Hi Cathy,
All those reasons might appear on the surface to be good reasons and logically, that is why many take a stab at dropshipping, but I believe you will discover, its not the best way.
I have done dropshipping. I have went through hundreds of dropshipping products to see their profit margins.
Essentially, only about 1/5 of any dropshipping inventory is even worth your time and at that, those 1/5 are only about half as profitable as salvage. Generally, they put some really bloated MSRP and then show their price as half as much, when really, their price is WAY WAY to high already..
Salvage, on the other hand, is about 90% sellable and profitable. Name brand makes ALL THE WORLD of difference for consistancy and figuring what your potential profit margins are.
No name products, which more dropshippers use, are like the waves of the sea, meaning one day worth a lot and the next day worth nothing. I know about non-branded, as I have imported from China.. Its difficult to control the price on non-branded items.
1. Rather than your money tied up in inventory, your time will be tied up in just trying to find one good product to sell, seeing most dropshipping products are not worth your time to read. We humans have no problem tying up all our worthless do-dads in credit cards, but we hesitate on things that could make us money. Generally, no one has a problem taking out a loan for a $100,000 house that will likely loose money, but to invest in $100,000 of product seems crazy to most, yet it will make you money, if you do it correctly. Like with all expensive things, you should treat a credit card or loan like a loaded gun. Very carefully. That goes for product or do-dads..
2. Of course. You have to incorporate all costs into your calculations. You just adjust your purchase price accordingly. If you can make $2000 off a pallet, consider adding all costs to make that $2000. For instance: shipping costs to you, the product themselves, eBay fees, Paypal fees. Generally, I will not pay more than $1000 to cover all expenses to make $2000 of revenue.
3. This is not hard. There are many companies out there. FURTHER you generally do NOT have to buy boxes, seeing all the items are already boxed.. You just need to buy peanuts, etc.. Boxes are only required a little bit of the time.. There are some good websites you can buy off of that are not expensive..
4. You have to find the room.. Garage, attic, basement, etc.. Gives you a good excuse to clean up the house also.. Or, you can just pay someone to do work for you and store the items at their house.. I do this..
5. Doesn't happen when you buy pallets.. I am never "stuck" with one type of item.. Matter of fact, I am never really "stuck". But, I guarantee you if you sell non-branded items, you might get "stuck" as I have sold non-branded items and they are far far more difficult to sell than branded items..
Might appear like there is "freedom" in dropshipping, but really you are just signing up to be some companies sales person. The freedom is in solving all the objections you raised.. Dropshipping "appears" to solve those objections, but really, it only does on the surface..
Everyone and their sister wants to dropship. That is why it is not really profitable. For, as soon as you decide not to do dropshipping, there are 100 more that want to and some of them will work for peanuts.
SOLUTIONS:
1. Use credit, not money to buy product.
2. Have others work for you and ship out the items for you.
3. Do things different than everyone else. That is where the money is.. If you just follow the herd, you will go over the edge with them.. I mean, think about it, everyone wants to dropship. As a result, the one with the lowest price wins.. I have met people who, BELIEVE IT OR NOT, think it is profitable to sell dropship items AT COST. YES, I had one guy I was coaching who was thinking this way, and I had to point out just how dumb it was of an idea.. So, imagine, there are people who will sell a dropship item AT COST, meaning they pay $100 and sell it for $100, making $0 dollars.. Yes, that dumb.. They believe for some reason that they can get "return customers" and at that point get profit.. They fall for some goofy principle someone taught which is really distorted.. Yes, you can make money on return customers, but it isn't anything remotely like he thought.. If you are lucky maybe 5% will come back to buy from you again..
WHY GO WHERE NO ONE ELSE DOES?
When everyone goes for a certain product or certain technique all it does is make a surge in sellers.. As a result, the profit automatically becomes harder to generate.. Since some sellers are very stupid, you end up competing with people selling for peanuts or worse, $0 as the guy I mentioned above.. THERE ARE ways around this, by simply making a better ad and just putting in the higher price.. It works, I do it, but you have to differentiate yourself from the low priced guy or you have to atleast look more credible..
But, if you have 10 people selling at some really low price, it is really hard to get a bit on a high price.. So, its good to also try to go away from the crowd..
Tony
TrixieFair@aol.com wrote:
Greetings Tony,
I received your message and checked out the sources you gave me here and I have also done my own searches for wholesale and surplus sources. I have been thinking about this for a long time and doing my due diligence.
I want to tell you my reasons why I prefer dropshipping.
1. Not having my money tied up in inventory. I can't afford to pay out thousands of dollars on something that I don't know will even sell.
2. If I purchase a lot/pallet, I then have to pay for the lot/pallet to be shipped to me, which adds to the cost.
3. I have to find and purchase packaging materials and then pay shipping to my purchaser. I realize you charge your purchaser for these items in your auction shipping costs, but sometimes it's hard to find the boxes at a reasonable price.
4. I don't want to have to store the items in my home when I really don't have the room.
5. I don't want to be stuck with having only one type of item to sell because most of these pallets are of only one style.
I realize I may pay a little more with dropshipping, but I have a lot more freedom and don't have the headaches of tying my money up in inventory that may not sell, finding boxes to ship items in, paying for the shipping materials and shipping the items myself, and having inventory stored in my home.
Do you understand what I mean?
Sincerely,
Cathy
