Dropshipping Explained:

According to Wikepedia, "Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer." Here is a visual:

The Difference in Dropshippers & "Dropshippers":

There are thousands of companies out there who dropship. But there are also some companies out there that "Dropship". Those companies are the companies that are really just middle men between you and the dropshipper, and they are skimming some of your profits. You need to be careful of these middlemen.

Here are some of signs of middle man interference:

• low profit margins: Sometimes the actual profit margin is hard to find, because of the items in the small print like per-product dropship fees, or percentage based dropship fees that eat away at your profits. A good profit margin to look for is 25% or higher. There are some products out there that the market rate is quite low, but less than 25% is a good sign that there is middle man interference.
• Lots of Name Brand Products: Although it is very enticing to be able to offer name brands on your site, it is actually VERY difficult to find legitimate wholesale prices on name brand products, and even more difficult to find someone who will dropship name brand products. If you see the most popular brands, you can almost be sure that you are dealing with a middle man.
• Imported Goods: Imported goods are almost always going to be shipped through a middle man. Often you can find healthy profit margins, despite the fact that you are not dealing direct because foreign products are so cheap. But remember, if your profit margin isn't high enough you will not make any money on your website, for a long time.

In reality the model above will look something like this in the end (you just want to avoid letting more hands in the pot than necessary):

The Fine Line of Using Dropshipping Profitably

If your profit margin is high enough for you to make money, it really doesn't matter how many hands are in the pot. You need to remember though, you have marketing costs associated with running a website. You will have paid advertising, as well as other costs. Generally a profit margin that will allow you to make money on your website it 30% or better. The better profit margin you have, the more potential you have to make money in competitive markets.

Where to Start with Dropshipping

The fastest way to find dropshippers is through dropship directories. One dropship directory that I have worked with in the past is at 123Shipper.com. Like most dropshipping directories they charge a fee, but unlike most dropshipping directories, this is a one time fee, with NO monthly charges. It is current as of May 2009, and it only about $100.

Here is a link to a special combination offer where you get the dropshipper directory, and a website builder for $20:

Webstie Builder Bunde

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