What is Drop Shipping?

By | December 12, 2016

If you are new to eCommerce or even just new to the drop shipping business model you likely have a lot of questions.  Unfortunately the way most people get their information these days is by doing a quick Google search and, as with any internet marketing business, (or any other online ventures) this often isn’t the best way to get information because things can change so fast and most of the information that ranks at the top of the search engines is old and outdated.

In this report I’ll answer questions that many beginners have by sharing information that is relevant NOW; in 2015.  

Starting with the most obvious:

What is Dropshipping?

Drop shipping (also referred to as “blind shipping”) is a strategy used when selling online that allows you to sell physical products without actually ever seeing or touching them.  

It works like this:

  • You get approved to sell for a “dropship supplier”.  This “drop shipping supplier” has at least one warehouse located somewhere in your country (in my case, the USA) where they store inventory.  
  • Once approved for an account the drop ship supplier sends you their product list and you can list these products for sale on your website.
  • When a customer buys these items from your website you then buy them from your “drop ship supplier” and have the supplier ship the item(s) from their warehouse to your customer.  
  • The difference between the retail price (what the customer pays you) and the wholesale price (what you pay the drop ship supplier) is your profit.

Who are these “Dropship Suppliers” and why don’t they sell directly to the public?

There’s a lot of misinformation that gets passed around when answering these two questions and that’s likely because there are two VERY different types of drop ship suppliers.  There’s the kind you want to work with (private brands) and the type you want to stay far away from (paid memberships with no price controls).

Drop Shipping RobotPrivate brands are the best to sell for because they do not sell directly to the public.

That is not their objective as a business.  Their job is to sell to retailers including online merchants like us.  What’s great about selling for brands is that they actually care about their products value.  They demonstrate this by offering high-quality product images, excellent customer support, and most importantly PRICE PROTECTION.  These suppliers/brands do not want to work with online retailers who will lessen the value of their brands by offering cheap pricing (for example selling a $1,000 desk lamp for $500 because they are OK with a small profit margin).

To enforce this they set a MAP policy (Minimum Advertised Price).  This makes it so that there is a minimum price that retailers can advertise products for sale for.  For example; The MAP for a product is $700 NO ONE is allowed to list it for sale for under $700.  Raising prices is fine, but you can not sell for lower or you will risk having your account banned.  Brands set these policies to protect their image (no cheap products) and the retailer’s profits (no one undercutting you).  There can be huge problems when working with drop ship suppliers they do not enforce pricing policies.

What is the drop shippers method to enforce MAP policies?

Suppliers who do not enforce MAP policies are usually the ones that are super easy for newbies to find.  Google any niche + drop shipper and they will appear high in the rankings.  These are NOT the types of company that I want to sell for, and you shouldn’t either.  Problem is those dropship suppliers that make this known as their “main” business model do not focus enough on their brand value but rather pushing products onto their retailers. 

Suppliers often just have the goal of moving as much product as possible out the door. To do this they do not enforce pricing policies.  The Supplier sends one price list (that you usually have to pay for and I have NEVER paid to be approved by any of my suppliers).  A price list will only contain wholesale cost, there will be no MAP (minimum advertised price).  This means to sell the product at ANY PRICE YOU WANT.  Sound good right?  It’s not, it’s TERRIBLE.  

The reason is a lot of newbies are OK with making 5% profit margins (sometimes less). The dropship suppliers main goal is just pushing product out the door. They are quick to approve everyone that applies (and pays).  Don’t get caught up selling for these companies.

Want to know more about how to Dropship Profitably?  

Anton, creator of the DropShip Lifestyle course himself, is hosting a LIVE training to teaches drop shipping fundamentals. It’s coming up soon, and I recommend you’re there for the training – I know I will be!

Go register your seat now before spots fill up for this highly anticipated event (it’s free) – **Click Here to get 187 niche ideas from Drop Ship Lifestyle**

Let us know your thoughts in the comments below…