As an online retailer you continually face the task of finding products to sell. Whether you are selling products that your company manufactures or you warehouse inventory to sell there is always the need to find additional sources of new products for your customers. Many factors go in to the process of determining what to sell, but one of the primary deciding factors is whether you can make a profit. Many online retailers are turning to drop shipping as a product sourcing method.
What is Drop Shipping?
Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details directly to the manufacturer or a wholesale distributor, who then ships the goods to the customer. As in all retail scenarios, the online retailer makes the profit on the difference between the wholesale and retail price.
Determining What to Sell
In determining what to sell, drop shipping can be a useful tool to help you meet your sourcing needs. The following are some of the things that can help you decide what to sell with drop shipping as an option:
1) One of the best ways to be successful selling online is to sell what you know and enjoy. Drop shipping can give you access to products that you have a good knowledge of which likely means you generally understand the audience you are trying to reach. This will ensure that you appeal to their needs and are able to effectively price your products to attract buyers and maximize sales. Furthermore, you will be able to supplement your website with valuable subject matter making your site more relevant to your visitors. The more your customers view your site as a trusted place for information, the more they will return and ultimately the more they will purchase from you.
2) If you currently have a site selling just a few SKU's you might want to focus on rounding out your portfolio of products through drop shipping. Offering your customers more of the products they are looking for is important to developing long-term, repeat customers. For example if you have a site selling fishing poles and reels you might want to extend your reach into the vertical by carrying products such as fishing line, lures, waders, fishing vests, nets, etc. If you are able to take care of all your customers' needs you will create customers that are more loyal over the long term and less price conscious in the short term.
3) Focus on dollar margin rather than margin percentage. Why should you follow this strategy? Simply put, with drop shipping, selling a high-priced product carries no more risk than selling a low-priced product. For example, if you sell a product that costs $10 for $20, the profit margin is 100 percent and the dollar profit margin is $10. If you sell a product that costs $500 for $550 the profit margin is a measly 10 percent, however your profit margin in dollars is $50. That is a five times higher dollar margin on a product with a much smaller percentage profit margin. Assuming it requires the same amount of effort to sell one product as the other, it is better to focus on the dollar amount you will earn on each sale rather than the percentage amount.
Try Drop Shipping
Vendio has partnered with Doba, the industry leader in connecting online retailers with drop shippers, to offer you the chance to try drop shipping for free for 14 days.
Click here to sign up for your 14-day free trial.