Robson Chartered Accountants Business & Finanical Advisors - Gosford - Central Coast - NSW

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The Secrets of profiting from drop shipping

Use drop shipping to generate repeat business.

To increase your retention rate and boost your average sale value, you can sell other products to your database. However, because many retailers don’t want to buy and hold more stock than is absolutely necessary, they utilise a sales process called drop shipping. This enables you to sell extra products to your database, with relatively low risk - you simply promote a manufacturer’s item/s and when an order is placed, the manufacturer ships the goods directly to the customer. As a retailer, you still receive your usual mark up on the wholesale price, you just don’t have to handle the stock.
How it works

There are thousands of people who use drop shipping as their sole source of income. Ebay is one particular market place where drop shipping thrives – log on and you’ll see hundreds upon hundreds of auction listings from independent operators who advertise and sell products across all categories, which they never actually see or touch because once sold, they’re shipped direct from the manufacturer. These manufacturers store great numbers of product for all industries, all you need do is choose one which has products that are both allied with your industry and would be attractive to your database. You then add these products to your website, or your catalogue – you can even have display samples in your store for clients to see and touch. Your retail buyers submit their orders to you, and you send them to the drop shipper. The drop shipper then posts the product out directly to your client, but stays invisible to them. The final result is that your business looks bigger than it actually is.

Drop shipping offers a lot of benefits

1.Lower operating costs. The expense of storage and transporting individual items doesn’t become cost-efficient until you do it on a large enough scale. Drop shipping negates this issue.2.No stocktaking. You don’t place an order with the manufacturer until your client pays you. Plus, you can test the popularity of new products without having to buy stocks that may not sell.3.Saved time. The time you’ll save taking in and organising stocks, printing labels, and sending orders is time you can spend promoting your new products via your website and e-catalogue.4.No order limit. You only order what your clients need. Ordering too many or too few items is no longer a concern.5.Wider selection. With drop shipping you can sell and post products that would normally be difficult to physically store – for example, bulky or heavy items. Plus, by expanding your product line you’ll be differentiating yourself from your competitors, giving you the edge of offering products they don’t have, or that aren’t widely available.What should I sell?

A good place to start would be to research the types of additional products your database might be interested in. Think of all the products that are related to your main product line and then determine whether they could be offered to your type of clientele. For example, if you were an optometrist, you might think of selling:

• Vitamin Supplements
• Cooling eye masks for tired eyes
• Spectacle holders/clips for cars
• Fashion accessories such as chains/cords
• Book lightsMagnifying glasses
• Basic repair kits
• Fashion microfiber cleaning cloths
• Novelty spectacle stands/holders
• Gift packs – e.g. cleaning pack, travel packs

When you analyse your database, you might find sections of your clientele can be further broken down into categories that are easily marketed to. Using the optometrists again as an example, if 25% of your clientele are children, you might consider offering a wider range of cases etc. that are specifically targeted to that demographic. Or, if you have a large contingent of customers who are of an older demographic, a range of magnifying glasses might be a suitable additional product line to offer. Also, think about the instances when customers have come in and asked if you stock a particular product, but you answered ‘no’ at that point in time. If enough people have asked for something in the past, there’s a good chance that there will be a demand for that product within your database.