Source Hard Goods
Via Drop Shipping

From Theresa Coffey, TNT Editor...

If you want to sell hard goods on the Net but have neither the desire nor the financial resources to stock and fulfill a "garage-full" of products yourself, drop shipping is a viable option worth your consideration.

Here's how it works...

• you place an item for sale on your Web site
  
  
• when a customer buys, you process the credit card order, and send your customer a receipt and "Thank You" message
  
  
• you then forward the order to your distributor (with whom a working relationship has already been established)
  
  
• your distributor packs and sends out the order, customized with your business name
  
  
• you pay the distributor the wholesale cost for the product, plus applicable shipping and handling fees
  
  
• your client receives the product and is delighted
  
  
• you pocket the profit (the difference between the wholesale cost, the applicable shipping and handling fees, and your selling cost).

The main advantage of drop shipping over the more traditional approach to selling hard goods is obvious... you have no inventory, storage or labor costs. But how does drop shipping stack up against the affiliate monetization model, the ultimate in headache-free Web marketing, where no product or shipping is required either? In this case, you simply refer visitors to your merchant-partner's site and receive a commission on every sale generated.

Drop shipping your product is more work in comparison. However, as usual, extra work brings additional profits and other advantages. You need to weigh the positives and negatives to see if drop shipping makes sense for your business.

On the plus side...

• Profit margins and earnings are generally substantially higher (varies considerably according to the product) than the typical 5-15% commissions you can typically earn on hard goods sold via an affiliate program.
  
  
• Many products available from drop-ship distributors are either not sold online, or not sold online via an affiliate program. This gives your business a unique edge. You stand out because you offer a product line not readily available on the Net.
  
  
• You decide how you will price your products (with drop shipping, you buy at wholesale prices, and then resell to your audience), giving you added flexibility when building your business. For instance, you may offer a certain product at or below cost (called a "loss-leader") to entice visitors/customers to your Web site. Once there, you can introduce them to other offers, or more expensive, upgraded versions of your "loss leader."
  
  
• You have greater selling flexibility -- you could, for instance, list your products on eBay (this is a common practice), as part of your monetization strategy.

On the negative side...

• You need the ability to clear credit cards online. Visit the SBI! Resources HQ for a short list of the best third party e-commerce providers for hard goods and simply plug-n-play (copy-and-paste) into SBI! and you're good to go!
  
  
• Your business must be properly registered, as most reputable drop-ship distributors will not work with "individuals."
  
  
• You need to process all orders yourself, and follow-up with both the distributor and the customer.
  
  
• You are responsible for all customer relations -- your client perceives you as both the merchant and shipper. That means you deal with any customer concerns (i.e., product backorders, product returns, customer complaints, damaged products, and so on).
  
  
• You may be subject to geographic restrictions, depending upon where you live. Only about 30% of the distributors listed in World Wide Brand's Drop Ship Directory (a top notch resource for locating real, verified distributors) are able to work with non-U.S. Registered businesses. Trade and export agreements are in place to prevent direct and unfair competition with distributors of the same products in other countries.

The best solution, if you do not want to stock or fulfill "product" yourself, is to combine two monetization models -- source hard goods via drop-ship distributors and promote products via affiliate programs. Generally, it's a good idea to promote low-margin products via affiliate programs (and save the extra work associated with drop shipping), and promote products with high margins via drop shipping.

To get you started down this blended monetization path, here are some tips courtesy of Chris Malta, CEO of Worldwide Brands...

1) Stay away from selling "cool-for-the-day" items -- sell what has solid demand and is profitable over the long run.

2) Differentiate yourself from the big retailers. If you must carry a similar product line, offer different models and/or brands. There is no way you can go head-to-head with the big guys.

3) You don't need to have the lowest price to sell online. There are plenty of reasons why people will pay a little extra -- convenience, high perceived value, trust and credibility, etc.

4) Build the cost of shipping into the cost of your product. Shipping is normally determined by the weight of the product. You can determine the cost of shipping by going to ups.com and using the shipping calculator.

Here's an easy way for calculating shipping costs... enter a zip code of origin in New York and a destination zip code in Los Angeles (which is the farthest distance you can ship in the US). Then subtract 15% from that amount and use that as a flat shipping fee for that product. Your shipping fees will even out over time.

For international orders, you may lose a few dollars, but you'll make them up elsewhere (another reason why it's best to sell products with high margins). It's also a good idea to stay away from promoting large, heavy products -- shipping costs are too prohibitive.

This method is especially helpful if you are selling products provided by more than one distributor (with drop shipping facilities in different parts of the U.S.).

As was noted earlier, SiteSell recommends the Drop Ship Directory, compiled by Worldwide Brands (WWB), as the premier source for credible, verified drop-ship distributors for a number of reasons...

• WWB compiles its list of verified distributors by hand.
  
  
• Every distributor listed in the Drop Ship Directory will single item drop-ship directly to your customer -- no minimum order required!
  
  
• World Wide Brand monitors the distributors listed in the directory, and drops distributors that fall below accepted levels of performance.

As always, do your prep work first. Before you subscribe to the Drop Ship Directory, use their free service to find out whether there are distributors listed for the product you are interested in selling.

When you are ready to register your membership, use the special discount link through the Resources HQ. (As always, we receive no compensation for our recommedations -- instead, we pass affiliate commissions on to you in the form of a discount for all third party "best of the best" resources that we recommend).