Are you making this mistake?

One of the biggest mistakes I see people making when they are new to buying and selling stock is that they are trying to trade in the wrong products.  This isn't something new, I have seen it going on for years - ever since I started trading online myself actually so at least 10 years!

Many new traders tend to try to go for what they see as the easy option - picking products to sell which they know are purchased in large quantities because they have mass appeal.  Some examples of products which fall into this category are computers and accessories, console games (Playstations/X Boxes etc), DVDs, household electrical goods and so on. 

Of course, the products listed above (and many like them) do sell in incredibly high numbers so it would be a natural assumption to think that they would be excellent products to be selling.  Unfortunately this assumption couldn't be further from the truth.  Firstly the markets for these products are completely over-saturated.  Everyone and his dog is trying to sell them and there is no way that a small business or individual could possibly compete on price with the major high street/online stores.  More often than not you will find the 'big name' retailers are selling for less than you can buy the products for at wholesale!

Bear in mind that profit margins on this type of stock is often less than 5%.  Let me put that into real world numbers for you.  When the PS2 first came out (yes I am going back a few years!), the difference between the wholesale price and the retail price was about £8.00 and that was before you factored in the cost of VAT.  It only takes a big retailer to commit to buying a large batch and suddenly the discount they receive means that they can sell for way less than you could ever hope for.  We have a very similar situation with the PS3 and XBox now.

Years ago I used to sell DVDs on eBay - not latest releases but older, harder to find films etc.  The reason I didn't touch new releases was because the profit margin on each one was less than a pound!  Factor in VAT and eBay fees and if you could make 25p per DVD you were doing well!

So many people are still making the same mistakes and often this is simply because they don't understand how the wholesale market works.  I regularly receive emails from people who think that the wholesale price of a PS3 or the latest mobile phone should be about half the price that they can buy it for on the high street.  It would be great if it was but I am afraid to say, this isn't the way it is.

Don't fall into the same trap - you will struggle to make any money and will probably give up your new retail business within a month or two.  There are tens of thousands of different products available from a variety of wholesalers on SimplyWholesale (and hundreds of thousands more products available from the UK suppliers in our wholesale directory) so why compete with every other Tom, Dick and Harry?  Find something a little bit more unique to sell than mobile phones, Playstations and computer bits!

Happy Trading!

Richard Grady
Director - Simply Wholesale Ltd
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Guide to drop shipping

Thinking of dropshipping? This guide contains information about dropshipping, what it is, pros and cons and resources to get you started.

What is dropshipping?

Drop shipment or drop shipping is a type of retailing where the retailer does not keep goods in stock, but instead passes the customer's order and shipment details to the wholesaler, who then dispatches the goods to the customer directly. The retailer makes their profit on the difference between the wholesale and retail price.

Advantages of dropshipping

Drop shipping can be a very simple and effective way to get started in ecommerce. Many online merchants find dropshipping strategies are good way of minimizing stock holding, decreasing overall shipping costs and cutting down on delivery times to customers.

No need to hold stock

Drop shipping allows web site owners to send single or low quantity unit orders gathered on their web sites to manufacturers, or wholesale warehouses, who in turn ship the items directly to the customers of the web site owner. Typically you take care of the promotion and collect the payment, and the drop shipper looks after order fulfilment.

You buy at a low wholesale price

Drop shippers can buy in huge volumes this means they will be able to offer you the best prices on products and shipping, usually wholesale.

No money up front to buy stock

There's no capital investment, no need to invest in stock and no danger of you suddenly having large stocks you are unable to sell.

You can sell a wider product range without buying stock

Using drop shipping allows you great flexibility in terms of product range. Promote as much or as little as you wish.

No need to worry about inventory and delivery

You can focus on listening to the market and discovering the products your visitors want to buy.

Disadvantages of dropshipping

Prices

Don't accept that the first drop shipper you come across will give you the best deal you should shop around.

Drop ship fees and charges

It's important to know all the costs involved so you can calculate your profit margins accurately. Any wholesale company that wants to charge you a regular "participation" fee should be avoided - the only time you should have to pay a dropship company anything is in connection with a specific order.

Shipping

Is the drop shipper using a reputable shipping company o deliver the goods? Where will they ship to?

Accounts

Will the drop shipping company automatically debit your credit card on each order you submit, or can you get monthly payment terms?

Support, returns and refunds

The last thing you'll want is to be caught up in a nasty situation where you have a number of returns - and have to foot the bill. Ask the dropshipping company about their returns policy, what kind of support they'll offer you for their products and about any guarantees associated with their products - and get it in writing.

Credibility

How long have the drop shippers been around for? Do they respond to your requests for information rapidly and professionally? Young dropship companies and wholesalers have the habit of going bust quickly, or growing too rapidly and as a consequence basic good customer service suffers.

How do I get started dropshipping?

It’s fairly easy to get started, the barriers to entry are low and you shouldn’t have to invest much money up front.

·         Set up a online store (DSD provides a tailored website fully stocked)

·         Find wholesale suppliers of products you wish to sell that will drop ship

·         Open an account with the company

·         Build your site, using content and images provided by the dropshipper or produced by yourself

·         When an order is made your site should alert you and take payment

·         Pass the customer details to the dropshipper

·         The dropshipper should then bill you at the special price you have agreed upon. Fulfills the order (in most cases with labels referring to your business/web site instead of the dropshippers)

How do I find drop shipping friendly suppliers?

You can always contact wholesalers directly asking them if they operate a dropshipping program. You can usually find details by searching on the internet.

Searching for the terms "drop shipping" or "drop ship" along with your area of interest usually gives pretty good results.

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