When Should You Automate your Drop Shipping Company?

Let me start by saying that drop shipping is not a passive business. You can’t just throw a few items on a website and never worry about or pay attention again. You must be involved if you want to succeed. Drop shipping requires less overhead and inventory expense since you won’t need a warehouse, but you pay for that lower upfront expense with higher long-term fees for services and higher merchandise charges.

A drop shipping business, and in fact, all other businesses should base their decisions about automation on financial reasons. When it becomes too expensive or time-consuming to continue to process orders by hand, you should explore the options available for automation.

Do a little test on your internal business expenses. Determine how long it actually takes to capture, process, and transmit a customer order to your supplier. Add how long it takes you to verify shipment has been made, tracking numbers received, and customer advised of details. How long does it take to handle all accounting functions for each order. Added all together, that will be your order processing time for each order you receive. Factor in other regularly repeating tasks you handle with every order. Multiply that time by the number of orders you handle each day times the hourly rate you pay your employees. That is what it costs you to handle each order. You probably will be surprised at how expensive it costs to handle orders. A lot of small businesses really underestimate how much it costs them to run a business.

Now, get the costs together on automation software and hardware necessary to process those same orders. Add your cost of human supervision of the operation. Add in your monthly service or maintenance fees to keep your system operational and you get the cost per order for automation.

These order costs don’t include your fixed expenses like rent, or equipment and utilities since they will be necessary whether you automate or not.

Always keep in mind that not all business process can be partially or fully automated. Some human intervention and oversight is always necessary.

You can automate the order processing system to send orders directly to your supplier after your system captures the customer data. Of course, you must make sure someone audits this process so correct data is captured and transmitted.

You can automate the process to send your customers tracking data and shipping advice. This could include your accounting entries so orders are properly processed, shipped, and marked when completed. You can’t just send your drop ship supplier 100 orders and rely on them shipping 100 orders on time, complete, and correctly. Your internal data needs to be matched and edited with the external data they send you.

You can automate customer contact to thank your customer for their order and give them options on how to contact you. You can automate future contact to advise about new items and promotions by utilizing an email auto responder for mailing lists.

You can automate some customer service tasks by offering a really great and comprehensive FAQ service but you still need human intervention. Some people are just funny that way! Imagine, wanting to actually speak with a live, real-time person that can actually answer questions and make decisions.

Of course, no matter how much automation you can apply and how easy you can capture and store customer data, it is still all worthless unless someone, generally a human, actually takes the time to analyze and use all that data.

How do you create a niche website?

A “ Niche” site is simply one that specializes in a unique product. It could be a product you have developed, a brand that you have marketed and established, a novel and unique way to advertise and sell your products. Anything that draws attention to your business and generates more sales.

The number one difficulty selling things on the internet today is competition. Anyone with an internet connection can sell online. It is really difficult to make a profit if you try and sell the same popular products as everyone else. Most sellers don’t know enough about advertising, marketing, or selling to establish a reason for customers to buy from them instead of any of the other competition so they simply try to sell based on low price only.

You create your niche site by research and by educating yourself about all aspects of the market for your chosen product category. You find out who your close competition is, what they sell, who they buy their products from, and the general size of the industry to make a decision about what to sell. You become an expert on the products you want to sell and develop unique and creative marketing and advertising methods to prove to customers you are the best choice for them to purchase from.

Every major retailer in the world has a group of merchants who have become experts in their assigned product categories. They are “Buyers” or “Category Managers” or Merchandise Managers”. They decide what products to sell, what price they sell them for, and how to advertise or promote the product to their market.

You have to become that expert to hope to have the best chance for success in your online sales niche. You first should choose a product category you have some previous knowledge about. It makes learning a whole lot easier. Suppose your interest is video games. You probably already know what the hot products are, the best joysticks or control devices, the hottest chips and memory cards for games. You also probably know what products you wish were available. Find those missing products. You would then be unique.

Maybe you know that a certain popular product can do a lot more than what it is advertised for. Advertise that special hidden feature and you have a unique niche product. Be creative, but always remember, you must continue to develop new products because your competition will catch up fast.

Over my many years as an International buying manager I dealt with many Asian factories. It was amazing to find so many electronic products available but not in production because no one every asked for those features before. I was developing an electronic horn for a customer and was meeting with the factory engineering team. My customer wanted a horn to compete with an existing model on the market that had 20 sounds. I asked the engineers if they could make the horn with 20 sounds and they replied, sure, which sounds would you like to use? The I.C. chip they used already had over 80 sounds programmed on it but no one had every asked for more than the 20 already available. For a few small tooling charges we developed an entirely new product. Find those unique niche products.

Do your research, use your experience, and learn all you can. Nothing is easy. but if it is profitable, in the end your hard work will be worthwhile.

Is it possible to earn a high 6 figure income drop shipping?

If you are trying to earn a high 6 figure income, I assume you mean maybe $500,000.00 to $900,000.00 per year, you would have to have an extremely unique, high dollar value product or group of products to sell and have virtually zero competition to cut your selling prices or divert sales.

Do the simple math. To earn $500,000.00 per year from a retail e-commerce operation you would have to sell 5 times that amount, or maybe even 6–8 times that amount to get a net income that high since many drop ship items have notoriously low-profit margins. Drop ship suppliers do actually charge you for the convenience of handling the inventory and shipping for you and most are not cheap. So figure you are running an extremely low overhead drop ship operation and you sell $2.5 Million each year. If your product is selling for $100.00 each that would be 25,000 pieces sold per year or a little over 2000 per month or about 70 each day. Even with extensive automation of order processing that is a lot of work or someone to handle.

Here are some of the daily things that must be done on a regular basis:

  • Process orders and send them to your drop ship supplier. Easy enough to automate but still requiring some human intervention at times.
  • Make sure tracking numbers are sent from your supplier on a timely basis and relayed to your customers. Again, can be automated but you must make sure your orders are being shipped on time.
  • Make sure you review the on-hand inventory position and monitor supplier for any selling price changes so you can react on your website or selling platform.
  • Handle any customer service related correspondence, questions, and request for returns.
  • Normal business routines like accounting, looking for new products, looking for new suppliers, marketing, and advertising.

Handling 70 orders a day does not sound like a lot of work, but it does add up when it comes to your time involved. All of these take time and hiring someone to handle these for you will cut into your potential net income. Some things can be automated but again, not everything can be done with an app. I will use Amazon as an example since it is easy to look up data on their seller’s performance. Only 13% of sellers on Amazon sell between 1 Million and 10 million dollars worth of merchandise per year. Only 2% sell more than 10 million. The average order value on Amazon is only $47.00. Not a lot of sellers in that high income bracket you are looking for out of the millions that sell on Amazon.

So yes it could be done but will probably require a whole lot of luck, an extremely unique product, and a good staff to handle the day to day operations. Another point to keep in mind. If you can find products where you can sell 25,000 pieces each year, you would be much better off buying in bulk and handling the shipping yourself.

Can You make 4-5 K each month Drop Shipping?

Yes, you can make 4–5 K per month with only 10 hours work per week but you probably won’t do it!

You would need an extremely unique, high demand item to sell and marketing and advertising programs in place to deliver your message cost effectively to your target audience.

If you don’t have a unique product your profit margins will be extremely small because of all of the competition you will face. Want to test that theory out? Find a drop ship supplier for just about any product you want. Get them to quote you a price including fees and handling charges. Now go to Amazon and search for that product.

How many sellers are offering exactly the same product?

How many sellers are using exactly the same art and sales copy supplied by the manufacturer or distributor?

How close are the selling prices? And how much is the profit margin?

After deducting Amazon selling fees, or your own marketing costs if you sell from your own website, how much (or little) net profit margin is left for you?

You see ads for drop shipping suppliers and dropshipping tutorials all telling you how easy it is to make money, and yes, the method is easy, but making a decent profit is very hard, again, unless you can find a unique, “Niche” product.

How do I get the artwork for my web site?

A customer has written me asking for an app to scrape photos and product content for his website.

Contrary to popular belief there is not always an APP for everything, nor should there be.

The purpose of an e-commerce website is to sell a product, and one of the toughest jobs of all is to convince customers to buy from you rather than the other 99,999,999 sellers using the exact same pictures and ad copy provided by the suppliers. Make your ad look unique and special. Take high-quality photos with proper backgrounds and good lighting. Show the product itself and show it in use by people your potential customers can relate to.

Product content works the same way. The factory or distributor wrote sales copy designed to sell the product from one professional (The factory)to another professional (The e-commerce seller). Their ad copy is usually not designed to attract or inform the consumer about the product. Write unique ad copy using product features, product benefits, tech or spec data, and then tell your shoppers why they should buy from you instead of anyone else. If you use the same sales copy as everyone else, why should anyone choose you?

I understand you may want to use an app because it is the easy way, but really, sometimes the easy way is not the best or most profitable way.

It takes hard work to be successful in whatever you are trying to do. Why not put in the necessary effort to be successful.

How do you start Drop Shipping?

You start drop shipping like any other retail business starts.

You decide which products you would like to offer.

You search for suppliers for your products of interest.

Do your research about competition. Will the cost the supplier quoted you allow you to price your items competitively and still make money? How much competition will you be facing? Is there a market for the products you want to sell?

You decide how you want to offer your products for sale. Amazon or eBay type selling platforms? Your own website?

You write unique, creative ad copy and take great photos so your ads look different than everyone else’s that are trying to sell the same product.

You give your potential customers some reason to buy from you instead of anyone else. Great sales copy, expert technical advice, faster service, great return policy, attractive and professionally done ads or website, anything to let the customer know you are the expert.

Sounds easy right? Drop shipping is the easy, passive way to generate a huge income, right? No, totally wrong. Any type of retail business is hard work. You must keep up with the competition regarding pricing and new market changing products. You must take care of customer service inquiries and complaints. You must process orders and send to your drop shipping supplier. You must monitor your supplier to make sure they are processing your orders properly and shipping quickly. You must keep track of your suppliers inventory to avoid back orders and make sure you keep your prices adjusted properly when your supplier changes prices.

Whew, you see so many tutorials and advertisements offering drop ship supplier lists and how to sell tips and tricks. They all will tell you it is so easy and profitable. Don’t believe them until you have thoroughly checked out the items they sell and what your competition is selling them for. Often the drop ship supplier wants to charge you almost the same price as people are selling the same item on Amazon for.

You can make money drop shipping but it is tough work. Drop ship suppliers charge you for the convenience of service and not having to carry inventory. Guess what, these fees are expensive and often add up to more than the profit you can make when you handle the actual selling.

Drop shipping works best to test an item to see if there is a market for it before you invest in inventory. Drop shipping works great for expensive or large and hard to handle items where inbound shipping charges will really hurt your profit.

Do your research.

How do I find a good niche product for 2017?

Finding a niche is one of the hardest things any potential retailer can do.

You need to do a whole lot of research and learn. Start with product categories that you are familiar with. Maybe you are passionate about cars? What do you, as an enthusiast want that you can’t find in stores? What problems exist that could be solved with the right product? What product is available now, but everyone is using it for the wrong reason, or maybe it would solve a problem or fill a need that people don’t see yet? Maybe some product is available now that only professionals use, but could be easily sold and used by the everyday consumer with the right instruction manual? Be creative.

Once you have reviewed your preferred category apply these same types of questions to other product categories. You use the personal knowledge you have to identify problems and potential solutions for those problems. You look at retail product assortments and think about what products you would like to see, but are missing from the shelves. Maybe you go to the store one day to buy some hardware item. You want 4 or 5 pieces but the store wants an extremely high price per 5 pack, say $5.00. You know if you bought 100 pieces you could get them for $0.25 each, but you don’t need 100 pieces. Maybe other people feel the same way. Build a niche by buying hardware in quantity and repacking into consumer friendly sizes. Instead of the retail price of 5 for $5.00, you could offer 5 pieces for $4.00 and still make a very nice profit.

There are many categories where you can buy bulk quantity and repack and make a large profit margin. Hardware, office supplies, packing materials, electronic cables and connectors, even stuff like laundry detergent.

The point is, buy in bulk, repack, and resell for a large profit. Retail theft-resistant packaging is expensive. Use a heavy weight plastic bag and you keep the profit.

So just keep your eyes open, learn about the competition and what is going on around you in the world of retail and find your profitable, low competition niche .

You’ve run a successful Kickstarter campaign. Now what do you do?

Ok, you raised the money on Kickstarter.

You developed the game.

You found a manufacturer.

You built some inventory.

Now all you have to do is sell it.

You could approach the major toy and game retailers yourself and try and sell the game directly, but I don’t recommend that. It usually takes having a good contact with the buyer or category manager to even get a meeting, and then you have to worry about extended payment terms, liability insurance, delivery guarantees, and a whole lot more just to do business with the major players. If you want to try on your own I suggest you hire a factory or manufacturer’s rep to set up the meeting and handle the details. They should have a good connection with the buyer in the category. You would have to hire a rep for each geographic location the major retailers have their corporate offices in.

An easier suggestion would be to approach a distributor that specializes in toys and games and sell to him. He would then sell and distribute your game to all of his customers, and he would handle all the details like payment terms and insurance. Many toy distributors are also regional so you may have to approach several to cover your geographic location.

The best suggestion I could offer would be for you to approach the major game manufacturers and sell your game or license your game to them. You would collect a commission or royalty on every sale and they would handle all the details. There would be no details for you to worry about. They sell, distribute, and collect payments from the retailers and handle all the problems.

There are thousands of new toys and games introduced every year but only a few get that special buzz where everyone sees it and wants one. I hope you get to ride on top of the big wave.