DROP SHIPPING

THE DROPSHIP SOULTION

A business opportunity

  

The Drop Ship Solution

Introduction

Section 1

UNDERSTANDING THE 3 TIERS OF DISTRIBUTION

Selecting a product to sell is one of the most important steps to successful retail. No matter the experience level this can be one of the most confusing and sometimes frustrating steps. In the following pages you will find the in depth information you need to get started in one of the most important areas of online distribution, drop shipping.

In distribution there are 3 tiers you will want to be familiar with before starting to find your own product(s).

• 1) Most shoppers are familiar with the first tier - retailing.
  Retailing is when the manufacturer sells merchandise
  directly to department stores, franchises, store chains,
  shopping malls or any other retail outlet.
• 2) May bargain shoppers are also aware of the second tier
  -wholesaling. Wholesaling takes place when the
  manufacturer sells in bulk quantity to discount stores
  and other wholesale outlets. Cosco or Sam's Club are
  good examples of stores who sell wholesale bulk items.
• 3) Our third tier, drop shipping, is generally the most
  foreign of all the tiers. Drop shipping is a multi-billion-
  dollar-a-year product distribution business in which
  manufacturers and wholesalers will ship or "drop ship"
  their product to your customer directly.

Companies that offer drop shipping will generally sell their products to you at or below wholesale prices. You, as a buyer or registered dropshipee, may then resell these items at marked-up prices to consumers, wholesale outlets, or even retail stores. Drop shipping gives manufacturers the opportunity to quietly distribute inventory without the overhead publicity tends to incur. You are able to have accesses to thousands of different products through one or more drop shipper without the worry of storage or inability to sell the items.

  

The business opportunities are astounding. Hundreds of manufacturers are seeking buyers for literally thousands of items that are worth millions of dollars. That's a lot of big numbers. But, most importantly, the value your clients will see in these items can lead you, as a distributor, to great financial success. And, the opportunities are expected to only get better!

POTENTIAL MARKETS -What's Out There?

You can sell your products to more people than you think. You may sell to small retail companies that don't normally carry the manufacturer's products, or to any contacts not specifically prohibited by the manufacturing company. You're left with a wide array of potential clients.

Unlike retailers and wholesalers, who have to mainly stick to their stores, you have a whole range of creative selling possibilities out there. Knowing where to find them, however, takes a little ingenuity. This section shows you where some potential markets are hiding. It's up to your imagination, however, to uncover the rest.

Even though most manufacturers experience times when they want to move merchandise as quickly as possible, they would rather not see their products nationally advertised as "liquidated merchandise." It looks bad for the company and may detract from a company's more profitable channels of retailing and wholesaling. For instance in the pricier new lines the manufacturer is currently promoting. Moreover, retailers paying more than the "nationally advertised" liquidation prices would get very upset with manufacturers if they saw the lower prices, and perhaps stop doing business with them.

TYPES- What's out there and how do I find them?

Manufacturers drop ship just about every product imaginable - from bread makers, clocks, televisions, and basketballs to computers, fax machines, baby grand pianos, and furniture. Oftentimes you can get the same merchandise that the retail stores are currently selling, but at a much-reduced price.

Earlier we briefly covered the 3 tiers of distribution: retail, wholesale, and drop shipping. As a merchant you have the opportunity to use all three of these channels as the means of a drop shipper.

Typically when a person hears the word drop shipper the first thing they think of is the third tier. The third tier 'drop shippers' focus primarily on just that, drop shipping. They have no retail shop nor do they care to have one. Focusing on warehousing items and shipping them out for their dropshipee cliental base is top priority. Third tier is a great place for a beginner to start. Establishing a relationship with a straight drop shipping company is usually a fairly easy process and requires very little to start up.

While starting up with a drop shipping company is one of the easiest routes to take, it isn't the only one. While they may not call themselves 'drop shippers' the other two tiers of distribution may also be used for drop shipping. Any type of retailer, large or small may be considered a drop shipper if you can work out an arrangement like mentioned above. Most large retailers don't have time to do drop shipping for you but often time smaller retailers will take business in any form they can get it, including drop shipping.

Kiosks and Booths	Home Parties	Children's Org.	Direct Mail
Swap Meets	Auctions	Door Prizes	Telemarketing
State Fairs	Charity	Networking	Internet Marketing
Roadside Stand	School Fundraisers	Sporting Events	Premium/Incentives

MARKET RESEARCH AND TESTING

Without market research and testing, there is no way you can fully determine the size of your potential market, the reaction your product will generate, or the price people are willing to pay for your product or service. The different ways to research and test your product include: offering them for home parties or as premium awards for businesses, and/or reselling them to small retailers such as flea market sellers (see matching items below for more detailed description of how to do this.)

By offering a few products through these means, you can get a better feel for how well your merchandise will sell. After you have done this you may safely move on to one of the suggestions below.

THE DROPSHIP SOLUTION

Drop shipping

Section 2

AN INDEPTH EXPLANATION

STATE FAIRS AND OTHER SPECIAL EVENTS

These are also characterized by low overhead booth operations, customers who come ready to spend their money on a variety of items, and a great opportunity to sell large amounts quickly.

To sell at a state fair, look up your county offices in the phone book and, if the number is listed, call the fairgrounds. If it's not listed, call the Department of Recreation of the general county number. Either way, explain you are interested in setting up a booth at the fair and ask what the requirements are. You will probably have to pay a fee for the space you will use. Depending on your county's laws, there may also be some other fees.

ROADSIDE STANDS AND VANS

Roadside stands are much like the kiosks and booths described above. The difference lies in the advertising. If possible place a road sign three miles away with a legible sign every mile thereafter, as well as a sign 500 feet away. The final sign should be placed by your stand. Make your signs look professional. Most people will equate a professional appearance with legitimate business. At your stand, there should be room for adequate parking. In addition, make sure your signs and stand do not violate any local ordinances or upset any local landowners. Also, be aware of security. Set up in a well-lit area and be alert when closing in the evenings

In particular, vans can be set up in the parking lots of malls,

parks, office buildings, sporting events, etc.   Another great idea

for van  owners-make your vacation  across  country  pay for

itself.

Sell your distressed merchandise at stopping points on your trip.

HOME PARTIES

This avenue is ideal for beginning distributors. Avon, Tupperware, and Mary Kay have all been successful. Try to get invited to one of these parties; you will learn valuable

techniques, and the person inviting you will appreciate your support and perhaps return the favor.

Promote your own party by word-of-mouth. You can telephone, send flyers, and have key friends spread word, and extend many personal invitations. As you advertise, express the social aspect as well as the buying opportunity. Throw your party in honor of a special occasion. If Christmas, Mother's/Father's Day, or Valentine's Day is around the corner, your friends will be anxious to buy.

While having your party, remember to have fun. Play games using small items as prizes; serve light refreshments. Do whatever comes natural marketing method, since you can be very informal, have fun, and make people happy as you make money. Devote approximately 30-45 minutes to the fun and games, and then spend the last 15 minutes selling the actual benefits of the specific products.

Be conservative in your approach. Offer a few items at a time. At the end of your party, have one-on-one discussions on what your group would like to buy at the next party. Be sure to give the hostess of your party a gift or a small percentage of the gross sale.

AUCTIONS

If you would like to try marketing at auctions, then purchase a small quantity of several different items from a supplier. Unless it's an auction for bulk buyers, you can't expect to sell large quantities.

People who attend auctions are bargain hunters who come looking for great pieces at low, low prices. Your items will be well received when this type of shopper sees your quality, name-brand goods at extremely reduced prices.

You will probably have to set a reserve price with the auctioneers. To do this, establish with them the lowest price for which an item can be auctioned. This will ensure that your products will not be sold below your cost.

CIVIC AND CHARITABLE ORGANIZATIONS

Charitable fund raising is a big business with tens of millions of dollars raised every year. In both organizations, you have the unique opportunity of making money while helping a cause. However, your focus should be on helping, rather than on profits. In fact, you can eliminate profits altogether and use this opportunity as a positive advertisement tool. If you choose to do this, it is best to use a variety of items to attract public attention.

RELIGIOUS ORGANIZATIONS

In order to collect operating and development funds, many churches and synagogues sponsor bake sales, raffles, and fund­raisers. To participate, explain to whoever is in charge that you would like to help while making a profit. Nevertheless, as with civic and charitable organizations, your main goal should be to help and not necessarily to earn profits.

WORD OF CAUTION:

IF YOU BECOME THE ORGANIZER OF AN EVENT RATHER THAN JUST THE SUPPLIER, FIND OUT THE LEGALITIES INVOLVED. CIVIC AND SOCIAL ORGANIZATIONS USUALLY HAVE AN ATTORNEY WHO WILL BE WILLING TO WORK WITH YOU.

SCHOOL FUND-RAISERS

Many schools have carnivals and fairs where you can set up a booth. To tap into this opportunity, call a school and ask when the next fund-raising activity is coming up and who will be in charge. When selling, display small-ticket items suitable for children, such as the wide variety of toys, which may be offered. You may also want to check and see if it is appropriate to donate a certain percentage to the school. Or, if your prefer, you can sell your merchandise directly to the school and they can either resell it or use it as prizes.

LITTLE LEAGUE, BOY SCOUTS, AND OTHER CHILDRENS' ORGANIZATIONS

These present you with a great selling opportunity. Little leagues, for instance, need gloves, balls, and uniforms and often don't have enough funds. Because of this, they will often sponsor sales and fundraisers. If you would like to participate, you should deal directly with the individuals who lead, promote and/or sponsor these organizations. You will find that most will welcome your ideas and support, and will offer many creative possibilities for you.

DOOR PRIZES

Because of the unique nature of the merchandise (i.e. quality items at a very low price), they are ideal to use as door prizes at any of the above events. Offer your merchandise to organizations that not only are they purchasing the merchandise at a bargain price, but also the event-goers will perceive these items as being expensive, and thus walk away with a good feeling about the organization.

NETWORKING

Your best first prospects are the ones you personally know. (These are the ones who will be most forgiving of an imperfect initial presentation). For example, if you know the parts manager of the local Cadillac dealership, and you have a product he or she would be interested in, discuss your plan with him or her. Between the two of you, figure out how you can get referred to the owner-this is your business; you want to be the one telling your story to the owner. If you don't talk to the boss yourself, the odds are about 99 out of 100 that the answer will come back, "not interested."

SPORTING EVENTS

You can also sell items to sports organizations to be used as giveaways. Both the stadium and that Sports team will appreciate the publicity giveaways bring, and will love the prices you have to offer. This is a specialized sale, however, and my not offer as many opportunities as other avenues.

If you choose to set up your own booth, you'll need to contact the local sponsors of swap meets and flea markets in your area. Keep your eyes open for any advertisements and attend one yourself. While there, get to know the other booth operators. You can ask them how they got started and who to contact.

Once you find out whom to talk to, be sure to get the following information to him or her. Ask how big your area will be. If a booth is necessary, find out if one is provided for or if you must bring your own. Ask how many people usually attend the sales and when exactly the event will take place. See if there is an admission fee. Then, and this is important, ask if they have any other helpful information specific to that particular area or sale. They may be able to give you some valuable advice you would have missed out on otherwise.

There are several ways you can set up your designated selling area. You can do something as simple as a blanket you spread on the ground or as elaborate as a booth that you build and paint. However you set up, give special consideration to how you will secure your merchandise and your money. Don't make it easy for some to sneak off with at item without paying for it.

You're all set up and your merchandise is ready to be sold. Remember, the shoppers have come ready to buy. Most items sold at these markets are inexpensive and low quality, so flaunt your high-quality, low-cost merchandise, and you'll be the main attraction. Also, prepare yourself for some old-fashioned haggling. To avoid selling your merchandise below cost, know the lowest profit margin you would be willing to accept.

Consigning your goods to someone who already has a booth, on the other hand, are less trouble but also less of a profit. If you decide to take this route, pick out your new partner very carefully. It's not only a matter of making sure that your personalities will work well together, he or she needs to be trustworthy! Check his or her references. This person will have your goods and the money generated from them. In addition, choose someone who is selling merchandise that will complement your products. If you are selling baseball gloves, for example, select someone who is selling other baseball paraphernalia such as baseball cards and hats. Before any selling occurs, decide how you will split the profits - 50/50 -20/80, etc. 

THE DROPSHIP SOLUTION

Business Opportunity

Section 3

DROPSHIPPING AS A BUSINESS OPPORTUNITY

If you have items you think would do well as giveaways, such as sun visors or water bottles, all the stadium or office and ask whom you should talk to. Tell this person about the great merchandise you have to offer. If he or she is interested, you can probably make a deal that benefits both of you.

You can also set up a van or booth in the parking lot of a sporting even and sell your goods to the fans.

PUBLIC SERVICE TELEVISION AND OTHER PUBLICE BROADCASTERS

When stations hold televised drives, they usually give some kind of incentive to those who donate. You can sell your merchandise to the stations to be used as those incentives.

If this method interests you, then call the station and ask for the station manager or for whoever is in charge of fund-raising. Be confident and tell them you have something his or her station might like, but you understand if it is an inopportune time. There will be some stations that cannot use what you have to offer, but there will be many that will want to take advantage of the opportunity.

DIRECT MAIL

This method of marketing can easily be adapted to a "home business" environment. In fact, virtually every aspect can be handled out of your own home, from stuffing letters to stamping envelopes.

HOW TO IMPLEMENT DIRECT MAIL MARKETING

1) Determine suitability of your product- First, you need to figure out if what you have to offer is appropriate for direct marketing. Items under $100 generate the greatest volume, but major appliances may also be sold. Because of the nature of direct marketing, you ought to purchase your items before offering them. However, this puts you in charge of mailing products to your clients. Unless you love expensive shipping costs, a large item like a dishwasher may not be the greatest idea.

In addition, the products you are promoting should be suitable for a mark-up of at least three times your total cost. This will cover all of your operating costs, which should be about $1.35 per letter, and still leave room for a profit. The mark-up shouldn't be a problem, due to the low, low prices you have access to. Also, a good direct marketing campaign will elicit about a 2% reader response; you must send out a large mailing to make it cost effective.

• 2) Discover your target market-Focus your effort on
  particular consumer group. You will have a narrow
  range of merchandise to offer, so first perform
  market research to find where the greatest interest
  for your product lies. A possible target market could
  be the entire medical profession, or just nurses.
  Other potential markets include law enforcement,
  teachers, sports enthusiasts, boat owners, etc.
• 3) Catch peak selling seasons-The best time to offer
  merchandise is the three-month period right before
  Christmas, and just prior to Mother's Day, Father's
  Day graduation, and June weddings. In addition,
  take advantage of seasonal interests, such as
  sporting goods, hot/cold weather products, etc.,
  coordinating your mailings with peak seasons
  requires advanced planning and organization, so
  begin early.
• 4) Design your campaign and ad copy-While creating
  your ad copy, keep in mind the following:

i. Professional services may be costly, but the quality of your copy will make it worth the price. One word advice: freelance writers are often just as good, yet less expensive, than an ad agency.

ii. You can either do a mass mailing of "junk mail" quality, or smaller mailing of personalized, high-quality letters addressed to specific individuals. The former is less expensive, but

also less effective per letter mailed. It's your choice.

iii. If you include a letter circular, and an order form, it will increase your sales four times. While designing, concentrate on your letter most of all, it will account for approximately 60-65% of your sales. The circular will account for about 10-15%.

iv. The average business person, when reading a letter from someone he or she doesn't know, will read the opening paragraph, glance at the middle, and then go to the last paragraph. Put a "hook" or attention-getter in the last paragraph.

• 5) Give your clients a reason to act NOW- One good
  way to do this is to offer free product(s). Be sure to
  communicate that you have something unique to
  offer. Name-brand merchandise at incredible prices
  should do the trick. Another good tactic is to present
  various offerings, such as discounts for cash
  payments or for large quantities, free merchandise,
  financing, or free trial period with a money-back
  guarantee.
• 6) Use a central theme - It helps to have one general
  idea to tie the whole campaign together. For
  instance, if you advertising waffle makers for
  Mother's Day, keep that theme recurrent throughout
  your letters, circulars, and envelopes. Use graphics,
  words, and expressions that would remind the reader
  of Mother's Day and the importance of providing
  your mom with a great gift.
• 7) Don't forget follow-up calls! This is a truly important
  part of your campaign, especially if you opted for the
  smaller, personalized mailing. Make your follow-up
  calls during mid week, avoiding Monday and Friday,
  since these are usually the busiest days at the office.

TELEMARKETING

This method may be used alone or in conjunction with any advertising or direct mail campaign. If you've invested in high-priced products and have a large budget, telemarketing may be the ideal format to market your goods. You have two options: you can either organize your own telemarketing initiative or hire a telemarketing company to handle your campaign. Although the latter is far easier, it also involves high start-up costs. A compromise of the two ideas could include starting up your own and then later, retraining a professional firm to make the calls for you. That way you get all the perks of an established, experienced company and still avoid the high initial costs.

There are two types of telemarketing: inbound calls and outbound calls. Inbound is a passive service sometimes used in conjunction with a TV ad and 800 number. The inbound call may be for placing an order or getting additional information and setting an appointment to meet with a salesperson. Outbound is active and seeks to make the presentation of information and close the sale. It is the more stereotypical view of telemarketing.

How to Implement Your Outbound Telemarketing Operations

• 1) Purchase a list- You may have to purchase a list of
  prospect name and phone number. If this is the case,
  shop carefully and make sure the demographics of the list
  fit those of your target market.
• 2) Develop a script- Work on creating a script that will elicit a
  positive response from the listener.
• 3) Keep the script flexible- Give the telemarketer the freedom
  to depart from or modify the script. This will not only
  sound more natural, but also let the telemarketer
  improvise for unexpected, and therefore "unscripted."
  Contingencies.
• 4) Have telemarketers present the pitch to you by phone- If
  you hire a professional firm, it is best to present your pitch
  so it doesn't sound memorized or like its being read.
  Evaluating their performance will give you a better idea of
•  

  the quality of their training and how your presentation will sound.

  5) Have a plan of action!    Plan how you will follow up on and/or close all leads.

  INTERNET MARKETING

  A great place to market merchandise is on an e-commerce website. Since most of the suppliers in our system have websites listing many of their products, it will be as simple as using the copy and paste feature on your computer. Since the Internet exposes your product to people all over the world your market base on the web is limited only by your marketing skills. The Internet is a highly competitive marketplace. Knowing what other companies are selling your product for is essential to your success. The Internet does make product research very simple. To explore the market for your particular product just visit the search engine or directory of your choice. Type in the applicable key words that pertain to your product then visit the sites that come up from the Internet search. By doing this you will find out what the competition are selling the product for and what their terms are. By learning this, you can determine if the price you are paying for the product will enable you to meet or beat the competition's price and still make a profit. If you can sell at or below the competition, then by all means put the product on your website. It will produce sales for you.

  PREMIUM INCENTIVES

  The premium incentive industry exchanges over $29 billion a year with increases every year. This industry promotes the purchase of products and services by businesses to be used as awards or "gifts." The businesses can then use these items to an employee incentive program or as free gifts to stimulate retail purchases.

  Companies in the 1990's have become more service- oriented as differences in pricing and products have narrowed and markets have become more segmented. Developing the means of cultivating employee consumer loyalty is becoming

• a high priority. This trend indicates an ever-widening opportunity to increase premium incentive sales

  Why is this a huge and growing industry? The answer is simple. Premium incentives work! Everyone wins - the employer, the employee, the product manufacturer, and, let's not forget the most important person of all, you!

  Through drop shipping you will have the products to help penetrate this multi-billion dollar industry. But you must be willing to contact businesses and work closely with the company to ensure that careful planning and promotion are at least thought out prior to the implementation phase. Become as much a part of the phase as possible. Even if you are new to the business, you can develop a rapport just by being a good listener (and that means repeat sales for you in the future).

  Your merchandise is ideal for premium incentive use. Employers are anxious to give gifts that are inexpensive, but have a high-perceived value. If a supervisor can get a product for $20 and his or her employees believe the product is worth $100, the employer has bought five times as much employee satisfaction as he or she has paid for; and he or she will be excited to have such a wonderful gift.

  The companies you sell to will want to create winning attitudes by rewarding winning performances. A positive change in behavior can result from a properly structured incentive program. Companies know this; it is one of the major reasons for using incentives. Recognition by reward is a psychologically acknowledged means of reinforcement.

  Here are some other reasons why companies but premium incentives:

  • To promote goodwill
  • To increase consumer awareness of certain products
  • To increase customer traffic
  • To generate incremental sales
  • To give incentives for salespeople to sell a product
  • To reward exemplary service or time in service, etc.
  • To give incentives for consumers to buy a product
  •  

    As referred to earlier, you will often help companies develop their incentive program. Pay attention to the types of incentives that work.

    Types of Premium Incentives That Work

    "Perceived Value" is a major element in a successful premium or incentive campaign. Electronics (CD players, computers, etc.), watches, and other merchandise work well. If the promotion is for the sales force, remember big hitter like big prizes or a combination of a prize and recognition. A CD player is not going to elicit the same excitement from a "big hitter" as complete stereo sound system will.

    The following are items are some top business gifts ordered through many drop shippers.

    • 1. Pen sets
    • 2. Calendars, diaries, and desk sets
    • 3. Clocks and watches
    • 4. Coffee mugs
    • 5. Attaches and portfolios
    • 6. Electronic items
    • 7. Golf items
    • 8. Calculators
    • 9. Note pads
    • 10. Jewelry
    • 11. Glassware and Crystal
    • 12. Cameras

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