Dropshipping Explained - In Detail For Beginners

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Dropshipping is not new. Back in the old days of mail order, dropshipping was a fairly common way to get a product to the customer without having to stock inventory. 

My first company was mail order. This was how dropshipping worked: 

  • Customer sees my ad in the classifieds
  • Customer calls with credit card number and what they want
  • I charge their card
  • I call the company that carries the product and order it with my credit card.
  • The supplier ships the product to the customer directly, without any sales material or invoices in the box. They use my company address as the return address on the box. 
  • Customer gets their product quickly, and the perception is they got it directly from me. 

Fast Forward to the Internet today: 

  • I research a product I want to sell on my store. I get all the pictures, description, and pricing from the supplier I choose from a dropship directory. 
  • I list the product on my store and advertise on Google AdWords, Facebook, or wherever. 
  • Customer orders the product through my online store ordering system. My merchant account verifies the credit card or PayPal account. 
  • I order from the supplier. I request a dropship order, in which they don’t include any information about themselves in or on the box. No invoices or sales literature. 
  • The supplier ships the item to the customer directly, with a return label that has my company’s information on it. 
  • Customer receives the product, thinking it came directly from me. 

Advantages: 

  • You don’t have to go to the post office
  • You don’t have to have capital tied up in inventory
  • You don’t need a warehouse and all the headaches that go with it
  • You don’t have to deal with what’s called “Aging Inventory,” where your products aren’t selling enough 
  • In the future, once you find a winning product, you can make a deal with the supplier for a better price wholesale. Give the product at least a year of very strong sales. Pick a product that won’t go out of style. Trendy stuff not such a good idea. 
  • You get to test a lot of products without risk

Disadvantages: 

  • You might never meet the supplier, so you must trust they are a good company. Places like AliExpress.com show you seller ratings. I always choose the best supplier ratings. I also pick the seller that has sold the most orders of a product. 
  • You won’t get as good a price on the item as you would’ve if you purchased it in wholesale quantity

So, not much has changed since 1985. I also used dropshipping back in the late 90's for a computer parts online store I owned. It worked well because the parts became obselete so quickly. 

How do you find great suppliers? Your best bet is to become a member of a service where they supply you with a database of products and suppliers. 

There are 3 I’ve found to be the best directories out there: 

Worldwide Brands - Chris Malta is, by far, THE expert at Dropshipping on the Internet. He's been in business since about 1998. I've been a member myself for a long time, and Chris is honest. His directory is amazing and includes not only U.S. dropshippers, but also ones from other countries. 

I prefer the first two dropshipper directories the most because they prevent the majority of people from using them. Most people don't want to pay for things, but if you want products that not everyone offers you just might want to open your wallet and purchase a membership from one of these directories. In other words: 

If you want to be unique, don't do what everyone else is doing. 

Just my two cents. 

Hope this article helped you understand dropshipping a little better.  

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