So, you’ve at last made up your mind you want to make some money on eBay or an e-store. You’ve searched the internet and come across an amazing way of earning some money from home you had never heard of before called “drop shipping”; a fantastic way of selling products online without worrying about stocking or shipping. And now you’re itching to try it out. But before you take the leap and decide to start drop shipping with the first company you find on Google, you should take a minutes time to find out who this site willing to drop ship for you really is. Of course you understand by now WHAT a drop shipper is, but the question you need answered is WHO the drop shipper is. Is he a manufacturer? Is he a wholesaler? Or is he a middle man? To understand who your drop shipper is, you need to know how the Supply Chain works.
The Supply Chain begins with the producer (or manufacturer) – the person who produces the merchandise from raw materials. Let’s imagine there is a demand for hiking boots in a city called Hikers Top. A Manufacturer will notice that demand and begin manufacturing container loads of hiking boots from raw materials like leather, cloth, rubber etc. Now, since the Manufacturer is so caught up in finding raw materials for production and busy running his factory, he can’t spare the time or money to put up a store in Hikers Top and sell his boots directly to the public himself. So he looks for a Wholesaler who will purchase his hiking boots in large volume bulk for, let’s assume, $50 a case (one case=12 pairs of boots). This price is the Manufacturer’s Wholesale Price.
However, this Wholesaler will not sell the hiking boots directly to Hiker Top’s public either. He is a Distributor who will distribute the hiking boots to numerous Retailers. He is the person who links the Retailer with Manufacture. This Distributor does business with one or many Retailers who already have shoe stores in Hikers Top city. A shoe store Retailer will buy truck loads of hiking boot cases from the Distributor (Wholesaler) for, let’s assume again, $100 a case. The Distributor makes a profit of $50 per case.
Now the shoe store staff will unpack each pair of hiking boots from the cases and display each pair to sell for the price of $20 a pair. The Retailer sells thousands of hiking boots to Hiker Top’s public because it filled their longing demand of owning a good pair of hiking boots for their hiking trips. The Retailer makes a nice profit of $140 per case bought from the Distributor ($20 x 12 boots in a case = $240, minus $100 which he paid for every case).
The hiking boots reach the end-consumer and everyone in the supply chain is happy.
This is how the supply chain works. (There may be more people in the real world who come in between, but you get the basic picture). Any ONE of these “links” in the chain can be your drop shipping supplier, but do you know which “link” in the chain you are in connection with? If you are absolutely sure that the dropshipper you have decided to buy supplies from is a REAL wholesaler or a genuine manufacturer, then you are good to go. You might ask, “Is there any OTHER kind of drop shipping company?” The answer is, “Yes.”
In short, there are two types of Drop Shipping Wholesalers:
1. Aggregators
2. Manufacturers and distributors
As someone wanting to sell on eBay or an online store, YOU are the Retailer – the third link in the supply chain who sells products to the end-customer. Obviously, you will be sourcing your products from either the wholesaler or directly from the manufacturer. The down side, as you may have understood from above example, is this: Manufacturers and wholesalers by nature sell merchandise in bulk. But, since the development of e-commerce and home based businesses, many manufacturers and wholesalers have begun to offer drop shipping services to small businesses.
Alas, these kind of REAL drop shippers are tough to get hold of. That is why a new “link” found its way in the supply chain, that is, the aggregators.
Aggregators put up sites and show almost millions of products you can pick from through their virtual stocks. I say “virtual” because they don’t in fact have those products stocked in a physical warehouse. They simply find a bunch of real wholesalers offering drop shipping and make an arrangement with them. They are in effect the middle man. As a retailer looking for products to get drop shipped, you can come to the aggregator’s site, choose any and as many products you want to display in your e-store, and sell them to your customers. You then buy the product from the aggregator and it takes care of the shipping and handling.
These aggregators are not scammers; they just make the tough job of getting hold of real drop ship wholesalers easy for you and charge you for it while also offering you some value added service.
Now that you know that a drop shipping company may either be an aggregator (middle man) or a real manufacturer or wholesaler, the question is which type of drop shipper to choose.
Up till now it may seem obvious that if you source your products from an aggregator you know that he is NOT the real wholesaler, but rather a middle man, and he will naturally mark up the price for the merchandise. But if you are lucky enough to find a real wholesaler who is willing to drop ship for you, or even more lucky and find a drop shipping manufacturer, you will get a more competitive price for your product. You will acquire a price that is closer to the wholesale price (of course, there are other constraints in drop shipping that makes it nearly impossible to get a TRUE wholesale price even from a real wholesaler.)
I can practically hear you asking yourself now: Why would anyone drop ship his products from an aggregator (middle man) when you can find a better price from real wholesalers? The answer, as I said before, is that it is significantly hard to find a manufacturer or a real wholesaler who will drop ship for a small home business. That doesn’t mean there are only a small amount of true drop shipping companies out there. There are tons of manufacturers and wholesalers that do drop shipping, but they are hard to find in simple free Google searches because they normally don’t advertise their drop shipping service like aggregators do. That is why you need the help of “product sourcing sites” like World Wide Brands or SaleHoo that help you connect with real Drop Shipping Companies.
If you wish to pass over the aggregator and get a more competitive drop shipping price by DIRECTLY connecting with the real wholesaler, then taking assistance from sites like SaleHoo and World Wide Brands is a smart way to do it.
Bloggers that are searching for more information about the niche of web traffic, then please go to the website which was mentioned right in this paragraph.
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