Section 4: Finding and Working with Dropshippers|
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.
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?”
Be sure you understand the supplier's policies in each of these areas:
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)
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.
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.
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.
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.
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”
City, State Zip
PLEASE CONFIRM THE RECEIPT AND STATUS OF THIS ORDER by return email at email@example.com, including tracking number where possible.
PLEASE INFORM ME ASAP if item(s) are backordered or discontinued.
CUSTOMER SHIPPING ADDRESS
ITEM #: ABCDE
PAYMENT METHOD: CREDIT CARD
SHIPPING METHOD: UPS GROUND
Thank you so much,
Sports Pulse, LLC
Signup for an eBay Seller Account
|Section 5: Bonus Lecture|
Why I Teach:
While studying to become a Communication Major at the University of Massachusetts at Amherst, I built a successful eBay business on the side.
After college, I moved to an apartment in Boston, MA (that I could barely afford) to create Udemy courses, teaching students how to sell on eBay.
The goal is to help hardworking people start a successful online business at an affordable cost.
Currently, I'm teaching people how to emulate my successes by offering cutting-edge training courses and passionate support communities that help them start a side businesses more quickly and easily.
The courses provide everything one could need to start and grow a home business. I've discovered principles, strategies, and technologies that produce real, measurable business results — without the expensive costs.
Things I Like:
Bowling, reading, beer, hiking, good deli meat, memorable experiences, my girlfriend, family, and close friends.
Skillhance helps hardworking people start a successful side business at an affordable cost.
Students get access to cutting-edge training courses and passionate support communities that help them start a side businesses more quickly and easily.
The courses provide everything one could need to start and grow a home business. We've discovered principles, strategies, and technologies that produce real, measurable business results — without the expensive upfront costs.