Drop shipping is for entrepreneurs who like selling, packaging and shipping merchandise. If you've ever been in sales or sold items on eBay or other online marketplaces, your transition into the wholesale drop-shipping business just got easier. You can operate the business from home if you have space to store inventory and pack and ship the goods.
Drop shipping involves a manufacturer, a wholesaler and a retailer. The manufacturer makes the product and the retailer sells it. The wholesaler operates between the manufacturer and the seller. She buys the product from the manufacturer, stores it as inventory and sells it at a discount price. The retailer takes orders for the product and sends the order and shipping details to the wholesaler. The wholesaler packages and ships the product to the customer. She is the drop shipper or distributor in the transaction. She makes a profit by buying goods at a low price and selling them to retailers at a slightly higher price. People often confuse wholesale drop-shippers with retail drop-shippers.
Most successful wholesalers have mastered the art of deal-making. Wholesalers keep on top of buying trends. They uncover the next "hot" clothing accessory or high-tech device. You don't need management experience to be a wholesaler. But it's useful in setting up a distribution operation, with automated inventory tracking and shipping-and-receiving functions. A business or finance background can help with payments and sales transactions. But organizational skills are critical; wholesalers must manage sales transactions with manufacturers and retailers, while maintaining inventory and packing and shipping merchandise on schedule. Wholesalers need good people skills, too. They must maintain relationships with current manufacturers and retailers and find new ones, often through networking and cold calling.
The types of products you choose to distribute determine your operation's setup. You can work out of your basement as a sole distributor if your products are small and can be stored, packed and shipped easily. Figurines and books fall in that category. Large, heavy goods, such as chairs or computer printers, must be distributed from a warehouse. Wholesalers rent or buy the space and pack and ship from there. They work with commercial real estate agents to locate warehouse properties to rent or buy. Wholesalers market their operations like other enterprises to build and maintain clients. They're registered businesses with their states and listed in wholesale directories. They set policies and procedures for services, such as shipping fees and minimum-order requirements for retailers.
Fraudulent distributors and theft are common in the wholesale and retail industries. Wholesalers can protect themselves by securing inventory, business records and client's financial information. And they can require employer identification numbers, and sales-and-use tax and resale certificates from shop owners. Build your reputation as a reliable wholesaler by dealing ethically with clients and setting fair pricing policies. Also, keep good records of sales, inventory and shipping orders.
Valerie Bolden-Barrett is a writer, editor and communication consultant specializing in best business practices, public policy, personal finance and career development. She is a former senior editor of national business publications covering management and finance, employment law, human resources, career development, and workplace issues and trends.