This tutorial will consist of 2 parts. Today's is about deciding whether you should use a drop shipper to source your products, or use a wholesaler to source your products and ship them yourself, and a little trick to do both without risking a bunch of money on inventory.
This is really going to be a nuts and bolts tutorial - I want to give you the same steps that I use to identify, contact and establish a relationship with a company that creates a product that I'd like to sell in one of my stores.
Having said that, I also want to touch on a few points about Drop shipping versus Wholesaling.
Let's get started.
First, I always try to find a company that will drop ship a
particular product. Drop shipping usually fits my business model
better than wholesale stocking, for a few key reasons;
1. Audrey and I have several eCommerce Stores that, in total, carry
thousands of different products. If we purchased those products
wholesale, we'd need a very large and expensive warehouse for all of
those boxes to live.
2. With that vast of a product line, inventory management would
become a full-time position, right along with shipping and
receiving.
Keep in mind that the above situation is not true for all eCommerce
Store Owners. We happen to own many stores with many products per
store - most people don't. In fact, you're going to hear from a
family next week that has just one store that has served their whole
family very well in terms of providing income.
Also, many eCommerce Store Owners don't sell products that occupy
the same space as a suit of armor, medieval shield, or battle ready
helmet - we do. The products you sell may not take up a huge volume
of floor space. In fact, many Online Store Profits students are
happily shipping their goods out of a spare bedroom, garage, or
basement.
The bottom line is, your decision to warehouse inventory or find a
drop shipper to do it for you must be based on factors specific to
your business situation, like:
1. Do you have the room in your home to store goods?
2. If you don't, do you have the means to rent a small public
storage facility or share warehouse space with a local business?
3. Do you have the operating capital to purchase a quantity or
products in bulk from a wholesaler?
4. Are you prepared to learn a fair amount about shipping and
handling?
Those are pretty obvious. But what might be surprising to you is
that when you purchase bulk wholesale from a company, you may be
able to do so at a savings over drop shipping.
In fact, when we do purchase goods in volume, we often realize a
savings between 10% and 40% over a drop shipped product.
If you're in a very competitively priced market, having those extra
margins may mean the difference between competing effectively, or
not competing at all.
However, I want to share with you a concept that I believe can make
a huge difference in your ability to grow your business. That
concept is called "Effective Time Management".
Now, before your eyes roll into the back of your head, just take a
few minutes to read what I have to write...
The kind of time management that I'm talking about has not so much
to do with being able to schedule the time that you work for your
business effectively - even though that's important, it's not what
this is about.
I'm talking about being able to make a judgment between Low Value
Work and High Value Work.
I'm going to paint with some broad brushes here, so some of the
details might get lost - for now, I just want you to understand the
concept...
The most effective use of your time online, or in any business
environment for that matter, is growing your business's sales
volume.
Let me write that again - The most effective use of your time is
growing your business's sales volume.
That means getting more traffic, turning that traffic into
customers, and turning those customers into repeat buyers.
You get more traffic by understanding Search Marketing, Pay Per
Clicks, Advertising, and Relationship Marketing.
You turn that traffic into customers by having an effective sales
presentation on your site, offering incentives to buy, and
merchandising products in a unique way.
You turn customers into repeat buyers by following up with them,
communicating information that they are interested in, and offering
a pleasant buying experience.
And you spend time refining and enhancing all of the above by
testing different methods.
I'd like to think that I have some experience in these areas, and
it's been that experience that all other considerations for your
business, other than the above, are secondary.
Sure, you need to manage your books, your Internet connection, your
vendors, your credit card merchant, and your cash flow... We all
need to do that - its just part of the requirements for operating a
business.
But what makes a business successful is the amount of sales volume
that it generates.
Period.
And that's what I'm talking about. Low Value Work is the sort of
work that doesn't do anything to increase your sales volume. While
it might be necessary in order to operate your business, it doesn't
do anything to grow it.
High Value Work, by my definition in eCommerce, consists of the
following procedures:
1) Search Engine Optimization
2) Pay Per Click Advertising
3) Sales Copy Writing and Testing
4) Customer Follow-Up
5) Unique Product Offerings in the form of packages or special value
purchases.
Hey - I'm a business owner. I realize that you have to do both. But
your priority should ALWAYS be growing your sales volume.
If you're just starting out and cash is tight, I know you need to do
everything yourself. But if you have a son or a daughter, brother or
sister, mother or father, friend or cousin that is willing to help
you manage some of that Low Value Work, by all means, take advantage
of their Human Work Cycles. Anything that you can do to relieve that
burden of Low Value Work will help you grow your business in a High
Value Way in the long run.
And that's why we drop ship.
"Huh?"
I know, I know - it was a long-winded explanation for the reason we
drop ship. But, consider this...
When I get an order from one of our stores, all I have to do to fill
that order is take the incoming email that I got from my shopping
cart, and turn that into an order for our drop shipper.
That means having 2 email windows open and copying information from
the incoming email to the outgoing email.
Total time to complete? 60 seconds.
Sure, as a drop shipper, I make less money per sale than I would if
I were an inventory stocking eCommerce Store Owner, but I spend far
less time completing the transaction of the sale. No picking,
sorting, packing, labeling, or shipping.
In a sense, all I'm really doing it turning around an email.
And that's why I try to drop ship whenever I can.
Having said that, there are times when I can't find a drop shipper
for a product that I want to sell.
When that happens, I here's what I do;
I find a source for that product and ask the wholesaler for some
samples. I then create the product listing, drive some traffic to it
with some pay per clicks, and measure the results.
I figure out exactly how much money it cost me to generate a sale
for that product, then figure out if I can make a profit selling it
like that.
If I can, I'll purchase a minimum quantity from the wholesaler, ship
it all to a fulfillment center like Ifulfill.com, and start
optimizing those product pages for the free search engines while I'm
driving traffic to that page with Pay Per Clicks.
See what I'm doing here? I'm taking a very small financial risk to
determine if that product sells at a profit for my company. I'm
using Pay Per Click traffic to determine if I can sell that product.
Only after I'm able to judge that product's effectiveness by testing
will I make a financial commitment to it and buy a quantity of it
from the wholesaler.
Then, in order to keep the sales fulfillment cycle short and easy, I
send that inventory to a fulfillment center that picks it, packs it,
and ships it for me.
The best of both worlds.
The key to this method is testing testing testing!
I need to find out if I can make a profit selling that product by
using the most expensive method of online advertising available (at
least when you compare it to Free Search Engine Traffic) - Pay Per
Clicks. If I can generate a profit from a sale from Pay Per Click
traffic, then I'm pretty confident that my profit margins can only
improve once I start to optimize that product page for the Free
Search Engines.
In my opinion, this is the lowest risk method of determining a
product's potential for your store, short of finding a drop shipper
right off the bat.
Next week, we're going to talk about using the Thomas Register at
www.thomasregister.com to find a product, and how I contact the
manufacturer and ask them to do business with me.
If you're still in the product-finding stage, do yourself a favor
and take a look at Chris Malta's directories. He runs the Drop Ship
Source Directory with over 700,000 drop shippable products, and a
NEW directory called the Light Bulk Wholesale Directory - a resource
of companies that sell wholesale in small quantities.
His site is at:
World Wide Brands - Drop Ship Source Directory, The Market Research
Wizard, The Light Bulk Wholesale Directory
His site is ALWAYS the first place I go to source a product.
Okay, that's it for this week. Next week, we'll get down to the nuts
and bolts of using the Thomas Register, and I'll include an email
and fax template that I use to contact sources from the Register.
Also, don't forget to visit Brad Fallon's blog and read what people
are saying about Stomping the Search Engines. It's at http://www.bradfallon.com/2004/07/discuss-321-launch.html
The comments there make me kinda weepy... :)
Till Next Week!
Andy Jenkins
http://www.online-store-profits.com
http://www.instantseoexpert.com
Andy Jenkins
