What is dropshipping

Drop shippers are wholesale suppliers that ship products directly to your customers or recipients from their place of business, such as a warehouse, store front or even a home. One Great Gift's design and distribution center is a warehouse while our administrative offices are home based. Most drop shippers label and ship the products in their member's name only. Be careful though, not all drop shippers do this. The last thing you want is a drop shipper who markets themselves and not you to your customers. One Great Gift will NEVER market to your customer, in any way!

The great thing about using drop shippers is that you don’t have to worry about costly overhead, inventory, labor, and shipping. You don’t have to store anything nor do you have to ship anything. You simply place product images and information on your website, drive traffic and sales , and earn money while you sleep! When orders are received through your website typically you either phone them in, email them, or directly enter them into the drop shipper's website. With drop shippers who offer pre-loaded websites, the orders are directly received and processed by them instantaneously, you don't have to do anything except smile when your money comes in! One Great Gift will soon be offering pre-loaded sites.

There are several companies that are, what we call, supplying drop shippers. They typically don't manufacturer or design any of their products lines. Instead they offer an array of products from other wholesalers at less of a discount to you so they can also make money. In essence, they are product brokers (middlemen). A benefit to using this type of drop shipper is that they usually have a wider variety of product lines than a drop shipper who is hand-designing (manufacturing) their own products.

Manufacturing drop shippers are the ones who hand-design (manufacture) their products. They typically carry the most burden and costs for each product being sold and shipped because they have to pay production labor costs, including all taxes, withholdings, and benefits, as well as the costs to buy, store and rotate inventory at all times. Not to mention shipping and transportation of goods and products sold.

With One Great Gift, you get the best of both worlds. We have over 20,000 items in-stock. While over 90% of our products are hand designed (manufactured) by us, we also offer other products from other wholesalers. Unlike other supplying drop shippers, our members receive a higher discount on the products from other vendors than we do. Why? Simple. Your business is important to us. We know that the more product lines we bring you, the more business we receive over the long haul.

Getting started is fairly easy. Most drop shippers have some type of membership agreement and enrollment form you must complete and sign before your membership is processed and approved. Every company has a different policies and approval process. If you don't know what they are, ask. One Great Gift approves only those members who have live websites with related products and services being offered. We believe in the quality of membership NOT quantity.

Some drop shippers charge a set up fee and most charge a monthly fee, especially if you don’t meet monthly sales minimums. Why? To be honest, the profit margin for a drop shipper is fairly low on each product and without monthly fees it is difficult for them to cover all of the costs incurred to bring you, the member, the products and services you need. Always read the forms and/or membership agreements thoroughly. If they don’t specify policies, procedures, fees, etc.then ASK. Failing to do so can become very costly!

How do you make money? Your income is the difference between what the drop shipper charges you for a product (discount or sale price) and the retail price you sell it for to your customer. Most drop shippers don't have strict policies on the prices you can charge for their products. Their suggested retail price is just that, a suggestion. With that said, they may from time to time, monitor their members' websites to ensure fair market pricing. If the drop shipper doesn't specify an MPR (Minimum Pricing Requirement), ask if they have one.

Common discounts and/or commissions in the drop ship industry range from 15% - 25%. Some companies may pay more but they will usually have a higher monthly membership fee. Monthly fees can range from $9.95-$29.95 with some companies charging up to $99.95 depending upon the added service(s) they offer. If you are marketing your site effectively and your volume of sales is good, it may be more profitable to pay the higher monthly fee because you typically receive a higher discount or commission. For those just getting started it may be better to choose drop shippers with lower discounts or commissions because they usually have lower monthly fees. Driving traffic to your site and receiving actual sales can take several months or even longer. Paying lower fees in the beginning will help you keep your costs down and you'll still make good money! One Great Gift's discount is 25% off the suggested retail (original) price and we charge a low monthly fee of $9.95 ONLY for the months you don't reach $100 or more in sales.

How does the drop shipper make money? Typically, from volume. Drop shippers today understand that most members are using more than one drop shipper. That's why discount pricing, commissions, and/or fees are fairly competitive. The drop shipper's profit margin comes from the difference between what it costs them for each product and/or to make each product (including cost of goods, labor, supplies, etc.) and what they sell it for to the member. Therefore, a drop shipper must be careful to price products at a suggested retail price the market bears with a discount amount or commission they can afford to offer to their members. That is why volume to a drop shipper is most important. Set up and/or monthly fees barely cover the other expenses such as overhead, marketing, web hosting, web design, product design, photography, etc.

How do you get paid? Typically you, the member, pay the drop shipper for their product when placing the order with them while in turn your customer pays you when ordering through your website. Usually a drop shipper will give you a suggested retail price for each product they offer. Then, when you place the order with the drop shipper, you will pay them their discount or "sale" price, keeping the difference between the price you actually sold the product to your customer for (suggested retail +/-) and the sale price (discount) the drop shipper sells it to you for. When you use a drop shipper's pre-loaded site it is common practice that you are paid a percentage of sales or the discount amount of each sale on a monthly basis instead of per sale.

Sound easy enough? In some ways it is. One thing to keep in mind, however, is to make sure you come into this business understanding your target market and that it takes time to start making money. Just because you put up a website and post some products, the traffic into your store and sales don't just happen overnight. Your online store is just like a brick and mortar store. It takes time to cultivate traffic and customers who actually buy. While the drop shipper's job is important - making the gifts, keeping up with inventory, making sure it's shipped appropriately and timely etc., your job is even more important. You have to keep up with the ever changing internet and online marketing trends! Not making the constant updates and optimizations to your website to keep up with the daily trends in e-commerce sales means failure tomorrow if not sooner. If you possess the knowledge up front of what it is going to take to make your internet business successful you are even more likely to succeed.

So do as you should with any business, research, research and research some more to be sure you have the time, energy and know how to make it work. The drop ship business, from either side, is not a get rich quick business by any means. However, if you do your research and know your market, it can be VERY profitable!