How to Do Drop Shipping

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To create a drop shipping business, choose a familiar product to sell, develop an e-commerce site, such as an eBay store, locate a reputable drop shipper, and obtain a tax ID number. Use a drop shipping business to make money with low overhead costs using advice from a small business owner in this free video on running a business.

Part of the Video Series: Small Business Basics
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Hi, my name's Justyn, with Justyn Paul Management, and this is a how to on drop shipping. Drop shipping is a wonderful way for small businesses to take off. It allows a manufacturer, or a third party warehousing company to make all of the inventory purchases on your behalf. And then all you have to do is to sell those products, send them a form, or even just sometimes simply as an e-mail, with the purchase information, such as the shipping address, and they ship on your behalf for a fee. So, anyway, it's a great way to start a company off, because there's very little overhead required. You don't have to go tie up a bunch of capitol inventory. So, one of the first things you need to do though, start off with, is pick the products that you want to sell. You need to have some kind of expertise, or maybe a passion about this product. Maybe it's a, there are a number of different things that you may have, and reasons for selecting a particular product line. Maybe it's electronics. Maybe you want to focus on, funny colored MP3 players. The point is to pick a product that you know you can sell, that you know you can market, and hopefully have some expertise on, so that you can answer questions that customers may have. The next step that you may want to do, is to actually develop a your own e-commerce site. I recommend people start with an eBay store. Other websites have some wonderful e-commerce tools that are very easy to implement, very quickly. Yahoo has a good merchant service. It's usually between 30 and 50 dollars a month to set up your own website, and have shopping carts, and be able to accept credit cards. For example, there are a ton of wonderful sites you can go to for that, and I've used a number of them, all very successfully. So, don't really have any specific recommendations, other than, if you've never done it before, I would certainly recommend starting with an eBay store, to work with. Simply because it's very easy to set up, and upload product pictures, and descriptions, and to begin selling. And you have a lot of protection through that as well. The next would be to actually locate drop shippers. There are a number, again, of wonderful places you can go to that. Usually, the places that I start, are doba.com, and shopster.com. They both have huge listings, and you can do research on those drop shippers. Find out from other customers that have been using them if they do a good job for them, shipping terms, and things like that. Also, some things you need to identify whenever you find a good drop shipper that may have the products that you would like to sell, is to make sure you understand that terms very clearly. Some of them have monthly fees. Some of them charge very high shipping rates that you have to cover on those shipping rates. And a couple of other items like that, that you just need to be aware of. Some of them also, do not, are not very good at actually reserving inventory, so they may only have two or three items left. You buy or reserve two of them, and there were already three out the door. So, go ahead and check with people that have worked with that drop shipper, and make sure that they have been able to take care of them, and actually fulfilled the orders carefully. You may need a retail license, or tax id number. Those are important things that you would probably like to have anyway. But, that is a legitimate request that a drop shipper may ask you for to be able to produce a tax id number, you can get very quickly on line through the IRS.gov. Especially if you already have your business established through like an, LLC, or it's been incorporated, and that should get you going. Again, as a quick summary, pick the products that you know a lot about, and that you're passionate about. Go ahead and develop an e-commerce store through either, eBay, or your own store, that you would like to build. Go ahead and pick a good drop shipper. Again I start with doba.com, or shopster.com. Make sure you give them the information that they need to set your account up properly, and understand their procedure as well, so that you can very quickly give them orders, and get them out the door very fast. And don't forget that you may have to have your tax id, and retail license as well.

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